Introduction: The Demographia International Housing Affordability Survey rates housing affordability using the “Median Multiple” in the analysis of Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, the United Kingdom and the United States. The Median Multiple is widely used for evaluating urban markets, and has been recommended by the World Bank and the United Nations and is used by the Harvard University Joint Center on Housing. Average multiple data (average house price divided by average household income) is used in Japan, where data for estimating medians is not readily available.
More elaborate indicators, which mix housing affordability and mortgage affordability can mask the structural elements of house pricing are often not well understood outside the financial sector. Moreover, they provide only a "snapshot," because interest rates can vary over the term of a mortgage; however the price paid for the house does not. The reality is that, if house prices double or triple relative to incomes, as has occurred in many severely unaffordable markets, the sum total of mortgage payments will also rise substantially.
Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices having generally been from 2.0 to 3.0 times median household incomes. The Average Multiple reached as low 3.5 and 3.9 in the major metropolitan areas of Japan within the last decade, though further historical data has not been identified.
The historic affordability relationship continues in many housing markets of the United States and Canada. However, housing affordability has deteriorated sharply in the past decade in Australia, Ireland, New Zealand, and the United Kingdom and in some markets of Canada and the United States (evidenced by sharply higher. Median Multiples). In every market where there has been a sustained and significant increase in the Median Multiple, more restrictive land use policies have been implemented. These policies are referred to in this Survey as "urban containment" (also called as "smart growth," "urban consolidation," "compact city policy," "growth management," "densification policy," etc.).
Regrettably, virtually no government administering urban containment policy effectively monitors housing affordability. However, encouraging developments have been implemented at higher levels of government in New Zealand and Florida, and there are signs of potential reform elsewhere.