KUALA LUMPUR: Current home affordability measurements mainly consider only income and price.
This disregards important factors such as connectivity, size and job opportunities, which are the real drivers for social mobility.
Hence, two researchers from the Centre of Market Education (CME) have introduced a new index to address this gap. Called Financial and Social Affordability Index, it incorporates both quantitative and qualitative factors.
The index, developed by CME research fellows Dr Consilz Tan and Dr Carmelo Ferlito, is also presented in a book chapter titled "Measuring Home Affordability: Challenges and Directions Forward".
According to CME, Tan and Ferlito sought to address home affordability shortcomings by developing a novel index that goes beyond traditional metrics, which typically consider only income and housing prices.
Their index incorporates quantitative and qualitative factors such as job opportunities and location, while also considering the impact on connectivity, infrastructure and employment prospects.
"These elements are crucial determinants in the broader effort to address affordability as a critical component of the broader struggle against poverty and in support of social mobility," CME said in a statement.
Meanwhile, CME noted that the concept presented by the two researchers involves balancing financial affordability with social affordability.
This means that a home considered "affordable" based solely on the traditional price-to-income-ratio (PIR) might be re-evaluated as more expensive when considering its location in terms of job opportunities and transportation connectivity.
Conversely, a seemingly expensive home could be deemed more affordable if it is well-located.
Overall, CME said while financial affordability measures the monetary burden of owning a home, social affordability focuses on its appeal concerning its proximity to efficient transportation systems and the availability of job opportunities.
Social affordability, therefore, serves as a proxy for assessing the potential for social mobility opportunities, it added.