Jun-Hyung Kim (2019. 8), "Can the RIR Measure the Housing Affordability among Korean Renters?" Journal of the Korea Planners Association, 54(4): 94-108.
김준형 (2019. 8), “RIR은 국내 임차가구의 주거비부담을 측정할 수 있는가?”, 「국토계획」, 54(4): 94-108.
Abstract
Rent to Income Ratio (RIR) is the most popular housing affordability index not only in Western countries, but also in Korea. In Korean housing policy, RIR is accepted as the representative index to measure housing affordability among renters and to analyze the effectiveness of housing programs. However, using RIR has two critical theoretical flaws. One is that the RIR approach does not explain the housing affordability where households pay housing cost not only with their income, but also with their asset. It is much misleading in Korea, since 90% of renters are paying deposit and the median ratio of deposit to rent is 25. The other is that the RIR does not control housing consumption of each household. As a result, it categorizes the households with over-consumption as households with problems and in converse, the households with under-consumption as households without problems. In this paper, I design the alternative index minimizing these problems, and find that RIR underestimates the overall housing cost burden. The new index also shows that RIR misleads us as RIR reports that Chonsei-tenants, households with higher income or larger asset experience a much more serious burden of housing cost.
Keywords
Rent to Income Ratio (RIR); Housing Affordability; Planning Index; Housing Policy; Housing Cost Burden