Chapter 5: Affordable home-ownership and mortgage markets in an international context
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Since there are vast social and economic benefits that flow from homeownership through household wealth, position and living standards, the affordability of homeownership is among many nations’ priorities. Despite this focus, for a sizeable proportion of world’s population, homeownership is unaffordable. The literature has attributed lack of housing affordability to rising land and housing prices, lack of housing supply, restrictive land use regulations and entitlements, and the inhibiting structure and depth of mortgage finance. There is simultaneity between housing and mortgage affordability. Literature has also suggested market, policy and regulatory interventions to address housing affordability, which in the case of mortgage finance relate to development of securitization markets, better mortgage instrument design and performance of mortgage institutions. This chapter examines key issues that pose constraints for mortgage affordability which in turn delay homeownership and/or lead to sub-optimal consumption of housing by households, particularly young and low-income households. Select theoretical and empirical research in these areas in an international context is reviewed to achieve this objective. The chapter also defines the agenda for future research in policy and mortgage institutional design to meet the housing affordability challenge.

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