Cognitive mapping the topic of housing affordability

Cognitive mapping the topic of housing affordability

Joseph Kim-keung Ho

Independent Trainer

Hong Kong, China

Abstract: The topic of housing affordability (HA)  in the subject of Housing Studies is complex. By making use of the cognitive mapping technique to conduct a brief literature review on the housing affordability topic, the writer renders a systemic image on the topic of housing affordability. The result of the study, in the form of a cognitive map on housing affordability, should be useful to those who are interested in the topics of cognitive mapping, literature review and housing affordability.

Key words: Housing affordability (HA), cognitive mapping, literature review

Introduction

As a topic in Housing Studies, housing affordability (HA) is complex. It is thus useful to employ some learning tool to conduct its study, notably for literature review purpose. For a teacher in research methods, systems thinking, housing studies and management, the writer is specifically interested in finding out how the cognitive mapping technique can be employed to go through a literature review on  housing affordability. This literature review exercise is taken up and reported in this article.

On the cognitive mapping exercise for literature review

Literature review is an important intellectual learning exercise, and not just for doing final year dissertation projects for tertiary education students. On these two topics of intellectual learning and literature review, the writer has compiled some e-learning resources. They are the Managerial intellectual learning Facebook page and the Literature on literature review Facebook page. Conducting literature review with the cognitive mapping technique is not novel in the cognitive mapping literature, see Eden and Simpson (1989), Eden, Jones and Sims (1983), Open University (n.d) and the Literature on cognitive mapping Facebook page. In this article, the specific steps involved in the cognitive mapping exercise are as follows:

Step 1: gather some main points from a number of academic journal articles on housing affordability. This result in the production of a table (Table 1) with the main points and associated references.

Step 2: consolidate  the main points from Table 1 to come up with a table listing the cognitive map variables (re: Table 2).

Step 3: link up the cognitive  map variables in a plausible way to produce a cognitive map (re: Figure 1) on the topic under review.

The next section applies these three steps to produce a cognitive map on housing affordability.

Descriptions of cognitive map variables on the housing affordability (HA) topic

From the reading of some academic articles on housing affordability, a number of main points (e.g., viewpoints, concepts and empirical findings) were gathered by the  writer. They are shown in Table 1 with explicit referencing on the points.

Table 1: Main points from the housing affordability literature and referencing

Main points from the housing affordability literature	Referencing
Point 1: "Reasons for .... interest in Australian housing affordability are not hard to find after drawing upon international comparisons.  By all accounts, not only are Australian  houses now among the world's largest..., but also the most expensive".	Worthington, A. and H. Higgs. 2013. "Macro drivers of Australian housing affordability, 1985-2010: An autoregressive distributed lag approach" Studies in Economics and Finance 30(4), Emerald: 347-369.
Point  2: "Apart from meeting the basic need for shelter, affordable housing also provides a foundation for family and social stability, and contributes to improved health, educational, social and economic outcomes.... Homeowners also may have a relatively stronger incentive for civic involvement, their typically longer residential tenure suggests minimal disruption for social networks and children's education, and the enhancement of self-esteem through homeownership can potentially reduce the incidence of socially disruptive behaviour and promote physical wellbeing".	Worthington, A. and H. Higgs. 2013. "Macro drivers of Australian housing affordability, 1985-2010: An autoregressive distributed lag approach" Studies in Economics and Finance 30(4), Emerald: 347-369.
Point 3: "Bramley (1990) ..... considered that households should be able to occupy housing that meets socially-accepted norms of adequacy (given household type and size) at a net rent which leaves them enough income to live on without falling below some poverty standard, which is commonly referred to as the minimum acceptable standard of living".	Lau, K.Y. 2001. "A Comparison of Indicators Used In Measuring  Housing Affordability In Hong Kong and Their Validity" Working Paper Series 2001/2, Department of Public and Social Administration, City University of Hong Kong, Hong Kong.
Point 4: "Normative measurement defines the limits or norms of housing affordability in terms of certain threshold values, that is, a household is experiencing  unaffordable housing if the amount spent on housing with its respective  income exceeds the benchmark rate".	Lau, K.Y. 2001. "A Comparison of Indicators Used In Measuring  Housing Affordability In Hong Kong and Their Validity" Working Paper Series 2001/2, Department of Public and Social Administration, City University of Hong Kong, Hong Kong.
Point 5: "...people's housing consumption behaviour can ...be used to assess housing affordability.  One way is to focus on normal housing decisions, i.e. how much households choose to spend on housing with their respective incomes and characteristics".	Lau, K.Y. 2001. "A Comparison of Indicators Used In Measuring  Housing Affordability In Hong Kong and Their Validity" Working Paper Series 2001/2, Department of Public and Social Administration, City University of Hong Kong, Hong Kong.
Point 6: "Since affordability is an important parameter in the function of demand, it is important for property developers and analysts to look into the number of households which can afford mortgages at certain price points in order to assess the number of houses to be built for the years ahead".	Lau, K.Y. 2001. "A Comparison of Indicators Used In Measuring  Housing Affordability In Hong Kong and Their Validity" Working Paper Series 2001/2, Department of Public and Social Administration, City University of Hong Kong, Hong Kong.
Point  7: "Before the housing reform, housing was part of the social welfare and was provided merely by the governmental institutions and state-owned enterprises (SOE). Under this housing allocation system, employees' residence was tied with work places and employees' mobility was greatly attenuated by this linkage. After the housing reform, the supply and demand of the housing have become more market-oriented. The housing  prices, however, have been rising quickly due to the fact that demand of housing is greater than the supply. As the housing price keep soaring, households with low and moderate income find it more and more difficult to afford housing".	Kuang, W. and X. Li. 2012. "Does China face a housing affordability issue? Evidence from 35 cities in China" International Journal of Housing Markets and Analysis 5(3), Emerald: 272-288.
Point 8: "Affordability is often interpreted as the relationship between household income and household expenditure - housing is affordable if the ratio of expenditure-to-income is reasonable".	Kuang, W. and X. Li. 2012. "Does China face a housing affordability issue? Evidence from 35 cities in China" International Journal of Housing Markets and Analysis 5(3), Emerald: 272-288.
Point 9: "Lerman and Reeder (1987) proposed a quality-based measure for housing affordability. This measure aimed to determine how much it costs to rent an "appropriate" amount of housing services for a given household type. The standard quality is measured by a hedonic measure".	Kuang, W. and X. Li. 2012. "Does China face a housing affordability issue? Evidence from 35 cities in China" International Journal of Housing Markets and Analysis 5(3), Emerald: 272-288.
Point 10: "The prospect of stability and growth in cities results in rising house values, which adversely affect affordability, but at the same time stem the disinvestment in neighborhoods that was frequently associated  with physical deterioration and social problems..... Left to the market alone,.... growing cities are unlikely to provide significant new affordable housing because construction and land costs  do not justify construction of moderately priced housing".	Voith, R. and S.M. Wachter. 2009. "Urban Growth and Housing Affordability: The Conflict" The Annals of the American Academy 626, November: 112-131.
Point 11: One of the main concerns with urban renewal strategies, particularly when used in conjunction with urban growth boundaries, is the potential effect on land  and house prices and, by extension, the availability of affordable housing".	van den Nouwelant, R., G. Davison, N. Gurran, S. Pinnegar and B. Randolph. 2015. "Delivering affordable housing through the planning system in urban renewal contexts: converging government roles in Queensland, South Australia and New South Wales" Australian Planning 52(2), Routledge: 77-89.
Point 12: "Most commonly used measures of housing affordability are essentially short-run indicators that compare current income with house prices  or housing costs. Despite the emphasis in the literature on the importance of long-term affordability, researchers have not developed measures of lifetime income because of data constraints".	Abeysinghe, T. and J. Gu. 2011. "Lifetime Income and Housing Affordability in Singapore" Urban Studies 48(9), Urban Studies July: 1875-1891.
Point 13: "...housing affordability is not a clearly defined term; it is affected by a number of factors such as house price,  household income both in the long run and short run, and financial market imperfections. Therefore, there are various ways of  specifying housing affordability which may lead to different public policy approaches".	Abeysinghe, T. and J. Gu. 2011. "Lifetime Income and Housing Affordability in Singapore" Urban Studies 48(9), Urban Studies July: 1875-1891.
Point 14: "Households with long-term affordability problems are those, who, in their lifetime, are unlikely to have sufficient income to pay for a house. Short-term affordability problems concern households who may have lifetime incomes sufficient for a house purchase, but face short-term restrictions in financing it".	Abeysinghe, T. and J. Gu. 2011. "Lifetime Income and Housing Affordability in Singapore" Urban Studies 48(9), Urban Studies July: 1875-1891.
Point 15: "Housing is commonly the single largest expenditure item for most households, while poor and  near-poor families often devote half  their income to housing...  It is not surprising, then, that the recent social protests occurring in many Western cities around the world were largely incited by requests for a supply of housing at affordable prices. This further explain the major interest that the general public, policymakers and regulators have in the discussion of housing affordability".	Ben-Shahar, D. andJ. Warszawski. 2016. "Inequality in housing affordability: Measurement and estimation" Urban Studies 53(6), Sage: 1178-1202.
Point 16: "Various ratios are found in the literature  for measuring housing affordability. Among these are housing-loan-repayment-to-income, ongoing-housing-cost-to-income, debt-to-housing-price and housing-price-to income".	Ben-Shahar, D. andJ. Warszawski. 2016. "Inequality in housing affordability: Measurement and estimation" Urban Studies 53(6), Sage: 1178-1202.
Point 17: "...while the state of housing affordability is commonly explored by focusing on an average and/or medium figure,  some studies further explore affordability among populations stratified by socio-economic and demographic characteristics such as income, poverty status, race and ethnicity".	Ben-Shahar, D. andJ. Warszawski. 2016. "Inequality in housing affordability: Measurement and estimation" Urban Studies 53(6), Sage: 1178-1202.
Point 18: "In the housing literature, the Gini coefficient approach has been applied ... to measure the effect of housing subsidies on living space inequality;...to measure inequality in housing values, housing costs and monthly rent,... to study changes in the distribution of housing wealth".	Ben-Shahar, D. andJ. Warszawski. 2016. "Inequality in housing affordability: Measurement and estimation" Urban Studies 53(6), Sage: 1178-1202.
Point 19: "The effects of the Great Recession on housing equity and homeownership have been well-documented. However, we know little about how rental households fared and the efficacy of housing subsidies in addressing affordability gaps".	Lens, M.C. 2017. "Extremely low-income households, housing affordability and the Great Recession" Urban Studies, Sage: 1-20.
Point 20: "...while large reductions in income reduce the rents that households  can afford, poor employment prospects tend to delay household formation".	Lens, M.C. 2017. "Extremely low-income households, housing affordability and the Great Recession" Urban Studies, Sage: 1-20.
Point 21: "... although there were fewer households forming, a greater proportion of new and existing households were renters, as the homeownership rate was in decline because of foreclosures, economic  uncertainty, and reductions in mortgage credit".	Lens, M.C. 2017. "Extremely low-income households, housing affordability and the Great Recession" Urban Studies, Sage: 1-20.
Point 22"... although it is true that rental vacancy rates tend to put downward pressure on rents...., it is unclear  whether the jump in vacancy rates was high enough.... to substantially affect rental affordability".	Lens, M.C. 2017. "Extremely low-income households, housing affordability and the Great Recession" Urban Studies, Sage: 1-20.

With a set of main points collected, the writer produces a set of cognitive map variables. These variables are informed by the set of main points from Table 1. These variables are presented in Table 2.

Table 2: Cognitive map variables based on Table 1

Cognitive map variables	Literature review points
Variable 1: Factors that promote interest in housing affordability	Point 1: "Reasons for .... interest in Australian housing affordability are not hard to find after drawing upon international comparisons.  By all accounts, not only are Australian  houses now among the world's largest..., but also the most expensive". Point  7: "Before the housing reform, housing was part of the social welfare and was provided merely by the governmental institutions and state-owned enterprises (SOE). Under this housing allocation system, employees' residence was tied with work places and employees' mobility was greatly attenuated by this linkage. After the housing reform, the supply and demand of the housing have become more market-oriented. The housing  prices, however, have been rising quickly due to the fact that demand of housing is greater than the supply. As the housing price keep soaring, households with low and moderate income find it more and more difficult to afford housing". Point 15: "Housing is commonly the single largest expenditure item for most households, while poor and  near-poor families often devote half  their income to housing...  It is not surprising, then, that the recent social protests occurring in many Western cities around the world were largely incited by requests for a supply of housing at affordable prices. This further explain the major interest that the general public, policymakers and regulators have in the discussion of housing affordability".
Variable 2: More intellectual knowledge on housing affordability	Point 8: "Affordability is often interpreted as the relationship between household income and household expenditure - housing is affordable if the ratio of expenditure-to-income is reasonable". Point 13: "...housing affordability is not a clearly defined term; it is affected by a number of factors such as house price,  household income both in the long run and short run, and financial market imperfections. Therefore, there are various ways of  specifying housing affordability which may lead to different public policy approaches". Point 14: "Households with long-term affordability problems are those, who, in their lifetime, are unlikely to have sufficient income to pay for a house. Short-term affordability problems concern households who may have lifetime incomes sufficient for a house purchase, but face short-term restrictions in financing it". Point 20: "...while large reductions in income reduce the rents that households  can afford, poor employment prospects tend to delay household formation". Point 21: "... although there were fewer households forming, a greater proportion of new and existing households were renters, as the homeownership rate was in decline because of foreclosures, economic  uncertainty, and reductions in mortgage credit". Point 22"... although it is true that rental vacancy rates tend to put downward pressure on rents...., it is unclear  whether the jump in vacancy rates was high enough.... to substantially affect rental affordability".
Variable 3: Effective housing affordability practices	Point 3: "Bramley (1990) ..... considered that households should be able to occupy housing that meets socially-accepted norms of adequacy (given household type and size) at a net rent which leaves them enough income to live on without falling below some poverty standard, which is commonly referred to as the minimum acceptable standard of living". Point 10: "The prospect of stability and growth in cities results in rising house values, which adversely affect affordability, but at the same time stem the disinvestment in neighborhoods that was frequently associated  with physical deterioration and social problems..... Left to the market alone,.... growing cities are unlikely to provide significant new affordable housing because construction and land costs  do not justify construction of moderately priced housing". Point 11: One of the main concerns with urban renewal strategies, particularly when used in conjunction with urban growth boundaries, is the potential effect on land  and house prices and, by extension, the availability of affordable housing".
Variable 4: Positive outcomes of housing affordability practices	Point  2: "Apart from meeting the basic need for shelter, affordable housing also provides a foundation for family and social stability, and contributes to improved health, educational, social and economic outcomes.... Homeowners also may have a relatively stronger incentive for civic involvement, their typically longer residential tenure suggests minimal disruption for social networks and children's education, and the enhancement of self-esteem through homeownership can potentially reduce the incidence of socially disruptive behaviour and promote physical wellbeing". Point 6: "Since affordability is an important parameter in the function of demand, it is important for property developers and analysts to look into the number of households which can afford mortgages at certain price points in order to assess the number of houses to be built for the years ahead".
Variable 5: Learn from housing affordability practices	Point 4: "Normative measurement defines the limits or norms of housing affordability in terms of certain threshold values, that is, a household is experiencing  unaffordable housing if the amount spent on housing with its respective  income exceeds the benchmark rate". Point 5: "...people's housing consumption behaviour can ...be used to assess housing affordability.  One way is to focus on normal housing decisions, i.e. how much households choose to spend on housing with their respective incomes and characteristics". Point 9: "Lerman and Reeder (1987) proposed a quality-based measure for housing affordability. This measure aimed to determine how much it costs to rent an "appropriate" amount of housing services for a given household type. The standard quality is measured by a hedonic measure". Point 12: "Most commonly used measures of housing affordability are essentially short-run indicators that compare current income with house prices  or housing costs. Despite the emphasis in the literature on the importance of long-term affordability, researchers have not developed measures of lifetime income because of data constraints". Point 16: "Various ratios are found in the literature  for measuring housing affordability. Among these are housing-loan-repayment-to-income, ongoing-housing-cost-to-income, debt-to-housing-price and housing-price-to income". Point 17: "...while the state of housing affordability is commonly explored by focusing on an average and/or medium figure,  some studies further explore affordability among populations stratified by socio-economic and demographic characteristics such as income, poverty status, race and ethnicity". Point 18: "In the housing literature, the Gini coefficient approach has been applied ... to measure the effect of housing subsidies on living space inequality;...to measure inequality n housing values, housing costs and monthly rent,... to study changes in the distribution of housing wealth". Point 19: "The effects of the Great Recession on housing equity and homeownership have been well-documented. However, we know little about how rental households fared and the efficacy of housing subsidies in addressing affordability gaps".

The next step is to relate the cognitive map variables to make up a cognitive map on housing affordability. The cognitive map and its explanation are presented in the next section.

A cognitive map on housing affordability and its interpretation

By relating the five variables identified in Table 2, the writer comes up with a cognitive map on housing affordability, as shown in Figure 1.

These cognitive  map variables, five of them altogether, are related to constitute a systemic image of housing affordability. The links in the cognitive map (re: Figure 1) indicate direction of influences between variables. The + sign shows that an increase in one variable leads to an increase in another variable while a -ve sign tells us that in increase in one variable leads to a decrease in another variable.  If there no signs shown on the arrows, that means the influences can be positive or negative. Readers are referred to the Literature on housing affordability Facebook page for more  information on the topic.

Concluding remarks

The cognitive mapping exercise captures in one diagram some of the main variables involved in housing affordability. The resultant cognitive map promotes an exploratory way to study housing affordability in a holistic tone. The experience of the cognitive mapping exercise is that it can be a quick, efficient and entertaining way to explore a complex topic such as housing affordability in Housing Studies. Finally, readers who are interested in cognitive mapping should also find the article informative on this mapping topic.

Bibliography

1.      Abeysinghe, T. and J. Gu. 2011. "Lifetime Income and Housing Affordability in Singapore" Urban Studies 48(9), Urban Studies July: 1875-1891.

2.      Ben-Shahar, D. andJ. Warszawski. 2016. "Inequality in housing affordability: Measurement and estimation" Urban Studies 53(6), Sage: 1178-1202.

3.      Eden, C. and P. Simpson. 1989. "SODA and cognitive mapping in practice", pp. 43-70, in Rosenhead, J. (editor) Rational Analysis for a Problematic World, Wiley, Chichester.

4.      Eden, C., C. Jones and D. Sims. 1983. Messing about in Problems: An informal structured approach to their identification and management, Pergamon Press, Oxford.

5.      Kuang, W. and X. Li. 2012. "Does China face a housing affordability issue? Evidence from 35 cities in China" International Journal of Housing Markets and Analysis 5(3), Emerald: 272-288.

6.      Lau, K.Y. 2001. "A Comparison of Indicators Used In Measuring  Housing Affordability In Hong Kong and Their Validity" Working Paper Series 2001/2, Department of Public and Social Administration, City University of Hong Kong, Hong Kong.

7.      Lens, M.C. 2017. "Extremely low-income households, housing affordability and the Great Recession" Urban Studies, Sage: 1-20.

8.      Literature on cognitive mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-cognitive-mapping-800894476751355/).

9.      Literature on housing affordability Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-housing-affordability-753903974782883/).

10. Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).

11. Managerial intellectual learning Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/managerial.intellectual.learning/).

12. Open University. n.d. "Sign graph" Systems Thinking and Practice (T552): Diagramming, Open University, U.K. (url address: http://systems.open.ac.uk/materials/T552/) [visited at April 10, 2017].

13. van den Nouwelant, R., G. Davison, N. Gurran, S. Pinnegar and B. Randolph. 2015. "Delivering affordable housing through the planning system in urban renewal contexts: converging government roles in Queensland, South Australia and New South Wales" Australian Planning 52(2), Routledge: 77-89.

14. Voith, R. and S.M. Wachter. 2009. "Urban Growth and Housing Affordability: The Conflict" The Annals of the American Academy 626, November: 112-131.

15. Worthington, A. and H. Higgs. 2013. "Macro drivers of Australian housing affordability, 1985-2010: An autoregressive distributed lag approach" Studies in Economics and Finance 30(4), Emerald: 347-369.