Housing affordability is a growing issue. As a recent Commons Briefing1 outlined: “Home ownership has become increasingly difficult to access, particularly for first-home buyers, as house price growth has outstripped growth in wages. Median house prices in England are now 7.9 times higher than median earnings. In London, the ratio can be considerably higher: in Kensington, it is 31.” As a knock-on, rental affordability has also been challenged: in Kensington again they are estimated at 75% of median income.

While many initiatives have been put in place to improve affordability – home ownership schemes, changes to planning – there is a very serious question to be asked about whether we are measuring affordability appropriately.

The Office for National Statistics has compiled housing affordability for well over ten years2. However, are there any lessons we should be looking to learn from other countries on how they have looked to calculate this affordability challenge? And if so, why should we care?

While housing affordability is a notoriously difficult thing to define, the New Zealand government has embarked on a journey to accurately and consistently measure changes to housing affordability over time.

Experimenting with new flavours of the HAM

The New Zealand government has taken an experimental approach to develop a Tier One statistic (one whose continual publication is protected by legislation). The HAM is now in its fourth iteration, as version 1.3, and the New Zealand government notes it is still subject to further changes as it identifies problems and opportunities for its development.

Introducing the HAM: two parts

The HAM is split into two statistics the HAM for potential first home buyers, and the HAM for renters.

The HAM for buyers measure compares the income after housing costs, including mortgage, home insurance and rates (council tax), of potential first home buyers in different parts of New Zealand to the national median income after housing costs for all households.

Conversely, the HAM for renters measure compares the income after housing costs of renters in different parts of New Zealand to the national median income after housing costs for all households.

HAM for Buyers3

Scroll, or flick right to view.

HAM for Renters4

Scroll, or flick right to view.

Listening to the HAM – what does it tell us?

As noted above, the denominator of the each of the HAMs is the national income after housing costs (also known as residual income). This includes all households, not just those renting, or looking to purchase their first home. However, it can have the potential to hide nation-wide trends in housing affordability.

The New Zealand government stresses that HAM users should consider trends in the data, as opposed to making judgements on any given point on the graphs. Factors such as demographic change (e.g. a glut of households reaching retirement age) may mask other changes in the market.

Nevertheless, the HAM is helpful for painting a picture of geographic affordability differences, and the divide of affordability between renting and buying5.

  • Auckland is New Zealand’s largest, fastest growing and most expensive city.
  • Affordability in Auckland has been a point of focus for successive governments.
  • Incomes are generally higher than the rest of the country, though its geographic boundaries include large amounts of lower income suburbs.
  • Fuelled by the government, Wellington has the highest median income in New Zealand.
  • Geographic boundaries include far fewer poorer areas relative to Auckland (Wellington has three nearby cities within a commutable distance that account for much of the wider lower-socio-economic area).

Evaluate and articulate the space needed for decision making

An alternative approach that the New Zealand government has published involves outlining the percentage of people who are spending more than 30% of their income on housing. The New Zealand government had previously outlined this level of accommodation spending as “housing stress”.

This crude approach is problematic. It gives an honest view of how poorer sectors of society are coping (or not coping) in the housing market. It does not, however, account for households who choose to spend a higher portion of their income on accommodation costs but are obviously not under housing stress – for example, high-income earners who voluntarily choose to spend more of their disposable income on accommodation.

Learn more about the HAM

More information, including reports on methodology, adaptations from previous versions and regional reports are available on the Ministry of Business, Innovation and Employment’s website.

So what improvements could be done?

  • Making both buying and renting affordability national measures, that are comparatively tracked.
  • Focus this on real housing market geographies – not cut by local authorities but based on city-regions.
  • Factoring in incomes after housing costs as a key variable rather than median income.

And why should we care? Fundamentally our supply and planning decisions are being heavily influenced by how we handle the affordability challenge. To ensure we are using the right evidence and data to drive these decisions is critical. Testing out new metrics and data approaches offers an ability for those providers to target need at the most appropriate user groups and geographies.

Gate One are well positioned to help you harness the insights within your data, to deliver on your most pressing challenges.


Umbar is head of digital at Gate One and leads our work in the housing sector. She has been consulting for 17 years and has been delivering better customer and employee experiences in the housing sector since 2012. She helps housing organisations get value from their digital transformations and make better sense of their data.