Page 321 - 2019 6th AFIS & ASMMA

So, this brings me to my last section about housing policies and Session II
the success of cities. First and foremost, I think it's very important to So, what are the causes of housing unaffordability? There are many
understand what the role of affordable housing plays, not just for the factors and I just want to highlight two factors we often see. There are
success of city but also for the success of the country itself, because the very strict land use regulations; you cannot build beyond a certain
cities are really the center of economic activity. So, what recent research limitation. In Asia, we see a lot of increase in demand due to rapid
has shown is that there are at least three factors, when it comes to an urbanization, but we also see that there are some bigger trends. For
affordable housing that affects the competitiveness of cities. One is, of example, we have more and more elderly households, we have more
course, if your housing is very unaffordable, it leads to a less flexible and more singles that live in smaller apartments, and all these trends
labor market. People don't want to move anymore, because they think push the demand for housing. So, what are the consequences for the
that they will pay a higher rent in the new location, so the labor market household itself? The household itself, of course, is forced to reduce the
flexibility is reduced. Second, which is also an important point, is that non-housing consumption, and this morning we heard that sometimes,
there is a certain capital misallocation; as the firms that have invested a it's a question of 'eat or heat'. We also have other negative consequences,
lot in housing see their assets going up in the value, firms might invest because you can spend less on health and education. And it even affects a
in housing more than in other areas such as innovation and R&D, which demographic decision; so people get married later, and they might have
can lead to this capital misallocation. Finally, the urbanization as a less kids, because these kids also need to pay for expensive housing. So,
process of structural transformation; a lot of economies of agglomeration there are lot of negative effects, when it comes to unaffordable housing.
will slow down, and this also hurts the overall welfare.

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