Independent Research and Policy Advocacy

Simulating Housing Choice for Low-Income Urban Households

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Abstract

As part of IFMR Finance Foundation’s “Notes on the Indian Financial System” research series, Anand Sahasranaman, Vishnu Prasad & Aditi Balachander, have authored the latest research note on “Simulating Housing Choice for Low-Income Urban Households”.

 

It has been argued theoretically that the nature of risks confronting low-income households – income volatility, wealth allocation and the need for mobility – makes them unsuited to mortgage-based ownership housing. Testing this theory by mathematically simulating the effect of these risks on the wealth of a stylised urban low-income household over a twenty year period, we find that rental housing minimises the risk of undesirable wealth fluctuations of the households and is a much more appropriate housing proposition for low-income households, thus corroborating the theoretical arguments. In view of our results, we believe that the policy environment must incentivise the creation of rental housing solutions for low-income households.

Click here to read the note.

 

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