Available online at www.sciencedirect.com
ScienceDirect Procedia Computer Science 55 (2015) 1079 – 1086
Information Technology and Quantitative Management (ITQM 2015)
ELES-Model Based Housing Affordability Comparative Research of Urban Households in Beijing between 2004 and 2013 Aihua Lia*, Qingqing Mob a
School of management science and engineering, Central University of Finance and Economics, NO.39, South Xueyuan Road, Haidian District , Beijing, 100081, China b School of management science and engineering, Central University of Finance and Economics, NO.39, South Academy Road, Haidian District , Beijing, 100081, China
Abstract In this paper, we apply the model of the extended linear expenditure system to measure housing affordability of urban households in Beijing, and calculate the affordable housing areas of urban households which are on different income levels in Beijing in 2013 and 2004. In this study, we find that, the household disposable incomes of urban households in Beijing increase along with the development of economy, all income levels of urban households in Beijing can cover the expenditures of their basic life needs, housing affordability of urban households of different income levels in Beijing is increasing. However, because the growth of house prices is faster than the growth of disposable income of urban households in Beijing, the affordable housing areas of urban residents in Beijing is decreasing. To solve the housing problem in Beijing, the government must find ways to increase households’ income and carry out efficient ways to control the growth of housing price. © 2015 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license © 2015 The Authors. Published by Elsevier B.V. (http://creativecommons.org/licenses/by-nc-nd/4.0/). Selection and/or of the organizers of ITQM 2015 Peer-review under peer-review responsibilityunder of the responsibility Organizing Committee of ITQM 2015 Keywords: Household disposable income; the expenditure of basic life need; the extended linear expenditure system; housing affordability;
1. Introduction Housing is one of the basic necessities. For most people, house is not just a building, but a home like a warm haven that can give people a sense of security. China has a large population. Along with urbanization and population growth, a large number of people come into cities, which brings a lot of demands for housing. Besides, with income increasing, urban residents have needs to improve living conditions, which also brings housing demands. Although there is such a large demand for housing, not many urban residents can afford a house in big cities. However, there is a noticeable phenomenon in some cities in China, ghost towns, where * Corresponding author. Tel.: +1-381-106-7922; fax: +0-106-228-9086. E-mail address:
[email protected].
1877-0509 © 2015 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the Organizing Committee of ITQM 2015 doi:10.1016/j.procs.2015.07.072
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have a high house vacancy rate in urban cities. This is very strange, one side is the high demands for houses, and another side is high house vacancy rate. Are the incomes of urban households too low or the house prices too high? Perhaps, there are other reasons that account for housing problem. Housing problem relates to the stability of society, it’s meaningful for us to find out the reason why some urban households cannot afford a proper house in urban cities. Foreign scholars and domestic scholars proposed a number of the concept of housing affordability [1-3]. After considering the various concepts of housing affordability, we define housing affordability as the ability to pay money when urban households get a house from real estate market [4]. There are many methods of studying housing affordability, such as price-income ratio [5-6], housing affordability index [7-9], and so on. These methods have some advantages, such as easy to understand and calculate, but still have some disadvantages, like unable to measure housing affordability accurately, and so on .The model we use in this paper is the extended linear expenditure system (ELSE) [10]. The extended linear expenditure system is on the basis of the linear expenditure system [11]. There are extensive researches based on ELES in foreign and domestic [12-16], ELES is a more sophisticated model. Li [17] had used ELES-model to calculate housing affordability of urban households in Beijing in 2004, and had proved the applicability of this model in the study of housing affordability. Nobody has used this model to do comparative studies of the same city in different years. We get the latest data of urban households in Beijing via Beijing Statistical Yearbook 2014[18], measure and compare housing affordability of urban households on different income levels in Beijing in 2013 and 2004, and find out the changes of housing affordability in Beijing between 2004 and 2013. In this paper, our goal is to find out the reason for housing problem and come up with the solutions to housing problem. This article consists of four sections, the first section is introduction, the second part is the model, Empirical Research and conclusion are the third and fourth section. We measure the housing purchasing power of urban residents in Beijing in 2013 and 2004 based on the extended linear expenditure system, analyze the changes of the housing affordability of urban residents in Beijing between 2004 and 2013. 2. Model Based on the linear expenditure system [11], Lluch C [10]took into account the savings and proposed the extended linear expenditure system model [17]. The expression of the extended linear expenditure system model is as follows:
Vi
Pi ri E i (Y
n
¦ Pr )
(1)
i i
i 1
Here, Vi is the annual expenditure of a household spending on goods or services of i -th. V
n
¦V , V is i
i 1
the total annual expenditure that the household spends on the total goods and services, Pi is the price of goods or services of i -th. ri is the annual basic amount of goods or services of i -th in the household. Pi ri is the annual expenditure that the household spends on the basic amount of goods or services of i -th. Y is the income of the household. E i is the marginal share of the budget of goods or services i -th, the proportion of income used on savings is E n1 .
n
¦ Ei 1 , and i 1
Let
n 1
¦E i 1
i
1.
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Aihua Li and Qingqing Mo / Procedia Computer Science 55 (2015) 1079 – 1086 n
Pi ri E i ¦ Pi ri
bi
(2)
i 1
then, the expression of the extended linear expenditure model is as follow:
bi EiY
Vi
(3)
First, we use the cross-sectional data to run a regression, then we can get the estimated values of bi and E i . Second, we calculate the annual expenditure that the household spends on the basic need of each consumer item and the total annual expenditure that the household spends on the total basic needs. Finally we estimate housing affordabilities of the household. According to Beijing Statistical Yearbook 2014[18], we know the basic needs of a household consist of eight consumer items, they are food (item-1), clothing (item-2), household appliances and service (item-3), health care and medical services (item-4), transport and communications (item-5), education, cultural and recreation services (item-6), housing (item-7), miscellaneous goods and services (item-8). From formula (2),we can get § ¨ ¨ ¨ ¨ ¨ ©
1 E1 E1 " E2 1 E2 " #
#
E8
E8
E1 E2
# # " 1 E8
· §¨ P1 r1 ·¸ §¨ b1 ·¸ ¸ ¸ ¨ P2 r2 ¸ ¨ b2 ¸ ¸ u¨ # ¸ =¨ # ¸ ¸ ¨ ¸ ¨ ¸ ¸ ¨ ¹ © P8 r8 ¸¹ ¨© b8 ¸¹
(4)
Then, we get
§ P1 r1 · § 1 E1 E1 ¨ ¸ ¨ ¨ P2 r2 ¸ ¨ E 2 1 E 2 ¨ # ¸ =¨ # # ¨ ¸ ¨ ¨Pr ¸ ¨ E8 © 8 8 ¹ © E8
" "
E1 E2
# # " 1 E8
1
· ¸ ¸ ¸ u ¸ ¸ ¹
§ b1 · ¨ ¸ ¨ b2 ¸ ¨#¸ ¨ ¸ ¨b ¸ © 8¹
(5)
Let Y j denotes the annual disposable income of a household on the income level of j , the monthly affordable repayment of the household on the income level of j is
wjmj
(Y j
8
1
¦ P r ) u 12 i i
(6)
i 1
m j denotes the monthly disposable income of the household on the income level of j , w j denotes the proportion that the household on the income level of j uses on the repayment for house, n is the loan period, r is the annual loan interest rate, P is the house price, x is the down payment ratio. Let :1
^1,2`, where 1, 2 respectively represent the new commercial housing and second-hand housing.
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Let : 2 ^ 1ˈ 2ˈ3ˈ4ˈ5,6 ` , where 1, 2, 3, 4, 5, 6 represent the average-income household, low-income household, medium-low-income household, medium-income household, medium-high-income household, high-income household respectively. According to the formula equal repayment of housing loans, we can get
r (1 x) u P u (1 )12 n 12
wjmj u
(1
r 12 n ) 1 12 r 12
j :2
(7)
Housing affordability of the household on the income level of j is
Pj
wjm j u
(1
r 12n ) 1 1 12 j :2 u r r 12n (1 x) u (1 ) 12 12
(8)
then we can measure housing affordability of the urban household on the income level of j in Beijing by (8). We calculate the affordable housing squares of the urban household on the income level of j in Beijing can buy from new commercial real estate market and second-hand real estate market,
Si
Pj pi
,
i :1 , j
:2
(9)
Here, S i is the affordable housing square of the urban households in Beijing on the income level of j can buy, pi is the house price. 3. Empirical Research By Beijing Statistical Yearbook 2014[18] and Beijing Statistical Yearbook 2005[19], we can obtain the data about urban households in Beijing, as shown in table 1 and table 2. Table 1. Consumption expenditure and disposable incomes of urban households in Beijing 2013 Income level
Item-1
Item-2
Item-3
Item-4
Item-5
Item-6
Item-7
Item-8
income
Average
21,242
7,267
5,132
4,467
10,676
10,361
5,528
3,643
104,835
Low
16,571
4,304
3,086
3,225
5,061
6,020
4,211
1,708
53,691
Medium-low
19,298
5,379
4,172
3,808
7,255
7,221
4,001
2,380
79,274
Medium
20,113
6,158
4,640
4,825
8,253
8,983
4,993
2,910
88,698
Medium-high
21,458
7,563
5,303
4,530
11,780
10,825
5,315
4,065
111,578
High
23,699
10,277
6,752
4,820
16,445
14,851
7,417
5,576
151,019 Unit (Yuan)
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Table 2. Consumption expenditure and disposable income of urban households in Beijing 2004 Income level
Item-1
Item-2
Item-3
Item-4
Item-5
Item-6
Item-7
Item-8
income
Average
11,384
3,081
2,389
3,430
4,530
6,136
3,090
1,340
45,350
Low
9,174
1,616
1,369
2,138
2,648
4,051
2,047
622
23,683
Medium-low
11,188
2,632
1,774
3,361
3,453
5,345
2,301
974
33,978
Medium
11,667
3,090
1,750
3,171
3,490
5,582
2,352
1,132
41,311
Medium-high
12,461
3,761
2,711
4,603
4,707
7,157
3,298
1,631
53,518
High
13,752
4,707
4,630
4,336
8,874
9,298
5,809
2,512
80,013 Unit (Yuan)
Running linear regressions, then we can get the estimated values of bi and E i Table 3. the estimates of the coefficients of the extended linear expenditure system model Years 2013
2004
i
1
2
3
4
5
6
7
8
bi
13,396.9
671.1
1,208.2
2,767.3
-1,943.2
527.3
1,825.1
-673.0
Ei
0.071
0.063
0.037
0.015
0.121
0.094
0.035
0.041
bi
8,186.8
722.7
-317.2
1,770.9
-531.3
1,980.0
-60.4
-194.7
Ei
0.074
0.052
0.059
0.037
0.111
0.092
0.069
0.034
Using the estimated values of bi and E i in table 3, we can calculate the basic life consumer demand of urban residents in Beijing in 2013 and 2004, shown in table 4. Table 4. the basic life consumer spending of urban residents in Beijing Years
2013
2004
Consumer items Basic Expenditure (Yuan) Basic Expenditure (Yuan)
Item-1
Item-2
Item-3
Item-4
Item-5
Item-6
Item-7
Item-8
total
15,811
2,813
2,466
3,277
2,170
3,723
3,015
721
33,996
9,999
1,996
1,127
2,677
2,187
4,233
1,629
638
24,485
According to the formula (5), we can measure the monthly affordable money that urban households in Beijing can pay for housing in 2013 and 2004, as shown in table 5. Table 5. the monthly affordable payment for housing Years
income level
Average
Low
Mediumlow
Medium
Mediumhigh
High
2013
the monthly affordable payment (Yuan)
5,903
1,641
3,773
4,558
6,465
9,752
2004
the monthly affordable payment (Yuan)
1,739
-67
791
1,402
2,419
4,627
The increment of the affordable monthly payment
4,165
1,708
2,982
3,156
4,046
5,125
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From table 5,we can find that, for the urban households on the average income level in Beijing in 2004, their household disposable incomes were less than the basic consumer expenditure, these household needed the government’s support to maintain the expenditure of the basic living needs, and they were unable to purchase houses in 2004. In 2013, the monthly affordable payment for housing of the urban households on the lowincome level is 1641 yuan, which exceeds the basic consumer expenditure, so they had the remaining income available for purchasing houses. Comparing the monthly affordable payments for housing of the urban households in 2004 and 2013, we can find that, after almost ten years of development, the monthly affordable payments for housing of the urban households in Beijing had been significantly improved, in this way we can conclude the capabilities of the urban households in Beijing to pay for housing are enhanced. Set the annual loan interest rate r = 5.51%, the down payment ratio is 30%, n = 30 years[20] is the loan period. And according to equation (8), we measure housing affordabilities of the urban households on different income levels in Beijing, the results are shown in table 6: Table 6. Housing affordability of the urban households in Beijing Years
income level
Average
Low
Mediumlow
Medium
Mediumhigh
High
2013
Housing Affordability ( million)
148
41
95
115
162
245
2004
Housing Affordability ( million)
44
-2
20
35
61
116
Comparing housing affordability of the urban households on different income levels in Beijing in 2004 and 2013, we can find, housing affordability of the urban households in Beijing had improved. According to the website of Soufang [21]and the website of XiTai real estate data[22], in 2013 the average price of new commercial housing in eight districts of Beijing was 28,700 Yuan/m2, the average price of Second-hand housing in eight districts of Beijing is 38,036 Yuan/m2; According to Real Estate Market Conditions of Beijing in 2005[23], we can know the average price of new commercial houses in Beijing in 2004 was 5642 Yuan/m2, the average price of Second-hand housing in Beijing in 2004 was 3921 Yuan/m2. Then we can measure the affordable housing squares that the urban households on different income levels in Beijing can buy via equation (9), the results are shown in table 7. Table 7. Affordable housing squares of the urban households at different income levels
Years
2013
income level
Average
Low
Mediumlow
Medium
Mediumhigh
High
House prices (Yuan)
New homing squares (m2)
52
14
33
40
57
85
28,700
Second-hand housing squares(m2)
39
11
25
30
43
64
38,036
New homing square (m )
77
-3
35
62
108
206
5,642
Second-hand housing areas(m2)
111
-4
51
90
155
297
3,921
2
2004
Table 8. Household income of urban residents in Beijing and price growth multiples
Years
total expenditure of basic needs
New commercial housing
Secondhand housing
Average
Low
Mediumlow
Medium
Medium high
High
2013
33,996
28,700
38,036
104,835
53,691
79,274
88,698
111,578
151,019
2004
24,485
5,642
3,921
45,350
23,683
33,978
41,311
53,518
80,013
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Multiple
1.4
5.1
9.7
2.3
2.3
2.3
2.1
2.1
1.9
From table7, we can see, along with the increased household disposable income, the low-income urban households in Beijing could cover the expenditure of basic needs in daily life, and the affordable housing squares changed from negative to positive, the low-income urban households improved their housing conditions, but these families could buy only a little of housing squares; For all income levels of urban households in Beijing, except for the low-income urban households in Beijing , regardless of new commercial housing or second-hand housing, the affordable squares decreased. The increasing disposable incomes enhanced the housing affordability of urban households in Beijing, but the excessive growth of house price related to the disposable incomes of urban households in Beijing resulted in the decreasing affordable housing squares. According to the Ministry of Construction[24], the commercial residential squares in the real estate market were mainly 90-140 m2, which is more than the affordable housing squares most urban households could purchase, made the problem of purchasing houses for urban households in Beijing even worse.
4. Conclusion In this paper, we measure the housing affordability and the affordable housing squares of the urban households on different income levels in Beijing in 2013 and 2004 based on the extended linear expenditure system model. By comparison, we find that, after almost ten years of development, the housing affordability of the urban households on different income levels in Beijing had enhanced. However, the excessive growth of house price made most urban households in Beijing purchase less housing squares, which were less than the housing squares of majority of commercial housing in real estate market in 2013. With the development of economy, the household disposable incomes of urban residents increases, can cover the expenditure of basic needs. And urban households in Beijing have more remaining disposable incomes to purchase houses. In support of housing loans, assuming the annual interest rate of housing loan and the loan period unchanged, the more disposable income it is, the stronger housing affordability it is. To solve the problem of purchasing house for urban residents, the government has to increase the disposable incomes of urban residents greatly. In addition, the government has to control the reasonable growth of house price. What’s more, real estate business providing housing should take housing affordability and the affordable housing squares of urban residents into account. In this paper, we use the extended linear expenditure system model, and measure housing affordability and the affordable housing squares of urban households in Beijing in 2013 and 2004. By comparison, we find that, the problem of purchasing house of urban households had improved from the point of housing affordability, but the problem were more terrible from the point of affordable housing squares. In this study, we study housing affordability from the micro level and consider factors such like the structure of expenditure, the household disposable income and the commercial housing loans. Comparing to dynamic methods, ELES-model is a static method. In future study, we should consider some dynamic methods and macroeconomic factors that affect housing affordability. Acknowledgements This research is partially supported by the grants (71401188 and 70921061) from the National NSFC, the third 211 construction funding and Program for Innovation Research in CUFE.
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