Investigation on housing affordability in Lanzhou, Northwest China

Purpose – With the rapid increase in both household discretionary income and housing price, how to improve housing affordability is the vital challenge for China, especially for the northwestern region where the household income is lower than that in the eastern region. This paper aims to provide an insight into the housing affordability by analyzing the influence factors of purchasing standard housing in Lanzhou, which is the second largest city in Northwest China. Design/methodology/approach – Price to income ratio (PIR) and housing affordability index (HAI) approaches were applied in this study to measure housing affordability for Lanzhou. Findings – The results show that the PIR values for Lanzhou range from 6.02 to 7.23 between 2001 and 2008. The value exhibits an increasing trend before 2004 and a decreasing trend after 2004. The HAI values vary between 62.0 and 83.2 and are higher from 2001 to 2003 than those from 2004 to 2008. It was observed that the level of influence of the household discretionary income, housing price and the mortgage interest rate on these two values differs significantly in the different studied periods. This indicates that housing affordability in Lanzhou is lower than the acceptable level. Originality/value – The paper establishes an understanding of the level of housing affordability in Northwest China, and provides the basis for the formulation of the new government's housing policy for this region.