Households falling below the fourth decile suffer from housing poverty, the latest studies conducted by Fardin Yazdani, the author of the Comprehensive Housing Plan of the Ministry of Roads and Urban Development, reveal.
Income deciles are groupings that result from ranking either all households or all persons in the population in the ascending order according to income, and then dividing the population into 10 groups, each comprising approximately 10% of the estimated population. The first decile refers to those with the lowest income and the 10th to those with the highest income.
Housing poverty pertains to the inability of people in meeting minimum home standard. Households who are capable of paying the rents of a 60-square-meter home with minimum facilities, namely kitchen, bathroom and a building constructed with semi-permanent materials, are placed above the housing poverty line.
New calculations by Yazdani indicate that the population of households below the housing poverty line has reached 42% of total households, i.e., families in the bottom four deciles and a fraction of fifth income decile.
Housing poverty line was first measured in the Iranian year ending March 2015. In May 2014, Yazdani published the results of the first survey conducted under the Comprehensive Housing Plan in the Persian economic daily Donya-e-Eqtesad according to the methodology used by the World Bank in 2000s.
He found that 24% or one-fourth of Iranian households were below the housing poverty line in the year ending March 2006. An updated research in the year ending March 2014 showed the figure had dipped to 33%.
In other words, the number of households living below the housing poverty threshold has nearly doubled in one and a half decades.
Yazdani, who recently repeated his research, believes that the number of households living below the housing poverty level has definitely increased in the year ending March 2021.
The “time needed to become a home owner in Tehran” index measures the number of years it takes for an average household to buy a 100-square-meter home in Tehran if they save up to one-third of their income. During March 2001-20, this period increased from 12 years to 66 years
The decline in families’ livelihoods and the economy, the rise in the country’s general inflation and rent hikes are the three main reasons behind the families’ housing deficiency.
The rise in the number of households below the housing poverty line over the past 1.5 decades is indicative of the failure of policies designed to support low-income people. The government’s two main affordable housing projects, namely Mehr Housing Project and the National Housing Initiative, have not been efficacious.
Yazdani says policymakers need to take two steps to pull the housing market out of the current crisis. First, they should introduce an annual property tax, a common tool used for years in advanced countries to stabilize prices and prevent the unusual demand for homes from non-consumers.
Property tax requires all home owners to pay a fraction of the value of their property, i.e. at the progressive global rate of 0.5-1.5% in tax on a yearly basis. This type of tax prompts owners to bring their homes to the market as the cost of holding a vacant or unused property increases. The annual tax also discourages speculative investments in the housing market.
Yazdani also studied three other housing indices: “time needed to become a home owner in Tehran”, “housing affordability” and “share of rent expenses in households’ expenditure”.
The first index measures how many years it takes for an average household to buy a 100-square-meter home in Tehran if they save up to one-third of their income. During March 2001-20, this period increased from 12 years to 66 years.
The Housing Affordability Index measures a household’s ability to afford a home, assuming they save up 100% of their income. Average housing affordability is five years in many countries, but the index has now reached 22 years in Tehran and 10 years in other Iranian cities.
A reading above five years is indicative of an “unfavorable condition” and that above 10 years is interpreted as “crisis situation”.
“The share of rent expenses in households’ expenditure for a 75-square-meter unit hit 58% in Tehran and 28% in other Iranian cities last year. The number of renters tripled from the year ending March 1987 to 2021,” Yazdani said.
According to the Population and Housing Census of 1986, only 12% of Iranian households lived in rented properties while the findings of the latest census conducted in 2016 show the figure increased to 30.8%. Yazdani said the number of renters has increased to 38% in the year ending March 2021 and currently an estimated 42% of households in Tehran are living in rented homes.
SCI, CBI Data
Tehran’s housing Consumer Price Index in the 12-month period ending March 20, which marks the end of the 12th month of last Iranian year, increased by 78.2% compared with the corresponding period of last year, latest data released by the Statistical Center of Iran show.
SCI had put the average annual inflation rate for the preceding Iranian month, which ended on Feb. 18, at 75.4%.
The housing inflation for the month under review (Feb. 19-March 20) registered a year-on-year increase of 81.9% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Feb. 18 was 91.3%.
The housing CPI (using the Iranian month to April 19, 2016 as the base) stood at 689.9 for the month under review, indicating a 3.2% growth compared with the month before.
During the month ending Feb. 18, the housing CPI stood at 668.5, registering a 4.7% increase compared with the previous month.
The latest data published by the Central Bank of Iran on Iran’s real-estate market show that during the last Iranian year (March 2020-21), the number of home deals finalized in Tehran totaled 83,303, which shows a 0.3% decline year-on-year.
In the same period, the average price of each square meter of a home in the capital stood at 238.65 million rials ($1,037), signaling a YOY surge of 80.3% compared with the year before.
The central regulator also reports changes in tenancy prices in the capital city and across urban areas.
