‘Affordable housing’ is a phrase that has been used in the media in different ways.

A common definition is that a house is said to be affordable if its asking price is 75 per cent of the median selling price of houses in the area.

In a few months the median house price in Auckland will be a million dollars.

Does that mean that a house costing $750,000 dollars is suddenly ‘affordable’?

Likewise we are told 20 per cent of houses at Hobsonville are ‘affordable’.

An alternative definition is that housing is affordable if the cost of housing is 40 per cent of take-home pay.

Clearly what is affordable for a family depends on what they earn so in this scenario the family income needs to be the starting point.

Statistics NZ gives the median family income in Auckland for 2015 as $1575 a week.

Using the IRD tax calculator and taking 3 per cent for KiwiSaver – leaves $1183 take-home pay.

Taking 40 per cent of this gives $473 a week to pay the mortgage (or rent). If interest on the mortgage is 5 per cent this will sustain a mortgage of $350,000.

With a 20 per cent deposit a house costing $440,000 is therefore affordable under this definition.

(Prudence suggests you should be prepared for an increase in mortgage rates to 7 per cent – meaning you should only spend $360,000 on a house.)

When Labour promises 10,000 ‘affordable homes’ a year costing $500,000 to $600,000 – the discussion above shows they are not affordable to more than half of the population.

In fact Labour have shut out exactly the families they are claiming to help.

(cont..)