The simulation model is a series of Excel spreadsheets which can be used to estimate the effects of several types of policy changes on different income groups. It can help analysts to determine who is being served by current policies, and who might be served if certain policy changes were introduced. Which policies affect which income groups? Are there gaps to assistance to the very needy, or somewhat needy, households? In designing subsidy programs when budget resources are limited, using the model can help policymakers to identify gaps in coverage of housing programs in some income groups. It can help policy makers assess which types of subsidies may redistribute income in well-targetd, transparent, and fair programs.

In the model, recent income data, rent and sales price data, and subsidy formulas from Poland are included. These figures could be substituted with data and formula from other time periods, countries, or similar programs in order to estimate the impact of different types of policy changes on income groups.

GOALS AND OVERVIEW

The affordability of housing is a major problem in Poland, as it is in most countries. The simulation model designed by the Urban Institute Consortium addresses the affordability of housing options available to different income groups by analyzing the interface between an estimate of the household income distribution for employed persons in Poland and a variety of assumptions about rent levels and prices for new housing and purchases on the secondary market. The simulation analysis considers the impact on affordability of the major subsidy programs—the housing allowance and the TBS (public housing association) programs—to see how they affect the rent burden faced by households at different income levels.

In addition, the analysis attempts to determine whether major "gaps" exist in addressing household affordability: for example, whether households not eligible for the current housing allowance program can afford housing under various cost assumptions, or could afford to take part in a TBS-type project.

The model allows us to examine current rent levels and resulting rent burdens, but the simulation analysis has also been extended to a future scenario in which rents have been increased; we then assess the situation of households with reference to the new income eligibility limits proposed by the Housing and Urban Development Authority (HUDA) for the housing allowance program.

Similarly, with regard to the TBS-type program, the analysis examines the payment burden for households in TBS programs when rents are set at or below the maximum of 4 percent of replacement cost. Finally, households whose income falls above the eligibility limits for TBS may or may not also face severe affordability problems; their options differ from those with more modest incomes and include home purchase as well as private-sector rental housing.

POTENTIAL APPLICATIONS OF THE SIMULATION MODEL

• Current Rent Levels and the Current Housing Allowance and TBS-type Programs
  • What is the profile of rent burden for households at different points in the income distribution?

  • What affordability problems are faced by households not eligible for assistance under the current housing allowance rules?

  • What might be the income and rent burden profile of households that might typically participate in a TBS project?

  • Is there an affordability gap for households those not eligible for a housing allowance but not able to afford a TBS unit?

• Rent Reform and a Revised Housing Allowance Program
  • What would the rent burden profiles be for households if rents were increased under rent reform?

  • What would be the impact of the new housing allowance eligibility rules on assisting households?

• Purchasing a New or Existing Unit with a Mortgage Loan
  • Which income groups can afford to purchase new or existing apartments or single-family houses with the assistance of a mortgage loan?

  • How is the affordability of home purchase affected by differences in location and the structure of housing costs?

APPROACH TO THE ANALYSIS

The analyses described in this section have been addressed through a "simulation" that relates the income distribution for employed households in Poland to various assumptions about rent levels, utility payments, and the cost of new housing. Ideally, an analysis of affordability would examine what Polish households are actually paying for housing. Thus, the analysis would use a database composed of information on individual households—for example, a sample of households selected for interview, with a sampling plan structured to provide nationwide and regional estimates. The interviewed households would be asked to supply information on income, housing costs, utility costs, mortgage loans, and so forth, which would provide figures for the actual payment burden facing each household.

Poland Housing Finance Program
c/o The Urban Institute
2100 M Street, NW
Washington, DC 20037