Who is affordable housing affordable for in Dubai?

One of the bright spots for declining housing prices is the fact that property, whether you are looking to buy or to rent, is supposed to become more affordable for the average consumer.

As Dubai is nearly set to welcome almost 25 million visits – 14 million of which will come from abroad – at Expo 2020, it is important that the city is competing where it matters most.

While investment is important, creating a healthy ecosystem of residents balanced by foreign investors is also a priority in helping to shape a happy, smart city. With that, good, quality housing that is affordable is one of the most fundamental factors in a city’s livability. Considering attention has heated up around Dubai introducing affordable housing, it is important to define what is actually affordable against the statistics available to us to see what changes there have been in overall costs for Dubai’s consumers.

Affordable housing, as defined by the Department of Housing and Urban Development (HUD) in the United States, is housing that can be obtained for 30 per cent, or less, of a household’s income. This varies from city to city depending how far away the urban centre is, where the majority of people commute to for work.

The dynamics of Dubai’s elongated coastline, which has grown away from the historical centres of Bur Dubai and Deira – coupled with the spreading out of other communities further out into the southeast and southwest parts of the emirate – has given Dubai multiple centres for commerce.

If one works and also lives in DIFC, they have a much smaller contribution toward transportation costs and could spend a bit more on housing. However, if one is working in Jumeirah Lakes Towers, and living in Dubailand, transportation costs will be higher, accounting for both the distance and the fact that public transportation does not link the two communities. As the city is rapidly developing, these dynamics will continue to change for the better.

A central question is: who is affordable housing affordable for?

According to a Dubai Statistics Centre’s (DSC) 2017 labour force survey, 18.4 per cent earn between Dhs10,000-35,000+ per month, with 76.8 per cent earning below Dhs10,000, the largest group of which earns below Dhs2,499 monthly and are individuals who are provided with worker accommodation.

When looking at the average household size (4.2 people as reported by DSC), a minimum of a two-bedroom apartment would be needed. The majority of residents who seek housing are those earning between Dhs2,499-10,000 per month and have up to Dhs3,000 per month to spend on housing.

Based on these numbers, if purchasing, a property that costs up to Dhs780,000 would be considered affordable; if renting, a property should cost Dhs36,000 annually.

According to the Dubai Statistics Centre’s Consumer Price Index (CPI) for 2019, broken down monthly, the general index number has remained fairly steady for the entire year, starting at 107.57 in January and moving to 107.46 as of July. These prices are indexed against those in 2014, and overall, prices have increased in almost every category for the past five years, as evidenced by the rating that sits over 100. The index grants the most weight to housing costs, which means that a shift in those costs, should also shift the overall index.

The CPI accounts for other necessary expenses such as transportation and education. While the government previously froze tuition costs, this did not result in the costs decreasing: it just meant they would not go up for another year in a row. When coupled with housing costs, these two items weigh heavily on a family’s budget and are therefore important to control. The most recent Annual Cost of Living survey conducted by Mercer found that Dubai went from being the 26th-most expensive city on the list in 2018 to 21st in 2019, despite price declines in the housing market and tuition costs being frozen.

While developers may be enticed to continue building luxury properties that yield a higher return, there are only so many millionaires who will be able to buy them. The pool of middle and lower-income buyers, many who aim to purchase property for the longer-term as a means of generating retirement wealth while imputing their rent, is much larger and should therefore be the focus as the city continues to grow.