Housing is a fundamental human need however due to market forces many individuals around the world lack appropriate housing or are homeless. The microeconomic importance of housing can be highlighted by the global financial crisis of 2008 as the main cause was subprime mortgages loans (Demyanyk & Van Hemert, 2009). The importance of addressing the issue of housing is that it will improve the welfare of the citizens. In addition, it will promote economic development as the elimination of homelessness and housing issues will allow for greater participation of individuals in economic activities. An effective method to measure the affordability of housing is to use the ratio method which measures the ratio of income spent on housing (Mulliner, …show more content…
As such, the government has to ensure that the introduction of low-cost housing through the refreshment of abandoned houses does not affect the housing market by providing housing to individuals or families that can afford to purchase their own accommodation or spend a relatively low ratio of their income on housing. Another risk the government has to avoid with this alternative form of low-cost housing is to ensure that these houses meet the requirements of residents. As such, the failure of many housing projects around the world can be traced back to inadequate planning by the government leading to transportation problems where the low-cost houses are in isolated regions. In addition, the lack of government services such as schools and hospitals adversely impact the effectiveness of housing projects, therefore, reinforcing the need by the government to properly plan for low-cost housing projects to avoid the wastage of funds. In addition, the government should also be aware of the numerous laws that may affect the reuse of abandoned housing for low-cost accommodation. The final risk the government should be aware of is the bureaucracy within the government itself which includes a multitude of rules, regulations, and policies that can affect the success of the