Housing Demand, Supply

and Projection

Urban and Regional Planning

Urban Housing
Lecture Compiled By: Admasu A.
NOVEMBER 2018
 Urban Housing I 2

Contents of the slide

Housing Lecture six
1) Housing demand and supply
demand, supply
and projection
Lecture seven
2) Housing demand projection

MU_EiT-M _ School of Architecture and Urban Planning _ Urban Planning and Design Program _ May 2017_Housing demand, supply and projection _ Lecture Six and Seven _ By Konno B.
 Urban Housing I 3

1) Housing demand and supply

a) Housing need
• The concept of housing need derives from an essential
development concern.
• Shelter is a fundamental human need, of direct
Housing importance to levels of well being, while also having
demand, supply
and projection implications for broader developmental issues such as
community, environment, health, identity and security.

• For these reasons, levels of housing are often used as

one of the key welfare indices of the human being.
 Urban Housing I 4

1) Housing demand and supply

a) Housing need
There are three definitions of ‘need’.
• Normative need describes need measured by standards
set by professionals or experts.
Housing • Expressed need is revealed by people’s actions in
demand, supply
and projection seeking and securing housing (equivalent to ‘housing
demand’).
• Felt need reflects the expectations or aspirations of
people, which may not be translated into expressed
need.
 Urban Housing I 5

1) Housing demand and supply

a) Housing need

• Housing need, therefore, means the numbers of people

needing housing irrespective of ability and willingness.
Housing • It requires an overall population growth, rate of
demand, supply
and projection urbanization and rate of new household formation, and
economic opportunities.
 Urban Housing I 6

1) Housing demand and supply

a) Housing demand

• Housing demand is composed of effective demand by

those who have the required down-payment and ability
Housing to service the monthly mortgage, and ‘aspiration’
demand, supply
demand by those who want to own a unit but do not
and projection
have savings to meet the down-payment.
• Need is based on numbers of people needing housing,
demand is the ability and willingness or ability to pay
for it.
 Urban Housing I 7

1) Housing demand and supply

a) Housing demand

• Housing demand is affected by income and cultural

preferences which fundamentally influence housing
Housing consumer’s behavior – defined by what individuals are
demand, supply
and projection actually looking for in terms of housing quality and
price, location, and what they are prepared or able to
pay.
 Urban Housing I 8

1) Housing demand and supply

a) Housing demand

(Effective and social/aspiration demand)

• Household expenditures survey, housing and
Housing demographic census are main resources that reveal the
demand, supply
total demand, the social demand (those who need
and projection
government assistance to access housing) and the
effective demand (those who are willing and able to pay
for the average housing price).
 Urban Housing I 9

1) Housing demand and supply

Issues to be considered while calculating the housing
demand

• average population growth rate

Housing • housing backlog
demand, supply • average household size
and projection
• average income and how are the income brackets
classified
• standard household expenditure pattern
• average price of a low-cost dwelling in the city/country
 Urban Housing I 10

1) Housing demand and supply

Issues to be considered while calculating the housing
demand

• estimated levels of affordability that can be defined for

Housing different social groups
demand, supply • estimated house price-to-income ratio
and projection
• most critical constraint identified in the demand side of
the housing sector
•  any change in the economic condition of the area that
triggers both positive and negative migration
 Urban Housing I 11

1) Housing demand and supply

a) Housing need and demand
Housing need
Felt
Housing need
demand, supply Normative
and projection need

Expressed
need Housing
Demand
 Urban Housing I 12

1) Housing demand and supply

a) Housing need and demand (Example)

Housing demand and supply (…Ratio)

• Addis Ababa has the highest housing demand ratio
of 361 per 1,000 population according to this
Housing source.
demand, supply • The second highest ratio is found in Semera (277
and projection
per 1,000), a city recently established to serve as the
capital of the Afar Regional State,
• Bahir Dar, Amhara National Regional State, has the
ratio of 272.4 per 1,000 population which is third
highest
 Urban Housing I 13

1) Housing demand and supply

b) Housing supply

• Supply is the amount of housing units constructed in a

given period of time in a given area.
Housing • The existing number of housing units in a given area
demand, supply
(Formal, informal; standard, improvised….)
and projection
 Urban Housing I 14

1) Housing demand and supply

b) Housing supply

Housing supply is influenced by policies and public sector

interventions like
Housing • Provision of land at affordable price
demand, supply • Provision of finance
and projection
• Adoption of feasible technologies
• Streamlining the planning regulations and standards
(oppressive housing)
• Intervening where the market fails (through direct
provision, regulating the actors, rent controls…)
 Urban Housing I 15

1) Housing demand and supply

b) Housing supply

Housing supply is influenced by policies and public sector

interventions like
Housing • Encouraging the different actors (Government [social
demand, supply
housing] Cooperatives, private individual builders, real
and projection
estate developers…..)
 Urban Housing I 16

1) Housing demand and supply

b) Housing supply

Housing by private developers at CMC, Addis

Ababa
Housing
demand, supply
and projection
 Urban Housing I 17

1) Housing demand and supply

b) Housing supply

Government [social housing] at Lideta, Addis

Ababa
Housing
demand, supply
and projection
 Urban Housing I 18

1) Housing demand and supply

b) Housing supply

Housing by real estate developers, Sendafa, Oromia

Regional State
Housing
demand, supply
and projection
 Urban Housing I 19

1) Housing demand and supply

b) Housing supply

Housing
demand, supply
and projection

Distribution of Housing Units Supplied During 2007/08-2013/14 in the 27

Cities
 Urban Housing I 20

1) Housing demand and supply

C) Housing backlog/Outstanding need?

Housing
demand, supply
and projection
 Urban Housing I 21

1) Housing demand and supply

C) Housing backlog/Outstanding need?

Housing Backlog is the difference between Current

Housing number of households (HHs) and Current number of
demand, supply
housing units (HUs)
and projection
 Urban Housing I 22

Estimated backlog in Addis Ababa

Table 11.1. Estimated housing backlog in Addis Ababa
Housing
Estimated Outstanding need
No. Housing required for Supply or Remarks
need or backlog
implemented
1. New already formed 210000 70000 140000 Major part catered for by the
families informal/squatter housing
2. Replacing deteriorated 42840 Insignificant 42840 The situation is even worse

Housing units: 18 per cent of the

stock (PADCO)
at present.

demand, supply 3. Relieving overcrowding 1.1 50300 It is also 50300 Density is increasing and it
and projection HH/HU (CSA, 1994) ie. .1 increasing is believed that this figure is
of the households though it with time underestimated.
seems to be underestimated.
4. Replacing improvised 8290 none 8290 The number is still
houses increasing and it is believed
that the figure will be high.
TOTAL 311430 70000 Approx. 241000 at The Medium variant i.e.
high and 233000 233000 is taken as the
(medium variant) backlog.
 Urban Housing I 23

Class Activity (15 minutes)

1) Define the following phrases/terms with your own

words (6 points)

i. Housing Demand
Housing ii. Housing Supply
demand, supply iii. Effective Demand (Housing)
and projection iv. Aspiration Demand (Housing)
v. Social Housing
vi. Housing Backlog/Outstanding demand

2) List and explain the factors that affects housing demand

and supply (4 points).
 Urban Housing I 24

2) Housing Projection

A) Population Projection
Housing • Methods of Population Projection
demand, supply • Estimation of Growth Rate
and projection • Estimation of Future Population Size

B) Housing Demand Projection

 Urban Housing I 25

2) Housing Projection

Why Population Projection?

• Urban planning deals with preparation of Structure Plan
(SP)
• Structure Plan has land use classification of which is
Housing Residential Zone is one of them
demand, supply
and projection • Area/land need to be reserved in the SP for residential
use
• Reservation of land is made based on housing need
/demand
• Housing demand is estimated based on population
projection
 Urban Housing I 26

2) Housing Projection

Methods of Population Projection

Housing
demand, supply I. Cohort – component Method
and projection
II. Mathematical Method
 Urban Housing I 27

2) Housing Projection

Methods of Population Projection

II) Mathematical Method
The Exponential Equation (Growth function)
Housing
demand, supply Pt = P0 ert or Pt = Po *((1+r)(t))
and projection

Where P0 = Initial population size

r = Growth rate
t = Projection period (year)
Pt = Population after ‘t’ years
 Urban Housing I 28

2) Housing Projection

Methods of Population Projection

II) Mathematical Method
Estimation of Growth Rate (GR)
• To project population size in to the future we need to
Housing estimate the growth rate
demand, supply
and projection • To estimate population growth rate, there should be
at least two observation at two different periods
• For example, P2007 and P1994

Pt = P0 ert
 Urban Housing I 29

Estimation of Growth Rate (GR)

Pt = P0 ert
lnPt = lnP0 ert

= lnP0 + ln ert
Housing lnPt = lnP0 + ln ert
demand, supply
and projection
lnPt - lnP0 = ln ert

ln (Pt / P0) = ln ert = rt

rt = ln (Pt / P0)
Pt = P0 e rt

r = ln (Pt / P0) X 1/t

 Urban Housing I 30

Estimation of Growth Rate (GR)

Given two observations P1994 by P2007
Step 1 - Divide P2007 by P1994
= P2007 / P1994
Step 2 - Take ln (exponential) of the result in step 1
= ln (P2007 / P1994)
Housing Step 3 - Divide the result in step 2 by the time
demand, supply = 1/ t x ln (P2007 / P1994)
and projection
Step 4 - Multiply the result in step 3 by 100
r = (1/ t x ln (P2007 / P1994) )x100 %

Pt = P0 ert
 Urban Housing I 31

Estimation of Growth Rate (GR)

Given P1994 = 10,000, P2007 = 25,000 ,  t = 13
years

St 1 - P2007 / P1994 = 25,000 / 10,000 = 2.5

Housing St 2 - ln (P2007 / P1994) = ln 2.5 = 0.916

demand, supply
and projection St 3 - 1/t ln (P2007 / P1994) = 0.916x1/13 = 0.07

St 4 - r = 1/t ln (P2007 / P1994 ) x 100 = 0.07 x 100

r=7%

r = (ln(Pt/P0)*1/t)*100
 Urban Housing I 32

Population Projection

Pt = Po ert
Where
Housing Base year population = P0
demand, supply
and projection Growth rate = r
Projection Period = t

Or
Pt = Po *((1+r)(t))
 Urban Housing I 33

Population Projection

Step 1 - Convert the growth rate in to decimal

number
( Exal. r = 2.4%  r = .024)
Step 2 - Multiply the rate by time (t) = tr
Housing
demand, supply Step 3 -Take the exponential of the result in step 2
and projection = ert
Step 4 - Multiply the result in step 3 by base
year population (P0)

Pt = P0 ert
Pt = P0 ert
 Urban Housing I 34

Population Projection
Given
r = 4%
t = 10 year
Po = P2013 = 10,000
Housing for a town called A
demand, supply
and projection Pt = P2023 = ?

Pt = Poe r x t

P2023 = P2013e .04 x 10

 Urban Housing I 35

Population Projection

St 1 – Convert the rate, = 4% = 0.04 = r

St 2 – Multiply the rate by time = 0.04x10 = 0.4 =

tr
Housing
demand, supply
St 3 – Take the exponential… = e.4 = 1.49 = e rt
and projection
St 4 – Multiply by initial population = 103 x 1.49 =
P2013e r x t

P2023 = 14,900
 Urban Housing I 36

Housing Demand Projection

Formula
Housing Demand = BL + NF + HD + CG

Where
Housing BL = Housing Backlog
demand, supply
and projection
NF = New Household Formation

HD = Housing Units to be Demolished

CG = Contingency
 Urban Housing I 37

Housing Demand Projection

Estimation of Housing Need

The estimation is based on
• Existing Overcrowding
Housing • New Family Formation Replacement Unit
demand, supply
and projection • Contingency
 Urban Housing I 38

Housing Demand Projection

Estimation based on New family formation Replacement
Unit
Steps
• Estimate future population size;
• Calculate additional population during the
planning period;
Housing • Convert the additional population in to
demand, supply households;
and projection • Calculate the current household(HH)- housing
unit (HU) ratio;
• Based on the assumption on HH – HU ratio and
the estimated additional HHs estimate
additional HUs.
 Urban Housing I 39

Housing Demand Projection

Backlog is estimated based on ;
• Current number of households (HHs) and
Current number of housing units (Hus), the
difference of which gives backlog;
• The number of applicants for plots.

Housing Replacement Units can be estimated;

demand, supply
and projection • From the land use proposal map;
 Urban Housing I 40

Example Housing Demand Projection

Housing Demand = BL + NF + HD + CG

Given current HU = 2000

HH = 5000
Housing Existing Backlog = 3,000 HUs
demand, supply
and projection
Housing Units to be Demolished = 500 HUs
New Household Formation = 2,000 HUs
Contingency (10%) = 550 HUs

Total Demand = 6050 HUs

 Urban Housing I 41

2) Housing demand projection

Housing need projection (Example)

Proposed housing need projection in Mekelle

Year Population No. of HHs No. of HUs HH to HU Backlog Future need
ration
2014 - - - - 45950  

Housing 2015
2016
358,131
383,200
98118
104986
56763
68226
1.73
1.54
41355
36760
6505
6868
demand, supply 2017 410,407 112440 80275 1.40 32165 7454
and projection 2018 439,546 120424 92854 1.29 27570 7984
2019 470,754 128974 105999 1.22 22975 8550
2020 504,178 138131 119751 1.15 18380 9157
2021 539,975 147938 134153 1.10 13785 9807
2022 578,313 158442 149252 1.06 9190 10504
2023 619,373 169691 165096 1.03 4595 11249
2024 663,349 181739 181739 1.0 0 12048
Total 45950.0 90126.0
Grand Total (2024) 136076.00
 Urban Housing I 42

Class Activity
The average growth rate of a town Y is 2.5% over 10 years
and base year population is 3.2 million. From the previous
year about 40,000 population are living in slum area. As a
result the area is intended to be demolished. (Average
Household Size=5)
Housing 1. How many new housing units would be needed over
demand, supply the next 10 years?
and projection
2. How many house would need to be built each year to
meet the demand?
3. If half of the households need a plot, then how much
land should be preserve for residence? (Assume each
of them need 150m2 plot)
THANK YOU!