In recent days, the poverty index has once again hit the headlines.
According to the data of the National Insurance, in 2021 the poverty line rose, leaving below it almost 2 million Israeli citizens who are defined as "poor".
The point is that those who really understand poverty, understand that the poverty line is very far from being the right metric to use to define who is considered a poor person in Israel - and he certainly cannot predict the chances of families in Israel remaining in the cycle of poverty in the long run.
Instead, it is better to use the ability test to purchase an apartment, which diagnoses in a much more accurate way who is poor.
The most critical problem in the poverty line index is a structural and essential problem: it is a relative test, which checks the income level of a family.
But the truth is that the idea that a household should only consider the ratio between income and expenses is not necessarily correct.
The correct calculation should be the total assets minus the total liabilities (family value).
One of the significant aspects that can predict poverty in the long term - those who do not own real estate - was not taken into account at all in this index.
Expenses are rising
And from here, we arrive at that "purchasing ability" test, which can be used by the financial institutions, the government and most of all the household in a reliable and good way.
The meaning of the test is the ability to predict the level of a household's ability to buy an apartment.
The formula for this test consists of three components: the family's monthly repayment capacity, the value of the family's assets and the family's possible credit policy.
Cooling down in the real estate market.. Construction of new apartments in Ramla (archive), photo: Yehoshua Yosef
Experience shows that the affordability test predicts the family's ability to purchase an apartment, and is an accurate compass in relation to the steps the family must take to realize the apartment dream, and thus it is much more accurate to measure poverty.
If the state knows how to use the purchasing power index as an index to examine the financial strength of families, we will be able to produce tools and answers for many households in the short and long term.
The principles of determining the index were written by Rabbi Amitsur Ariel (one of the founders of the "Achim Beit" association).
The writer is the manager of "Anchor to the house" from the Ogan group
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