Emiratis and expats will benefit from cheaper units as developers renovate old areas to cash in on growing demand.
Affordable homes plan a good fit for Dubai
The policy, approved on Sunday by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, requires the renovation of some of Dubai's older areas.
Low-income individuals will be classified as Emiratis or non-Emiratis, the latter to include expatriates and workers in "strategic sectors" in Dubai.
Many low-paid people were supportive of the plan, despite a shortage of details available.
Talha Saeed plans to move his family to Sharjah because he cannot afford a big enough apartment for him, his wife and three-year-old daughter, even though he works in the manufacturing industry in Jebel Ali some distance away.
"I cannot continue to live in a small studio in IMPZ [International Media Production Zone]. We need space but I cannot afford to live in Dubai," the 33-year-old Pakistani said.
He pays Dh38,000 a year but could get a one-bedroom apartment in Sharjah for the same price. "I will never get a one-bed apartment in Dubai for Dh38,000, so I have no option other than to move far, despite the fact I will be spending almost three hours in traffic."
Shahzad Hanif, 35, moved to Sharjah from Dubai because the latter was too expensive.
"I shifted to Sharjah because I was not able pay Dh50,000 rent for a one-bed apartment in Qusais. I am now paying Dh30,000 for a one-bed apartment in Al Nahda, Sharjah.
"Saving Dh20,000 is a huge amount for me," said the sole earner in a family of four.
A question that remains is who the affordable housing is for. Last year a research paper by Core, the UAE associate of real estate services provider Savills, said Dubai Municipality should define affordable housing as living space for households with an income between Dh3,000 and Dh10,000 a month.
For homes to be considered affordable, they argued, those paying for them should spend no more than 30 to 35 per cent on housing expenses.
The policy will examine families' income levels, where they live and public benefits and will compare them with requirements at the time and the extent of challenges families are facing, the government news agency Wam reported.
During Sheikh Hamdan's meeting with Dubai Executive Council, of which he is chairman, he examined options for accommodation for low-income families based on comparisons and survey results.
These included two main programmes to work with real-estate developers to encourage more housing units for low-income families and to refurbish some older areas in Dubai.
Although Emiratis have been able to access housing through the Sheikh Zayed Housing Programme - a multibillion-dirham initiative building new homes for nationals across the country - low-income housing for expatriates has generally been provided by employers in the form of worker camps.
Lower earners in Dubai's service sector who do not have accommodation provided for them often rely on long commutes from cheaper areas such as Sharjah and Ajman.
Properties for sale that are marketed as affordable by developers remain out of reach for many.
Although the average price for a new home in Dubai has dropped in recent years, a study published by Reidin/Global Capital Partners in December found that 51 per cent of new apartments being built had a price tag below Dh1 million - even "mid-income" families earning between Dh10,000 and Dh30,000 a month have a price ceiling of about Dh790,000, according to a 2015 study by consultancy JLL.
In December, Asma Dakkak, a research manager for JLL, said: "The shortage of affordable housing threatens the long-term stability and economic competitiveness of the country."
Developers are now integrating mixes of low-income and luxury housing in their plans.
Representatives of Dubai Holding are today in Cannes, France for the global launch of its Dh74 billion Jumeirah Central project, which has provisions for student and worker accommodation in the project.
Last month, Morgan Parker, the chief operating officer of Jumeirah Central, said the scheme would be the emirate's first truly mixed-use district.
"We're not positioning Jumeirah Central as a district to any one particular segment of the economy but rather positioning it for all segments. Why are we doing that? To try and improve the robustness of it."
Rizwan Sajan, founder and chairman of Danube Group, said it was already building affordable homes.
"In the past developers mainly focused on the luxury sector but are now looking to provide affordable homes because there is a huge latent demand," he said. "Last year the affordable housing sector did better than other segments. As Expo 2020 approaches, I strongly believe the demand will keep going higher."