OPINION: IN the run-up to the Federal election, housing affordability has suddenly become a hot topic, partly because potential interest rate rises will further impact cost of living pressures. So far, political announcements have largely centred on easing access to home ownership. There appears little appetite to address an increasingly problematic private rental sector, with nationwide rent escalations and vacancy rates falling to critical levels. So why is housing affordability such an important issue, and why the focus on home ownership policies?
The term housing affordability is tied to the principle that households should have access to an adequate standard of housing without the cost burden impacting on well-being. Affordability constraints often result in price-driven trade-offs, for example, between tenure, location and dwelling quality and can also prevent households from forming in the first place. Such affordability issues arise because incomes are too low relative to house prices/rents and there is a lack of available subsidised housing.
Falling rates of home ownership are politically concerning, particularly given the basis of Australia’s retirement system is outright home ownership. As the biggest barrier to ownership is the deposit gap, policies tend to centre on reducing this gap through cash handouts and guarantees. Simple policy, but largely effective only in bringing forward the purchases of those that would have probably bought in any case. Meanwhile, grossly inadequate Commonwealth Rent Assistance payments for lower-income private renters and a general lack of subsidised rental housing remain in the too hard basket.
As dwelling prices rise quicker than incomes, aspiring homeowners are now residing for prolonged periods in the private rental sector. In turn, a greater proportion of higher-income households seek out more affordable rents to increase their capacity to save for a mortgage deposit, pricing out households on low incomes. Anglicare recently identified fewer than 1% of rentals affordable to recipients of JobSeeker, parenting payments and the Age Pension.
There is now less social and affordable housing stock available compared to a decade ago, and while state and territory governments have committed funding to increasing and improving the supply of social housing, the sector remains too small, resulting in extensive waitlists and protracted wait times. Recent figures show that the quantity of social and affordable housing needs to increase by 5.5% a year to meet need but is forecast to grow at only 1.4% by 2026 on the current trajectory.
With private rental sector reform deemed too difficult and the direct provision of social housing too expensive for the Coalition Government, they must be seen to be doing something to address affordability. They have promised to expand their low-deposit guarantee schemes, which largely assist moderate-income earners into ownership. And while a further $2Billion in low-cost financing will be made available to Community Housing Organisations, the Coalition’s housing agenda offers little for the sizable proportion of low-to-moderate-income households living in housing stress and poverty.
While Labor’s housing agenda also targets home ownership through a ‘Help to Buy’ shared-equity scheme, the opposition party has at least pledged to deliver 30,000 new social and affordable homes, develop a National Housing and Homelessness Plan and create a National Housing Supply and Affordability Council, with the intent to assume a proactive role in relieving pressure along the entire housing continuum.
It has long been clear there is a urgent need for a national housing strategy with targeted initiatives designed to improve housing access and affordability. Yes, it is difficult, and yes, it is expensive but major reforms to both demand and supply are essential to deliver a sustainable housing system into the future.
By Steven Rowley and Adam Crowe.
Steven Rowley is professor of property studies in the School of Accounting, Economics and Finance at Curtin University and Director of the Australian Housing Urban and Research Institute’s Curtin research centre. He has been publishing impactful research on housing affordability, affordable housing and housing supply for over twenty years securing numerous research grants from industry and government.
Adam Crowe is a postdoctoral research fellow at the AHURI – Curtin Research Centre. His research examines innovative ways to improve tenure security within the private rental sector, with a focus on tenant experiences and outcomes, policy innovation, and Build-to-Rent as an emerging asset class touted to increase rental supply. Adam’s research builds on his PhD thesis which explored the socio-spatial and psychosocial effects of shifting housing and neighbourhood dynamics for lower income households.