Housing affordability

Housing affordability (or ‘unaffordability’ as Professor Bill Randolph from the University of NSW suggests we should re-name it,) is regularly dominating the headlines of all forms of media as well as being a major preoccupation of governments, and many members and sectors of the community.

The key determinants of housing affordability are a complex mix of supply and demand for housing; dwelling prices/rents; interest rates; household incomes; and demographic factors.

As median house prices across Australia reach unprecedented highs, over 400,000 lower income households are paying more than 50% of their income for housing.

Important recent research by the Australian Housing and Urban Research Institute (AHURI) drills down to give more of face to who is in housing stress in Australia. Low income private renters are particularly likely to be in housing stress, even more so than lower-income home purchasers. Almost half of lower income households in stress are working households, dependent not on welfare payments, but on employment as their primary source of income.

Once in housing stress there’s also a likelihood it will continue – there’s close to a 50% chance that a person living in a household in housing stress in one year will be living in a household in stress the following year.

Indigenous Australians in particular experience the highest level of housing need. The percentage of Indigenous Australians living in overcrowded households is almost five times that of the non-Indigenous population. Housing solutions for Indigenous Australians need to be particularly mindful of diversity between areas. The level of need is highest in remote Australia, but the areas needing most additional housing are in the cities.

Housing affordability is now a national public policy priority. Professor Randolph identifies that housing policy needs to take three major directions:

• Policies that are sufficiently responsive to the huge changes that have taken place in family structures, labour markets and housing markets over the past few decades.
  
• Policies that rise to the immediate challenge of improving affordability outcomes for those currently in housing stress as well as the long term challenge of improving affordability outcomes.
  
• Policies that provide opportunities for housing security and wealth creation in an environment where not everyone who aspires to enter home ownership will be able to do so.
  

Some initial policy responses to these challenges have already been outlined in the recent Federal Budget, including a National Rental Affordability Scheme to attract private investment into affordable rental housing; a Residential Investment Fund to support infrastructure provision in rapid growth areas; and 600 new houses for homeless Australians. Key structural parts of the response include the setting of a clear national affordable housing target, namely halving the number of low income households living in unaffordable housing. The new National Affordable Housing Agreement will also be critical.

Ultimately though, this issue will require much more than action just by government. There are roles for business, non-government, philanthropic, academic sectors, just for starters. And it will take some creative thinking to what is a very complex problem.