Affordable Housing in Australia. It's a Problem.
It’s probably not something you think about much if you’re already settled in your home and making your mortgage commitments each month. But if you’re a young Australian or you have a low income, it’s front of mind.
Australia has a critical problem in all of its biggest housing markets with five Australian cities in the top 25 severely unaffordable housing markets in the 2019 Demographia survey of 91 metro markets. Good old Sydney ranked the 3rd least affordable out of the 91 listed.
It’s no surprise that the mean age of first home buyers in Sydney is now 38 years old. On average, tenants are spending far more than 30% of their income on rent, so they are struggling to save a deposit.
But that’s the first world problem side of things, there are people out there doing it tougher. Australia’s private rental market is failing to provide affordable homes to the bottom 40% of income earners, forcing many to cram into overcrowded rooms, couch surf with friends or even live out of their cars.
Quite simply the demand for affordable housing is exceeding supply to the tune of 212,000 homes according to the Australian Housing and Urban Research Institute (AHURI). This is resulting in 4/5 very low-income households paying unaffordable rent – more than 30% of a household’s gross income.
So why is this happening? And how can we fix it? Let’s look at the why first.
Research conducted at Swinburne University has found the shortage has increased since 2011 and will continue to rise. Firstly, because we’re simply not building enough social and affordable housing. And secondly, higher income households are actually moving into the homes that only low-income households can afford.
While the private market is producing a lot more supply, there is a lack of supply at the lower end of the market. Very low-income earners (earning up to $673 per week) and low-income households (earning between $674 – $1200 per week) are struggling to find supply because neither the public or private sector are building enough affordable homes.
In the 90s Government housing policy shifted from home building to providing rental subsidies. And unfortunately, the private sector hasn’t filled the gap left by the public system.
The housing market just isn’t geared towards providing housing for low income Australians. And the problem can’t be fixed by the private market alone.
So how do we fix it?
We need to build in excess of 200,000 homes, that’ll cost around $100 billion. Given the amount of money the Government’s currently spending, we can’t expect they will foot the whole bill. It’s time to be clever. There are ideas out there like providing land free of charge to the superannuation industry, so more funds could be invested in social housing. These homes need to rent out for as low as $202 per week to meet the needs of low income families.
And it’s not just about housing supply. We also need to take work-life balance into account – when building social housing we need to consider location for employment options. The properties that are affordable are increasingly on the outer areas of large cities and regional towns, rather than inner or middle city suburbs. This means low-income families face a longer commute to work. Better public transport options need to be created to help – places like Singapore and Hong Kong have developed extensive public transport options to help with work/life balance.
The way things currently stand, only the poorest will benefit from the public housing system, while the younger generation struggle to get on the property ladder. Housing has a direct impact on our well-being and also enhances the economic productivity of a city. If we don’t handle housing affordability properly, then it may trigger economic and political crises – and we sure can’t handle that right now!
When the Government has time to scratch itself, this issue needs to be back on the table. And we need to look at affordable housing systems for both the rental and ownership sectors.
Cooperation between the public and private sector could help change Australian lives for the better. And wouldn’t that be nice?