While studying my Bachelor of Planning degree at university, I completed quite a few assignments on affordable housing as I felt it was an important topic to the urban planning and property industries. Two years later I am still very intrigued, to the extent that I will publishing a series of articles on this epidemic. Additionally, I have dedicated a page for resources on The Planning Boardroom website which are located on the Affordable Housing Portal.
Some of the areas I will be focusing on in future articles include; key issues, Government policies, Generation Y, relevant statistics, my personal struggle, renting vs buying, property investment, and I will attempt to offer suggestions.
I will be undertaking interviews with key stakeholders in the property industry to find out their opinions and I will be presenting their findings. If you would like to share your thoughts or have any suggestions please email me at firstname.lastname@example.org.
Affordable Housing: Setting the Scene
To start off, below is a list of the key contributing factors to the affordable housing problem. There are probably more but this is just a quick list I compiled on the train to work. In the articles to follow, I will focus on some of these issues.
-Demand outweighs supply
-State and Local Government charges
-Struggle to save for deposit
-Reduction of first home owners grant
The determining factor of housing affordability is ‘housing stress’. A household which falls in this category is usually spending more than 30% of their income on home repayments. I browsed the web for some relevant definitions and they appear below.
A generalised definition of housing stress according to Wikipedia is “a situation where the cost of housing (either as rental, or as a mortgage) is high relative to household income. It may also be used to describe inadequate housing for a proportion of the population.” (Wikipedia)
Tony Kryger wrote about ‘Mortgage Stress’ in 2003 which was published on the Parliament of Australia’s website. The research is not current but it still demonstrates the housing affordability problem was fairly prevalent almost 10 years ago. Kryger used data sourced from the National 2001 Census, which revealed “more than one in ten Australian homebuyers are experiencing ‘mortgage stress’,” and he defines in his research where a homebuyer is paying “35 per cent or more of their income on home loan repayments”. (Parliament of Australia)
In a paper published in 2008 in conjunction with the 3rd Australasian Housing Researchers Conference, it examined the variety of definitions used to measure ‘housing stress’. The three definitions use 30% as a basis point but it is based on different variables. These are;
a. More than 30 per cent of the household’s income is being spent on housing costs
b. More than 30 per cent of the household’s income is being spent on housing cost and the household is in the bottom 40 per cent of Australian incomes
c. More than 30 per cent of the household’s income is being spent on housing costs and the household earns between 10 and 40 per cent of Australian incomes and two types of income, disposable and gross.
It is noted in the abstract of this paper that these different definitions can have a large influence on the number of households faced with ‘housing stress’.
(NATSEM University of Canberra)
The Australian Real Estate and Property website is a fantastic resource for property-related issues. They define housing stress also as 30% or more of a household’s income on their property repayments. (Australian Real Estate and Property)
Additionally, the website refers to a speech made by Tony Richards from the Reserve Bank of Australia in September 2009. Richards declared that Australia’s strong economic position averted the possibility of a major recession, even though housing prices are still considered high.
Richards stated “over the past five years, housing prices have risen less rapidly than incomes, after a long period when the reverse was true. This was a positive development, which reduced the vulnerability of our economy going into the global financial crisis. Nevertheless, the ratio of Australian housing prices to incomes is still high relative to earlier decades, or compared with other countries” (Reserve Bank of Australia)