Why Does Australia Have an Affordable Housing Problem and What Can Be Done About It?

Abstract

As a result of economic trends in Australia over the past 25 years, a growing proportion of households have faced high housing costs in relation to their income because of a shortage of affordable housing, particularly in areas where there is ready access to well-paid employment. Problems have been particularly severe for lower income renters. This article provides a proposal to address this shortage, based on encouraging institutional financing of affordable rental housing, suggests more controversial policies that might be needed to address underlying causes and identifies a number of reasons why so little progress has been made.

Pathways to housing tax reform

“…Rising house prices-which are driven in large part by the commodification of established housing and growing demand for housing assets by 'mum and dad' investors-have also pushed household debt to record levels, posing a risk to financial stability and constraining consumption and economic growth . The 'deposit gap' 3 for first home-buyers is now more than double annual household income (Yates 2016). Households unable to buy a dwelling have little option but to rent 2 Housing stress is defined in terms of the '30/40 rule'.…”

“…Households are deemed to be in 'housing stress' if they are paying more than 30 per cent of their income on housing costs and are in the bottom 40 per cent of the income distribution (Yates and Gabriel 2006). 3 'Deposit gap' in this case refers to the gap between the cost of a median-priced dwelling and what bank finance would cover for a middle-income household (Yates 2016). privately. However, the supply of affordable private rental too has steadily declined over the last 25 years and is increasingly concentrated in locations poorly situated in terms of employment options or access to services (Yates 2016).…”

“…3 'Deposit gap' in this case refers to the gap between the cost of a median-priced dwelling and what bank finance would cover for a middle-income household (Yates 2016). privately. However, the supply of affordable private rental too has steadily declined over the last 25 years and is increasingly concentrated in locations poorly situated in terms of employment options or access to services (Yates 2016). Thus, growing numbers of Australians are living in insecure, unsuitable or poorly-located housing, which is detrimental to community welfare and economic productivity.…”

Pathways to state property tax reform

“…Home ownership rates are in long-term decline across all age groups under 65 years of age, and is particularly salient for the 25-34 and 35-44-year old cohorts with implications for generational inequality (Wood, Ong et al 2014;Grattan Institute, see ABC 2017) 3 . One of the constraints for first home buyers is the 'deposit gap' 4 which is now more than double annual household income (Yates 2016). Therefore, unable to buy a dwelling, more households have little option but to rent privately.…”

“…Therefore, unable to buy a dwelling, more households have little option but to rent privately. However, affordable private rental too has steadily declined in supply over the last 25 years and is increasingly sequestered to locations poorly located in terms of employment options or access to services (Yates 2016).…”