Housing affordability - informing local government with some facts and figures

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Housing Affordabilityinforming local government with some facts and figures

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sAbout the research

This work is designed to provide a practical resource for local government to address housing affordability, using census data-based time series analysis, to quantify:

– Who is in housing stress?

– How many are there?

– Where are they? and

– What can be done about it?

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sEvidence based decision making

Objective: To informing housing policy to address

housing affordability at the local level. How:

Understand it...Define it...Quantify it...

Identify the issues (What does it mean?)...Make it relevant to good decision

making...

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DriversDemand for dwellings has grown at a faster rate than overall population growth

Household types (living arrangements) have become more diverse.

Demand has changed a lot while supply has changed only a bit.

Where supply has changed a lot, there are continuing high prices (for both rental and purchasing).

IndicatorsThe key indicators for supply not meeting underlying demand are:

• Increasing house prices (rental and purchasing);

• Increases in mortgage foreclosures;

• Increases in homelessness;

• Delays in the formation of young households (young people staying in the family home for longer).

Understanding housing stress (macro-level)

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sMortgage Stress• High proportion of low income earners• Insufficient supply of housing• Insufficient housing stock diversity• Homebuyers taking too much risk• Rising housing prices; interest rates• Job loss; economic downturn• Static or declining incomes• Family break-up

Rental Stress• Rents rise due to insufficient rental stock supply• Large rental market (private rentals)• Concentration of family types known to be prone to rental stress (One parent families; Couple families with young children; Older lone person households)• Gentrification and rapid social change• Insufficient public housing / subsidised housing supply

Understanding housing stress (local-level)

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sDefining housing stress• The most extreme form of housing stress is of

homelessness ....• 30% of household income is considered a good

benchmark of the critical affordability level in the household budget.

Cumulative % of households by % of income spent on housing (ABS 2006 Census)

)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20% 30% 40% 50% 60% 70%

Hous

ehol

ds (%

)

Income spent on housing costs (%)

Purchasing Renting

Above 30% the number of households rapidly declines

Most hhd’s spending >30% are in 30-40% range

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• HOWEVER... We also recognise the “middle income” earners (in the third quintile - 40th to 60th income percentile). Those in this group who spend more than 30% of income on housing are also vulnerable and in many circumstances have only limited housing choice.

Defining housing stress

HOUSING STRESS

• the NATSEM model is used in this work to define households in housing stress as those with equivalised household income in the lowest 40% (two quintiles) of all household incomes in Australia, who are spending more than 30% of their gross household income on either rent or mortgage repayments.

‘MARGINAL’ HOUSING STRESS

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sQuantifying housing stress

Tenure types

Income levels

% income spenton housing

All households7,144,094

Purchasing & Renting4,366,934

61.1%

Purchasing2,436,115

55.8%

Renting1,930,819

44.2%

Low231,27442.1%

Middle143,40626.1%

High175,20431.9%

Middle95,17815.3%

High25,5984.1%

Fully owned & Rent-free 2,570,443

36.0%

Unknown421,45317.3%

≤ 30%1,464,778

60.1%

> 30%549,88422.6%

Not stated206,717

2.9%

Mortgage stress

9.5%

Unknown240,99512.5%

≤ 30%1,068,419

55.3%

> 30%621,40532.2%

Marginal Mortgage

stress5.9%

Housing Stress

731,90310.2%

Marginal Stress

238,5843.3%

Rentalstress

25.9%

Marginal Rentalstress4.9%

Low500,62980.6%

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sQuantifying housing stressState and Territory comparisons

Housing Stress by State/Territory, 2001 and 2006 Census

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

NSW Vic QLD SA WA TAS NT ACT Australia

Hous

ehol

ds (%

)

States and Territories

2001 2006

Levels were remarkably consistent between states, with only a 1.1% variation between the levels in NSW, VIC, QLD and SA.

Proportions of stress have increased in every state except WA and NT (incomes keeping pace with price increases).

New South Wales had the highest level of housing stress (11.1%).

Housing Stress by State/Territory, 2001 and 2006 Census

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sQuantifying housing stress – who?Overall (mortgage & rental) Stress

Overall Housing Stress by Household Type, 2001-2006 (ABS Census)

Young Maturing Older Young Maturing Older Young Maturing Older Young Maturing Older Otherfamily

Group h'holds

Couples with children Single parent families Couples without children Lone person households Other

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2001 2006

Household type

Hous

ehol

ds (%

)

Total housing stress tends to decrease with age as the key tenure type with no housing costs increases.

Single parent families are significantly stressed also note young families and lone person households

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sQuantifying housing stress – who?Mortgage StressMortgage Stress by Household Type, 2001-2006 (ABS Census)


Group h'holds


0%

5%

10%

15%

20%

25%

30%

35%

40%

2001 2006

Household type

Hous

ehol

ds (%

)

Note: Single parent families again; BUT also note older couples without children AND older lone person households under considerable mortgage stress

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sQuantifying housing stress – who?Rental StressRental Stress by Household Type, 2001-2006 (ABS Census)


Group h'holds


0%

10%

20%

30%

40%

50%

60%

2001 2006

Household type

Hous

ehol

ds (%

)

Note again: single parent households BUT look at the proportion of older lone person and older empty nester households

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Understanding the role and function of an area is the key to understanding any policy issues for that area.

Informing Local Government

The extent to which levels of housing stress is a problem will vary dependent on the role and function of the local area to those household types.

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sHousing Stress in Frankston City by Census Collection District, 2006

Frankston North and Frankston Central recorded the highest levels of housing stress and the largest increases between 2001 and 2006, indicating that the problem is becoming more severe in these areas.

Frankston Central had an extremely high level of rental stress and lower mortgage stress, while Frankston North had very high levels of both rental and mortgage stress.

Frankston Central is undergoing some regeneration, with young singles moving into the area to access employment and education. Rental stress is particularly high among the vulnerable older lone persons group here, who may be forced out by rising rents.

Skye-Sandhurst had slightly higher levels of marginal mortgage stress indicating that it may take two incomes to pay a mortgage there, and with recent interest rate rises there could be issues with affordability in this new suburb.

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What residential role and function is played by suburbs within the LGA?• Suburb Typology for each suburb

Informing Local GovernmentHousing Affordability

What is the role and function of the LGA by looking at?...• Age structure for LGA and SD, 2006• Household types LGA and SD, 2006• Household Types, Change 2001-2006, LGA• Housing Tenure, LGA and SD, 2006• Emerging dwelling structure, LGA, 2001-2006• Household incomes, LGA and SD, 2006• Change in household income quartiles, LGA, 2001- 2006

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What types of households are experiencing housing stress?Breaks down housing stress by household type to identify which households are at greater risk.

Certain household types have greater propensity for certain tenure arrangements, and so mortgage and rental stress are analysed separately.


How many households are in housing stress?Presents the levels of housing stress and marginal housing stress at the LGA, compared to the Statistical Division level in 2006 and 2001 and examines change over time, and differences between households.

ALSO presents the data for overall housing stress and separates mortgage and rental stress data.

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s What can be done?

• Reviewing planning controls• Encouraging the development of medium and higher density• Selective land release • Joint ventures with developers and housing associations• Providing incentives to developers• Exploring and advocating for innovative methods• Initiatives relating to directly assisting households• Rent to buy schemes• The National Rental Affordability Scheme• Providing financial counselling and education services• Schemes designed to reduce household costs


Increase supply, diversity and choice!

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sInforming Local Government…“Sustainable communities are diverse communities”

Young families

Young people eithercouple or remain as lonepersons (or in group)

Young couples

Young couple mayhave children and become young families

Young families matureand parents mayseparate/divorce

Mature families

Single parentfamilies

Young lonepersons and/or

Group households

Young people leavehome to form newhouseholds, leavingbehind ‘empty nesters’

Lone person /group households

Emergingempty nesters

Empty nesters

Old lone persons

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sSupply and Demand Analysis...

Analyse the LGAs housing consumption patterns both in relation to residential supply and demand by addressing the following questions: • How are households changing?

• How is the dwelling stock changing?

• Who is living in what type of household and dwelling?

• How is age structure changing?

• Who is leaving and why?

Informing Local GovernmentHousing Opportunity

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sResidential Opportunities Analysis...

Quantify and locate dwelling development opportunities:

• Where is residential development occurring?

• What are the residential opportunities in and around designated activity centres?

• What are the residential opportunities on redevelopment sites?

• What are the residential opportunities on underutilised residential lots?


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Increase overall dwelling supply


Increase diversity of dwelling stock

Increase housing choice

Increase housing affordability

Build social sustainability

Build environmental sustainability

Maintain social networksMaintain the broadest range of services & facilities

Data & Analytics

Housing affordability - informing local government with some facts and figures