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Australia’s housing affordability crisis
August 21, 2007, 1:19 am
Filed under: australia, Macro trends, Oz stats, Trends stuff

The great Aussie dream is dying. Owning a beautiful house with a Jamie Durie-styled garden is an unobtainable fantasy for many young Australians due to the nation’s current housing affordability crisis. With soaring rent and exorbitant housing prices—it’s practically impossible for young people to move out of home let alone even consider buying their first house.

The so called ‘housing crisis’ has been splashed across the media in recent months. There is no single solution to the problem, but federal, and state and territory governments need to work together to provide greater support to first home-buyers and low income earners who are being driven out of the housing market.

A lack of affordable housing is clearly making home ownership and even renting a nightmare for ordinary Australians. According to the 2006 Census, over 500,000 Australian households are facing ‘housing stress’, which means they spend more than 30 per cent of their income on rent. Similarly, ‘mortgage stress’ is affecting over 500,000 households, with home owners directing more than 30 per cent of their gross income into mortgage repayments.

Current strategies to resolve the escalating housing crisis do not address the need for ongoing financial support. The First Home Owner Grant and state government schemes that reduce stamp duties are great incentives to buy a home. Yet they remain only launching pads to home ownership, not ways of managing debt and avoiding mortgage stress. For instance, the $7000 First Home Owner Grant can only be a starting point when the median house price in Melbourne is $420,000.

The Howard Government’s solution to the housing crisis is to release more land on the outskirts of metropolitan areas in the hope that it will increase land affordability. While increasing the amount of available land may reduce housing demand, it’s also a one-way ticket to urban sprawl. This means metro regions rapidly grow, which can often result in a delay in establishing community infrastructure like public transport, schools and healthcare facilities.

In July this year, the federal Opposition pledged to create a $500 million fund to encourage local councils to cut infrastructure costs and red tape in the home building process. Local councils would receive grants if they proved they could reduce costs associated with developing new housing, such as installing sewerage, electricity and roads—which are traditionally shouldered by home buyers. Whilst the ALP recognises the burden of taxes, levies and stamp duties on home buyers and the long term benefits of investing in infrastructure in new communities, it remains uncertain whether their strategy can significantly lower housing prices.

One method of addressing the housing crisis is to examine land use in existing suburbs. Rather than simply bulldozing more trees on urban fringes to make way for more housing estates, land use should be in line with a long term housing plan. Usually implemented by state governments, such plans now require an open approach to new developments, recognising the need for a mixture of property types and dwellings, from apartments, to townhouses, to strata titled houses. The ideal of having a house on a quarter acre block is no longer feasible for most people, particularly for first home buyers.

Furthermore, critical ongoing financial support is urgently needed to cover a range of different circumstances—from supporting low income earners to pay their rent, to aiding first home-buyers to pay off their mortgages. Lobby group Australians for Affordable Housing (AFAH) has put forward a proposal for addressing housing affordability. They are calling for the First Home Owners Grant to be extended into a mortgage assistance scheme benefiting those who struggle to pay off their mortgages in the first few years of ownership. AFAH also proposes an increase in Commonwealth rental assistance to a maximum of $20 per week for low income earners who cannot afford their own homes or are unable to access public housing.

Even more pertinent is the need for public housing. In Western Australia, for example, there are 15,400 people on waiting lists for public housing. The WA Government announced a $417 million injection into a public housing ‘rescue package’. Yet the federal government has supported an initiative for private companies to develop public housing, potentially excluding state governments from providing public housing. Nevertheless without increased public housing, the rise of homelessness in Australia is a real possibility.

The key to finding a solution to the housing crisis is cooperation. Federal, state and territory governments need to work together to support young people, ordinary Australians and those living on the poverty line. We need more financial initiatives, more public housing, and opportunities to develop both older and newer suburban areas with greater planning and foresight. Most of all we need these initiatives to begin now or risk severe problems such as rising homelessness.

( via ACT NOW written by Natasha Chow)

Research Links ::

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