JACK DE GROOT. The hidden cost of low rent housing

May 3, 2019

Although just paying the rent is enough of a challenge for most low-income households – as Anglicare’s latest Rental Affordability Snapshot demonstrates – their housing affordability challenge is further impacted by the cost of energy and transport. For them, it obviously forms a much higher proportion of their take-home pay and therefore puts housing affordability even further out of reach. An increased supply of social and affordable housing is an essential part of the solution, as too are more energy efficiency and public transport solutions.

If you are on a low income and looking for somewhere to live, your search will no doubt be tough.

Each April, Anglicare’s Rental Affordability Snapshot shows just how challenging it is for families on low incomes to find an affordable home. This year, the survey found that no rentals in any major city or regional centre are affordable for a single person on Newstart or Youth Allowance.

But while we now have a good grasp of the extent of the housing affordability problem, we know much less about the ways in which the lack of housing choice intersects with the cost of other essentials, such as energy and transport, for people on low incomes.

Based on the available data however, we can make some well-informed hypotheses. If the definition of housing affordability was expanded to consider energy and transport costs, it’d be a pretty safe bet that many ‘affordable’ rentals would no longer be classified as such.

We know that people on low incomes generally spend a much bigger chunk of their take-home pay – roughly 4.3% – on energy bills than higher income earners (even though higher income earners consume more energy). But this is an average. Within the bottom income quintile some households spend upwards of 10% of their incomes on energy. These are households about which we should be deeply concerned, yet policy-makers scarcely even register their existence.

Surveys conducted by bodies such as the Australian Bureau of Statistics and the Independent Pricing and Regulatory Tribunal (IPART) confirm that people on low incomes are less likely to have insulation, and more likely to have older appliances. This means it costs low-income households more to meet basic needs such as heating and cooling: they are effectively penalised for being poor.

There are things we know would improve the outlook for these households. Phasing in minimum energy efficiency standards for rental properties, for example, would increase the take-up of efficiency incentives by owners of low-income rental properties, and in the longer-term would force improvements to the poorest quality dwellings. And moving towards a system of energy concessions calculated as a percentage of the bill would mean financial support more closely matched to the level of need.

But we also need to boost the availability of houses that can provide people with good homes.

For people to go to school or work or to the doctor, for people to build strong relationships with family, friends and community, they need accessible and affordable transport. But there is likely to be an inverse relationship between the cost of rent and the cost of meeting basic transport needs. Well-located houses are more expensive and for people that can’t afford them, covering the cost of petrol or of public transport can take a high financial (and emotional) toll.

In the United States, recognition of the need to factor transport costs into measures of housing affordability has led to the development of a Location Affordability Index. This gives both individuals and policy-makers a more holistic understanding of the cost of living in a particular location.

While better understanding the problem can help us develop better solutions, we already hold some key pieces of the puzzle. Social and affordable housing is an integral part of our housing ecosystem with its capacity to provide more than just shelter. Public and community housing providers can lead the way when it comes to providing people with truly appropriate housing, where the living costs are affordable, not just the rent.

As part of our own commitment to the right to home, St Vincent de Paul Housing has pledged to achieve a minimum 7-star efficiency rating for the 500 dwellings we are constructing under the NSW Government’s Social and Affordable Housing Fund (SAHF).

But 500 dwellings will meet only a tiny proportion of the level of need in our community.

Homelessness levels are on the rise, and tens of thousands of people can expect to live in over-crowded conditions, in inappropriate housing, or in housing stress for years or even decades, before being offered a home. Decades of under-investment have led to a situation in which social housing is seen as a last resort. Yet it could be much more than that.

Social housing can meet people where they are at, and it can support a much more holistic response to the human need for a place to call home. In doing so, it has the potential to help people build or rebuild their lives. Yet we need much greater investment – from both State and Federal Government – if we are to properly realise this potential.

Jack de Groot is the CEO of St Vincent de Paul Society NSW

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