OLIVER FRANKEL AND SUSAN RYAN. Monthly digest on housing affordability and homelessness – Jan/Feb 2020

The following is the latest instalment of a monthly digest of interesting articles, research reports, policy announcements and other material relevant to housing stress/affordability and homelessness – with hypertext links to the relevant source.

New Zealand’s waiting list for state housing hits record high [The Guardian, 16 Jan] Despite promises 2 years ago by NZ’s Prime Minister Jacinda Ardern to “fix” the country’s housing crisis, the waiting list for state housing in NZ has under her watch ballooned from 6,000 to a record high of 14,500. Opposition members blame a lack of new housing supply, while government spokespeople attribute the longer waiting list to a more realistic appreciation of the number of people seeking help, flushed out by the current government’s more open and empathetic approach to those in need. NZ’s associate minister for housing said the Ardern government had already delivered 3,300 new public housing units, with another 2,500 expected to be delivered by the middle of this year.

Tiny houses: not the big answer to housing you might think [UNSW Newsroom, 29 Jan 20] Dr Laura Crommelin, a researcher from UNSW’s City Futures Research Centre, points to the limitations of tiny houses, despite the significant growth in small house living and the positive role they play in challenging accepted norms about how much living space we really need and use. Dr Crommelin notes that the challenge with housing affordability is not just the cost of the house itself, but just as importantly the cost of the land on which it sits, and the tiny house concept does nothing to solve that. She argues that apartments are likely to be a more economical use of space than a tiny house, and bemoans the fact that our housing model is “built around speculative investment”. For a more sceptical view of the role of tiny houses in addressing the problem of housing affordability, see: UNSW: Tiny houses are a gimmick [Macrobusiness, 6 Feb 20]

16th Annual Demographia International Housing Affordability Survey [20 Jan 20] Covering data for 3rd quarter 2019, this latest annual survey from Demographia covers 309 metropolitan housing markets in 8 countries, including Australia. Of the 309 markets, 92 are considered “Major”. Of those 92, five are in Australia and all are ranked “Severely Unaffordable”. Sydney is rated the 3rd least affordable of all markets surveyed, behind only Hong Kong and Vancouver, whilst Melbourne is ranked 4th least affordable internationally. Of the remaining 18 Australian housing markets covered by the survey, all but 4 are ranked “Seriously Unaffordable” (5) or “Severely Unaffordable” (9). The survey includes a detailed and instructive focus on Singapore, which boasts one of the highest home ownership rates in the world. The report’s authors believe this has been an important contributor to Singapore’s rapid economic growth since the early 1960s. Its GDP per capita is now the world’s 3rd highest. Much of the credit for solving Singapore’s housing challenge is ascribed to the efforts of Singapore’s Housing and Development Board (HDB), a government agency established in 1960 to oversee and drive the development of “public” housing. In more recent years, residents have been encouraged and assisted to buy their apartment. HDB has supplied more than 1m new homes, 90% of which are now owner-occupied.

US homeless student population reaches 1.5m, the highest in a decade [The Guardian, 5 Feb] According to a study by the National Center for Homeless Education, more than 1.5m US school students reported experiencing homelessness during the 2017-18 school year, an increase of 15% over the past 3 years and the highest number in more than a decade. The majority of homeless students reported that they were forced to stay with friends or relatives due to economic hardship or the loss of their primary housing. Housing instability can of course severely affect a child’s development and ability to learn, not to mention their physical and mental health.

Super funds invest in affordable housing deals aimed at vital service workers [The New Daily, 7 Feb] First State Super has invested $200m in key worker rental housing in Victoria and NSW, including through the recent purchase of a 55-unit residential development at Moonee Ponds, near Melbourne’s CBD. The relevant key workers – those working in healthcare, aged care, disability services, teaching, law enforcement, emergency services, childcare and associated sectors – pay rental equal to 80% of the market rental rate for the area. The units are located close to workplaces, the CBD and facilities like hospitals and schools, and save key workers from long and often expensive work commutes. According to the New Daily article: “The [Moonee Ponds] project will be self-funded and not rely on a government subsidy.” First State is reported to have said its key worker affordable housing portfolio is achieving returns over its benchmark rate of CPI plus 5%. The article quotes UNSW City Futures research estimating a shortfall of over 1m social and affordable homes across Australia by 2036, of which over 650,000 are needed now. See also Super fund offers aged care staff discounted housing [Australian Ageing Agenda, 12 Feb 20]

UK Government to cut cost of new homes by a third [Mirage News, 7 Feb 20] Under a scheme known as “First Homes”, the UK Government plans to cut costs of a proportion of new homes by 30% (off the market rate) for first-time buyers, saving eligible buyers an average of around £100,000, and lowering deposit and mortgage requirements accordingly. The discount will be prioritised for veterans and key workers such as nurses, police officers and firefighters. For homes covered by the First Homes scheme, a 30% discount will apply in perpetuity to future first-time buyers. The number of first-time buyers has reached an 11-year high of close to 360,000, an increase of 84% since 2010. The percentage of 25 to 34 year-olds has grown from 36% to 41% over the last 5 years. See also Britain has a housing crisis: First Homes is just a comfort blanket [The Guardian, 16 Feb], which claims that in 96% of the UK someone on an average salary could not afford to buy one of these “First Homes” scheme properties, even after the 30% discount, and that the scheme is still delivering “incredibly expensive homes” – ones which may come at the expense of the social homes that more than a million UK households are desperately waiting for.

Older women and homelessness [SMH Good Weekend, 8 Feb] The moving case studies in this SMH article provide yet another reminder that single older women are the fastest-growing cohort of homeless people in Australia today. The reasons include gender pay inequality during these women’s working lives, their dominant life role as home makers and in childcare, domestic violence and the increasing rate of “grey divorce”. The number of women aged 65 to 74 describing themselves as homeless increased by 51% in the 5 years to 2016, according to Census data. However, the actual position may be even worse, as it is thought many older single women staying in relatives guest rooms or on friends’ sofas may be ashamed to admit their homelessness. According to this article, “Currently, more than 330,000 single women over the age of 45 are living in a state of economic distress – that is, spending more than 30 per cent of their gross income just keeping a roof over their heads – with as many as 45 per cent of them earning the minimum wage or less.”

Half of over-55s are open to downsizing – if only they could find homes that suit them [The Conversation, 12 Feb 20] This article, by the authors of a recently released AHURI report, say that more than half of Australia’s 6.5m people over 55 – living in about 4.3m households – are open to the idea of downsizing, but thwarted from doing so by a lack of housing that matches their needs and preferences, and which would enable them to age well in place. “Downsizing, or rightsizing, is considered an essential component of meeting the housing aspirations of older Australians. At the same time, downsizing creates housing opportunities for younger households by freeing up family homes.” Aside from a lack of supply, other barriers to downsizing include a lack of financial incentives for developers, as well as a range of emotional and physical factors affecting our older members of society. Broader dwelling diversity for downsizers implies an increase in the supply of medium-density housing in neighbourhoods with easy access to services and recreation facilities, community activities and public transport.

ABC 7.30 Special Report: “Betting on the house”, Part 1, Part 2, Part 3 [ABC iView, 10 to 12 Feb] This special report, featured as part of ABC Television’s “7.30” report over 3 successive nights, highlights, with the help of case studies from around Australia, the difficult and still largely unaffordable challenge for those seeking to buy (as owner-occupiers) into the residential property market, and the plight of those seeking affordable rental properties.

The gaping hole in Closing the Gap: housing [Brisbane Times, 13 Feb 20] According to James Christian, CEO of the NSW Aboriginal Land Council, Aboriginal and Torres Strait Islander people make up 3% of Australia’s population but 20% of the nation’s homeless. He says Aboriginal people are 2.3 times more likely to experience rental stress and 7 times more likely to live in over-crowded conditions than other Australians, and a quarter of Aboriginal people accessing homelessness services are children – more than half under 25. The current social housing supply gap for Aboriginal families in NSW is, he says, 11,000 dwellings, a figure he expects to triple in the next 20 years. As Mr Christian notes: “Housing is also a key determinant of health, education and safety. Poor housing and poor housing circumstances negatively affect the physical and mental health and wellbeing of Aboriginal people.” Despite all of the above, Mr Christian reports that neither housing nor homelessness rated a mention during the Prime Minister’s recent Closing the Gap speech…

The mum-and-dad revolution in boarding houses [AFR, 14 Feb] As housing affordability pressures continue, “new generation boarding houses” appear to be attracting increased interest from both investors (including mums and dads) and tenants, particularly in the latter case amongst low-income earners, students, young professionals and retirees, squeezed out of the traditional housing market by rising prices and lack of supply. The number of development applications for boarding houses and student accommodation in NSW has risen from 27 in 2017 to 131 in 2019. New gen boarding houses can be as small as 12 sqm for single occupants and 16 sqm for double occupants. As an incentive for developers, NSW boarding houses are exempt from land tax if single occupants are residents for at least 3 months and are charged a maximum of $267 per week. However, in areas of high demand, rents are often much higher. Some institutional investors, including overseas groups, are being attracted to the build-to-rent market, particularly targeting young professionals as tenants.

Australia’s housing system needs a big shake-up: here’s how we can crack this [The Conversation, 17 Feb 20] Professors Hal Pawson, Vivienne Milligan and Judith Yates, authors of a comprehensive new book: “Housing Policy in Australia”, say that Australia’s 30-year housing affordability decline and rental stress (both amongst the worst in the developed world) are fundamentally structural – not cyclical – in nature. Many of our housing woes are not unique. For example, as with many other comparable countries, our housing market has been affected by the “financialisation” of housing, heavy demand side pressures through cheap debt and rapid population growth in our major cities, spurred by high net immigration. These similarities aside, Australia’s housing affordability has fared worse than most other members of the OECD, and experienced the 3rd biggest fall in affordability over the past 30 years, measured across 18 OECD countries. Given Australian governments’ recent focus, it may come as a surprise to some that our biggest policy problem is not how to help first-home buyers, but rather the rental affordability stress affecting lower-income earners, many of whom are pushed into poverty by high rents. The authors highlight that “…housing system under-performance doesn’t just damage the welfare of key population groups. It also raises concerns about economic productivity and systemic financial risk”. The article concludes by describing a range of urgently needed and worthwhile reforms, including: A Commonwealth led national housing strategy; discouragement of speculation in land and housing; increased diversity in the housing market; more government subsidised social and affordable housing; the appointment of dedicated cabinet-level housing ministers at both Federal and State level; the creation of enduring national housing agencies akin to the US Department of Housing and Urban Development; the introduction of more aggressive “inclusionary zoning” policies (particularly but not only for ex-government land); and a rebalancing of tenancy laws towards tenants’ rights (including outlawing “no grounds evictions”)

Government inquiry launches to find answers to homelessness [Probono Australia, 17 Feb] The Australian House of Representatives Standing Committee on Social Policy and Legal Affairs has just launched a federal parliamentary inquiry seeking to understand how people become homeless and how to prevent that. The Committee will accept written submissions until 9 April 2020.

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Oliver Frankel is a former corporate finance and M&A lawyer, who has spent the second half of his career in finance, investment and management. Most recently, he has taken a strong interest in how to address the affordable housing crisis.

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