This is 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.
Why we still have a housing affordability crisis [CoreLogic, 27 Sept] This article comes on the back of CoreLogic’s release of its 2019 Perception of Housing Affordability report. Despite the modest (and no doubt temporary) fall in house prices over the last 18 months, CoreLogic acknowledges that we still face a serious affordability crisis. Prices remain unaffordable for a large proportion of the population, particularly the young and those on lower incomes. The hurdle of raising a deposit is still a big challenge, and the proportion of household income that needs to be spent on servicing a mortgage places severe strains on a substantial proportion of borrowers, despite record low mortgage rates. CoreLogic regards stamp duty concessions and first home buyer grants as “cosmetic”, and advocates more fundamental change, including better transport infrastructure (to enable people to commute more easily and quickly to where the jobs are) and a transition away from stamp duty, which is widely regarded as economically inefficient, to a broad based land tax.
Treasurer’s economic masterplan – rising property prices? [The New Daily, 27 Sept] It has been reported that at a recent Sydney property conference, Treasurer Josh Frydenberg lauded the recent rise in house prices, on the basis that it is stimulatory for the economy (ie. will help boost consumer spending and GDP). What this conveniently ignores, of course, is that for those not fortunate enough to already be “set” in the property market, a resumption of the house price boom, or any price trend significantly above inflation, will make things even more unaffordable for those, including the young, who are yet to enter the market. Nice for the two-thirds of the population who own their own home, but not so for those still wanting to break into the market.
Millenials are ditching big US cities for the suburbs, in search of more affordable housing [Business Insider Australia, 27 Sept] Quoting a recent report in the Wall Street Journal, this article refers to figures suggesting that millennials in significant numbers (even those who are better off) are moving to the suburbs of some of America’s larger and more expensive cities like NYC, or even ditching those cities altogether, due to housing affordability pressures. Those who elect to stay in the city are sometimes having to resort to living in basements or very cramped apartments.
NHFIC to become Australia’s new housing research body [AFR, 30 Sept] The relatively newly minted National Housing Finance and Investment Corporation (NHFIC), our so-called “bond aggregator”, is to expand to become a Centre of Excellence for housing data, to inform housing policy and industry decisions. Treasurer Josh Frydenberg confirmed that NHFIC’s research capability would be boosted by a four year, $25m government investment commitment. Although NHFIC’s detailed research remit is still to be fleshed out, it is hoped that this boost to NHFIC’s resources will enable it to resurrect (and hopefully improve upon) the role played by the former National Housing Supply Council, set up by the Rudd government in May 2008 and abolished by the Abbott government in November 2013. See also this article in P&I.
More young adults staying home, for longer [AHURI Brief, updated 1 Oct] The average age of first home buyers has increased from 33 years in 1995-96 to 36 years in 2017-18. A related trend is that early adults (aged 25 to 34) are increasingly staying in their parents’ home longer (or returning home) or living in shared housing. The proportion of early adults living at home with their parents has increased from 14% in 2003-04 to 20% in 2015-16. Over the same period, the share of early adults in group households increased from 11% to 13%. The most common reason (nearly 29% of responses) for early adults to move back home was that they are trying to save enough money to be able to move out. Around 20% of respondents said they wanted to move out but couldn’t afford to. For those early adults who lived in a shared house, the biggest reason (40% of responses) for doing so was that they couldn’t afford any other option.
Australia is bracing for a tsunami of homeless women [ProBono Australia, 10 Oct] Publication of this article by Jan Berriman from YWCA Housing coincided with World Homelessness Day. It highlights the plight of women aged over 50, the fastest growing group of people at risk of homelessness, where we’ve seen a 30% rise in the number of grandmothers, mothers, aunts and sisters sleeping in their cars, couch surfing or accessing crisis accommodation since 2011. According to the author: “The tsunami in demand for affordable housing is coming largely from a generation of women who experienced pay inequity, divorce and family violence and who have little to no superannuation or savings, or who took time out of paid work to care for children or parents.” Ms Berriman calls for “a catalytic investment in social housing over the next 20 years, the scale of which requires government leadership”.
Shh! Don’t mention the public housing shortage. But no serious action on homelessness can ignore it [The Conversation, 10 Oct] Australia needs a radical increase in the supply of social housing, as it is “the single most effective means to get people out of homelessness”. As the authors of this article note: “This requires a shift in policy direction that values housing not as real estate but as a basic right to a safe, secure place to dwell.” The authors quote a recent AHURI study estimating the number of public housing dwellings that Australia needs to build in the next 20 years to provide for the people in the most urgent housing need –the bottom two-fifths of income groups.
NAB commits $2b over 3 years to support affordable and social housing initiatives [news.com.au, 11 Oct] In speaking about this important commitment, NAB’s Chief Customer Officer for Corporate and Institutional Banking has publicly acknowledged that NAB sees the lack of affordable and specialist housing as “a major societal issue and one banks should definitely play a role in trying to solve”. NAB’s focus will be on providing loan funding for not-for-profit organisations that build affordable and specialist housing, including crisis accommodation, community housing, disability housing, build-to-rent properties and sustainable development. There are almost 190,000 people on public housing waiting lists across Australia, a figure that almost certainly doesn’t take into account many of the approximately 116,000 homeless people in Australia, nor those on low incomes in unaffordable accommodation who aren’t on waiting lists. This article references modelling by UNSW, which projects a shortfall of around one million in the number of social and affordable dwellings by 2036. See also this article from The New Daily, in which UNSW Professor Hal Pawson welcomes NAB’s announcement but stresses the importance of substantial government support for social housing (eg. in the form of cheap or free land), noting that loan finance alone is insufficient to support social housing.
UK planning for new national model for shared ownership to help low income earners into housing market [UK government, 17 Oct] The UK government has announced it is reviewing a new national model for shared ownership, designed to make it easier for people to buy more of their own home. It’s analogous to Australia’s concept of “shared equity”, offered in some parts of Australia, though allows much greater flexibility, including the ability for the occupier to increase their ownership stake in 1% increments (down from the previous minimum of 10% at a time). This incremental type of ownership is sometimes called “staircasing”. A person’s initial ownership stake could comprise as little as 10%, down from the previous minimum of 25%. The process for increasing one’s stake will be simplified and made far less costly.
Growing numbers of renters are trapped for years in homes they can’t afford [The Conversation, 21 Oct] UNSW Professor Hal Pawson’s article covers new evidence from the Productivity Commission, which shows that almost half of “rent-burdened” low-income tenants are likely to remain stuck in “rental stress” on a long-term basis, rather than suffering this plight only temporarily. Rental stress arises where rental costs eat up more than 30% of the renter’s income. The rising rate of rental stress for low-income tenants apparently results from the growing dominance of private rental housing as the tenure in which low-income households live, which in turn results from the post-1990s failure of Australian governments to expand the supply of social housing to match population growth. From 1996 to 2018, the proportion of low-income tenants renting in the relatively expensive private rental market (rather than the social housing market) grew from 52% to 71%. The implications for policy are less straightforward, and Professor Pawson describes the PC Report as “timid” on solutions beyond modestly improving tenancy conditions, and he is specifically critical of the PC’s characterisation of the broad ranging strategy of increasing social housing stock as an “expensive option”.
Berlin freezes rents amidst housing affordability crisis [Australian Financial Review, 22 Oct] Berlin’s governing parties have agreed a deal to freeze rents in the German capital for 5 years. The move has sparked interest in a range of other international cities, and parallels moves in New York City and parts of Spain. The initiative, intended to ease the burden on tenants after the property boom caused rents in Berlin to double over the past decade, is not universally popular across Germany, with Hamburg for example preferring the solution of increased supply. Once Berlin’s new rent controls are in place, landlords will be limited to an annual inflation-related rent increase of 1.3% from 2022.
Facebook devotes US$1b to affordable housing in the US [The Bull.com.au, 23 Oct] Facebook has announced that it is investing US$1b during the coming decade in affordable housing, most of it in California, Facebook’s home state. Facebook is partnering with State authorities on housing projects intended to benefit teachers, nurses, first responders and other “essential workers”
Public or private housing? There’s an in-between solution [The Age, 26 Oct] This article makes the case for Victoria to emulate the ACT’s Land Rent Scheme, under which – instead of selling off public land for residential development – the government provides a 99-year ground lease, at a small ground rent (2 per cent). For a typical house and land package, this structure represents a 60% discount on land costs, translating into a smaller mortgage, a smaller deposit and an opportunity to save on rental costs while paying off the house. A land rent scheme of this nature sits somewhere on the continuum between private owner-occupation and public housing, providing a first rung of quasi-private ownership for low-middle income earners. The article also explores the concept of a Community Land Trust (CLT), a form of shared equity tenure long established in the US and UK.
Beds in car parks don’t solve Australia’s rough sleeping problem [The Conversation, 28 Oct] A trial by charity Beddown, to provide homeless people with overnight beds and shelter in Brisbane CBD car parks, not only does little to solve the problem of rough sleeping in the long-term, but it may not even be in the best interests of rough sleepers in the short to medium term. This is partly because it lets government off-the-hook from doing something more meaningful and permanent to address the problem of rough sleeping, and charitable gestures of this nature can have the effect of masking the underlying problem, despite almost always seeming to generate positive press. The author notes that there is existing, rigorous research-based evidence that demonstrates our ability to permanently end rough sleeping, showing that between 80% and 90% of people who are supported to exit rough sleeping through Housing First programs sustain their housing for at least 12 months. Furthermore, there is an average annual saving to government services of A$13,200 per person when that is done, in part because of the reduced impact on criminal justice and health services when a person stops sleeping rough.
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.
Susan Ryan was Minister for Education in the Hawke Cabinet and Age Discrimination Commissioner at the Australian Human Rights Commission 2011-2016.
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