Preface
A new report from the Australian Housing and Urban Research Institute (AHURI) reveals for the first time the extent of Australian housing demand. It is estimated that 1.3 million households are in a state of housing demand, whether they are unable to obtain market housing or are under rental pressure. It is estimated that by 2025, this number will increase to 1.7 million.
To be precise, 1.3 million people account for approximately 14% of Australian households. This national total includes 373,000 households in New South Wales. According to the benchmark economic assumptions modeled, this number will increase by 80% to more than 670,000 by 2025.
The first chart below shows the average annual housing demand through 2025. The second graph shows the percentage of households, which can be directly compared by state. New South Wales and Queensland have the worst conditions. The calculated ACT has the minimum proportional requirement.
What does this mean for families in need?
This includes potential families whose income is too low to rent in the private rental market. These families will traditionally rely on public housing and community housing to meet their needs. However, more and more people are forced to enter the private rental market to pay for housing that they cannot afford without major sacrifices.
By 2025, an average of 190,000 potential households in New South Wales will be unable to obtain market housing each year. The picture below illustrates the problem best. It illustrates the gap between demand and supply for affordable housing.
The lack of social housing and subsidized rental housing prevents these families from forming under affordable conditions. Many people will try to form, but must spend more than 30% of their income on housing costs, putting them under financial pressure.
The results also show that the shortage of affordable housing puts increasing pressure on housing assistance budgets, especially the Commonwealth rent assistance.
Since the implementation of the National Rental Affordability Program (NRAS) in 2008, there has been no large-scale new supply of affordable housing, which has caused state governments to try to find ways to bridge the affordability gap.
The response on the demand side mainly comes from the demand side, such as the first-time homebuyer offer recently announced by New South Wales. However, such incentives are useless to low-income families. To help them, they need to intervene on the supply side.
How does Australia and Britain compare?
AHURI research is based on the ideas that emerged in the UK’s research on housing needs. It reveals interesting differences between the two countries.
British government policy prior to 2010 emphasized the role of the planning system in helping to substantially increase the supply of affordable housing. This reflects evidence from England and Scotland that there is a link between lower supply of new housing and rising and rising house prices.
In this project, we found a lot of evidence that Australia’s housing affordability is declining. However, we have not found a particularly close relationship between housing supply and price growth. This may reflect the importance of other drivers of deteriorating housing affordability in Australia, such as tax incentives for investors.
These findings suggest that we need to study more carefully how new supply and investment demand interact, and under what circumstances adding new supply might improve affordability.
Based on our analysis of individual labor market conditions and income, it is clear that the Australian labor force has not escaped the erosion of reliable full-time employment opportunities seen in other countries.
Pervasive insecurity, part-time job opportunities, high housing costs and insufficient supply of rented social housing means that many working Australians have extremely unstable housing.
How is it done?
The study used a series of economic assumptions and interrelated models of family formation, housing market, labor market, and tenure choice to model housing demand in states and territories by 2025.
These models are based on data from the Australian Housing, Income and Labor Dynamics (HILDA) survey, the Australian Bureau of Statistics (ABS), and house price and rent data.
This study provides for the first time in Australia a consistent and reproducible method to assess housing needs. It can be used to provide information for resource allocation and to simulate the impact of policy decisions on housing outcomes.
