Economic Report: Analyzing Housing Affordability in Australia

This report analyzes the critical issue of housing affordability in Australia, focusing on its economic and social impacts, particularly on low and middle-income households. It highlights the disproportionate increase in housing prices compared to average incomes, leading to housing stress, a gap in housing supply and demand, and a deficit in affordable rental properties. The report examines household incomes, homeownership rates, and rent-to-income ratios, alongside the overburdened social housing system and rising homelessness. To address these challenges, the report recommends policy interventions such as tax reforms, improved urban planning, financial support for homebuyers, rental market reforms, and revitalized social housing programs, including sustainable funding and improved management. The ultimate goal is to make housing more affordable, reform the rental market, combat homelessness, and revitalize social housing to ensure viable housing solutions for all Australians.

Running head: HOUSING AFFORDABILITY IN AUSTRALIA
Housing Affordability in Australia
Name of the Student
Name of the University
Author Note

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Introduction:
Housing Affordability is an index that is used to measure the reasonability of
adequacy of hosing for lower and middle income households which does have a high cost and
does not impede the ability of the families to cover their basic needs. In Australia the cost of
housing is very high, especially in the metropolitan areas and the increase in housing prices
are increasing disproportionately compared to the average household incomes, making the
housing increasingly unaffordable for middle and low income groups (McGreevy, 2018).
The topic of this report is to analyze housing affordability and the social as well as
economic impacts of housing affordability on individuals and families and develop
recommendations for policy makers to support the need for affordable housing.
The key problems that would be analyzed in the report include housing stress, gap in
housing supply and demand and deficit in affordable rental properties.
In the report, aspects such as household incomes, home ownership rates, rent to
income ratios, home ownership by age groups as well as the social and economic impacts of
affordable housing on individuals and families will be analyzed followed by
recommendations for policy makers to improve the affordability of housing across Australia
(Chappell & Campbell, 2018).
Discussion:
Housing in Australia is not affordable for ordinary citizens:
Studies have shown that the rates of increase in housing prices over the last decades
have far outpaced the growth in individual as well as household incomes, as a result of which
Australians; especially the younger people are facing an increased challenge to find
affordable housing for them (Baker et al., 2016). The affordability of the Australian citizens

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to get affordable housing for themselves have been further restricted because of an increase in
the costs of other essential elements such as costs of food and fuel expenses which have
resulted in an increase in financial stress especially for medium and low income households.
Due to this there is a steady decline in the affordability for housing as the individuals are no
longer able to afford a decent housing while trying to make savings from their restrictive
salaries (McLaren, et al., 2016; Bryant, 2017).
It has also been pointed out that because of these disproportional rates of growth for
housing expenses and salaries, there is a widening gap between supply and demand, as the
demand for affordable housing increased while there is not enough supply for affordable
housing solutions. Moreover, this gap is expected to increase further as the high demand and
low supply of affordable housing is expected to cause further increase in housing prices
(McGreevy, 2018).
The Private rental market of Australia fails to meet the housing needs of the people:
Due to an increase in the price of house ownership more Australians are now opting
for renting of houses which are cheaper and more affordable. However, according to some
authors, the current rental housing market in Australia is not adequate enough to meet the
demands of the market. One of the biggest reasons for the lack of adequate rental solution is a
lack of investors in the rental housing sectors (Hulse & Yates, 2017). The primary investors
currently are the individual house owners and small household investors who have a limited
attachment to the rental market. Due to this the growth in the rental market in Australia is not
sufficient enough to meet the growing demand for rental housing. Additionally, due to
limitations of the rental market, sufficient regulations do not exist for the rental agreements
which can provide a long term security for the tenants and rental agreements are often made
for very short terms followed by termination of rental contracts after the agreement is over

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even though there has been no breach of the contract (Easthope et al., 2018). Due to this, the
tenants often end up shifting from one house to another after the tenancy contract is over and
thus the demand of rental housing never slows down (Pawson et al., 2017).
Overburdened Social Housing System:
Different reports have shown that the current housing system is overburdened with the
huge demand for affordable housing. The supply of social housing solutions for low income
groups is not adequately funded and the rate of increase in social housing projects is not
adequate enough to meet the rise in the demand for affordable housing solutions and
increasing economic gap. Due to this increasing demands, the public housing projects have
additionally made the eligibility criterion for social housing more restrictive and have
reduced the waiting times to get access to affordable housing in order to ensure that only the
most needy have the first access to the housing (Alston, 2018). However due to this, a
significant proportion of marginal population with medium incomes have been affected, and
their accessibility to affordable housing reduced. This is increasingly overburdening the
social housing system across Australia as more and more people seek affordable housing to
address their housing needs to balance the increased costs of living (Pawson et al., 2017).
Additionally, due to inadequate funding for social housing there is an inadequate number of
affordable housing for the people and it is expected that in the future this problem will only
get worse without an increase in the funding for housing projects (Easthope et al., 2018).
Large number of Australians is homeless or living in inadequate housing:
According to statistical data, the problem of homelessness in Australia is increasing
every year. According to 2011 census more than 105,000 Australians have been counted as
homeless which increased from 89,000 as of 2006 (Rowley et al., 2015). However, according
to authors, their numbers are significantly under represented and the number of people who

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have sought help of homeless services between 2012 and 2013 have been estimated to be
around 224,000 people, signifying that a much larger proportion of the population than
initially measured are suffering from homelessness (Yates, 2016). The ABS census of 2016
further showed that over the last 5 years, the number of homeless people in Australia have
increased to 13.7% and the rate of homelessness have been estimated to be around 50 people
out of every 10,000 Australians, which is an alarming figure (Gurran and Phibbs, 2015).
Although the government is actively taking strategies to overcome the problem of
homelessness and provide social housing for homeless individuals, the rate of increase in
homelessness is also disproportional to the increase in the increase of homeless shelters.
Studies have shown that almost half of the people who have sought for homeless shelters and
homeless support services between 2012 and 2013 have been turned down because of an
inadequate supply of housing for them (McGreevy, 2018).
How to address these challenges: (making housing more affordable; reforming private
rental market; combating homelessness; revitalizing social housing):
The challenges that have been discussed above can be addressed by the following objectives:
Making the housing more affordable for people from middle and low income groups:
Housing can be made more affordable for the public through several actions such as tax
reforms (reducing taxes for housing development to facilitate the initiation of more housing
projects), using effective urban planning (to identify and use real estates in a more effective
manner for housing projects and increasing the available space for housing development),
assisting house purchases (the government can assist house buyers through financial support
and housing loan schemes) (Gurran and Phibbs, 2015).

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Reforming Private Rental market: Private rental markets can be reformed through changing
the investment strategies for rental housing development. Also ensuring better protection of
the tenants through rental agreements, improving assistance for rent (which can help the rent
seekers to get a property easily) and using intermediate rental housing projects can also help
to increase affordability and availability of rental housing (McGreevy, 2018).
Reducing Homelessness: The government can also help to improve marginal housing for
homeless people thereby helping to provide housing for them. Implementing housing
programs that are nationally/federally funded as well as funded by provinces, states or
municipalities can help in a significant increase in the number of homeless shelters and thus
address the problems of homelessness across Australia (Rowley et al., 2015).
Revitalizing Social Housing: Social housing projects can also be revitalized through
increasing the sustainable funding for people from medium and low income households.
Through sustainable funding, the individuals in high need for social support can also get
assistance to find a suitable housing (Easthope et al., 2018).
Conclusion:
Housing affordability is an aspect that is related to the availability of viable housing
solutions for middle and low income families in a way so that they don’t have to spend most
of their incomes to afford their accommodation. In Australia, the prices of housing are
increasing every year as well as the costs of living due to which more and more people are
unable to acquire houses for themselves. The disproportionate increase in the housing process
compared to the increase in average household income have caused an imbalance with the
supply and demand and stressed the housing sector in Australia. Some of the biggest
problems faced by the housing sector include the unaffordability of housing costs by most
Australians, failure of the rental market to address the increase in housing demand, an

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overburdened social housing system and an increase in homelessness in Australia. In order to
meet these challenges, objectives such as making the housing projects more affordable to
middle and low income groups, reforming the rental market, reducing homelessness and
revitalizing the social housing system can be used.
Recommendation:
Discussed below are the key recommendations that can be implemented to achieve the above
objectives:
Making the housing more affordable for people from middle and low income groups
 Tax reforms
 Improvement of urban planning
 Providing financial support to house purchasers
Reforming Private Rental market
 Changing the investment mix for rental market
 Improving protection for the tenants
 Improving assistance for rent seekers
 Providing intermediate rental housing
Reducing Homelessness:
 Reforming homelessness services to support more homeless people
 Improving marginal housing
Revitalizing Social Housing
 Increasing supply of social housing
 Implementing sustainable funding for social housing

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 Increasing diversity of social housing projects
 Improving management of social housing programs

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of Australian welfare policy. Australian Journal of Human Rights, 1-23.
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Bryant, L. (2017). Housing affordability in Australia: an empirical study of the impact of
infrastructure charges. Journal of Housing and the Built Environment, 32(3), 559-579.
Chappell, J., & Campbell, N. (2018). The Housing Gap—Sydney, Australia. In Sustainable
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Australia. Urban Policy and Research, 1-18.

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