June 2008 - Issue #2
How rents are crushing quality of life
Story by Karin Derkley
View articles in related topics: Built Environment, Society
When housing affordability is raised in the media, the story is invariably about how hard it is for first homebuyers to plant a foot on the property ladder. But the real housing affordability crisis is among those not even in the hunt for home ownership, say Associate Professor Kath Hulse and Professor Terry Burke of Swinburne University of Technology's Institute for Social Research (ISR). Renters are the ones doing it really tough, they say.
"Housing stress is defined as paying more than 30 per cent of your income on your mortgage," says Professor Burke, from the ISR Cities and Housing Program. "But many renters are paying out more than 50 per cent of their income on housing, on rent. They are suffering not just in terms of financial stress, in keeping up rental payments, but also in terms of their wellbeing." The problems are particularly severe for households in the bottom 40 per cent of incomes.
Professor Burke recently co-authored research for the Australian Housing and Urban Research Institute (AHURI) looking at how housing affordability is affecting lower-income Australians. The study built on earlier research that measured the affordability problem in broad terms, in terms of numbers and statistics. In the latest research, he narrowed the focus by drawing on surveys and interviews to fill in the picture of how low-income earners were actually experiencing and negotiating housing-affordability problems in their everyday lives.
"Many renters are paying out more than 50 per cent of their income on housing, on rent. They are suffering not just in terms of financial stress ... but also in terms of their well being.
Professor Terry Burke
"We found people suffering real stress in trying to afford to keep a roof over their heads," he says. "Many renters told us that they can't afford proper medical or dental care, their diet is inadequate and their kids are missing out on school excursions."
AHURI executive director Dr Ian Winter says the research has been invaluable for putting the focus on the difficulties experienced by renters: "Private renters as a group tend to be ignored. But they face the most severe housing stress.
"This research helps put a face to the crisis to show how renters are foregoing some of the basic necessities of life just to keep a roof over their heads."
For Associate Professor Hulse, director of the Swinburne-Monash AHURI Research Centre, shelter is not a choice: "It is a necessity. And when you are renting you don't have many other choices."
The researchers say homelessness is not too many steps away for renters unable to pay rents when costs spiral beyond their income.
"Renters have no control over their housing costs," says Associate Professor Hulse. "They have to take what the rental market throws up. Rents can go up every six months and bear no relation to their income."
While those who have recently bought homes are also experiencing financial stress, exposing them to significant risks when unexpected costs arise, for renters the problem is exacerbated by being trapped in long-term rental occupancy that is increasing the likelihood of never owning their own home.
Inflation and capital growth mean that over time the real cost of a mortgage decreases: "For home purchasers who can stay the course they'll find that the housing market will eventually give them asset growth," Dr Winter says.
However, rents tend to increase every time a lease is negotiated. Compounding that problem is the fact that, by their very nature, renters tend to have lower incomes, Associate Professor Hulse says. Many are single-income households and particularly vulnerable to rental increases.
Research co-authored by Professor Burke also found that 10 per cent of renters had once owned homes of their own. Many are single parents who lost their home following a relationship breakdown and are unable to make it back into home ownership.
Compounding the situation is a booming demand for accommodation from international students - the subject of another research project by Professor Burke and Associate Professor Hulse. And the pipeline is also being blocked by a huge shortfall in public housing units, they say.
"You've got people who would normally have moved out of public housing into the private rental sector, but they can't afford to, so they're staying there," Associate Professor Hulse says.
To Associate Professor Hulse and Professor Burke the problem has been created by a major contraction of the public housing sector and only limited development of the community housing sector.
Their studies also show that the private housing sector is relying almost solely on the so-called 'mum-and-dad investors', whose investment property activities have had the effect of driving up prices, displacing first homebuyers who are driven back into the ranks of renters.
While they say the answer is to create more supply, none of the usual policy levers needed to stimulate housing construction - tax concessions, the Commonwealth-State Housing Agreement, the First Home Owner Grant scheme - are helping the situation.
