Queensland Parliamentary Library
Housing Affordability
High levels of home ownership, and the aspirations of young people and families towards home ownership, have long been considered one of the hallmarks of Australian culture. However, many people have recently asked whether there is now a crisis in housing affordability, not only for homebuyers but also for those in the private rental market. Others dispute the existence of such a crisis.
This Research Brief:
• examines the concept of ‘housing stress’ and provides information on the numbers of households in that circumstance;
• discusses a selection of recent reports/other information relevant to the issue of housing affordability;
• profiles the private rental market in Queensland and considers a recent report on rent bidding practices; and
• identifies some of the possible causes of, and solutions to, the apparent housing affordability concerns. This includes a discussion of the recently announced Queensland Government ‘Housing Affordability Strategy’.
Renee Gastaldon
Research Brief No 2007/27
Queensland Parliamentary Library General Distribution Research Team Research and Information Service Ms Karen Sampford, Team Leader (07) 3406 7116 Mrs Nicolee Dixon, Senior Parliamentary Research Officer (07) 3406 7409 Mrs Renee Gastaldon, Parliamentary Research Officer (07) 3406 7241
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© Queensland Parliamentary Library, 2007
ISSN 1443-7902 ISBN 978-1-921056-56-7 OCTOBER 2007
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CONTENTS
EXECUTIVE SUMMARY ......
1 INTRODUCTION...... 1
2 HOUSING STRESS ...... 5
3 SELECTED REPORTS RELEVANT TO HOUSING AFFORDABILITY...... 8
3.1 HIA/COMMONWEALTH BANK AFFORDABILITY REPORT ...... 9
3.2 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY SURVEY: 2007 .....10
3.3 URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA, AN INDUSTRY REPORT INTO AFFORDABLE HOME OWNERSHIP IN AUSTRALIA...... 11
3.4 RESIDENTIAL TENANCY AUTHORITY, MEDIAN WEEKLY RENTS ...... 14
3.5 OFFICE OF ECONOMIC AND STATISTICAL RESEARCH, DATA ON VACANCY RATES ...... 16
3.6 2006 CENSUS...... 17
3.7 PROPERTY COUNCIL OF AUSTRALIA: BEYOND REACH: A WORKFORCE HOUSING CRISIS IN THE MAKING ...... 18
3.8 ST VINCENT DE PAUL SOCIETY, DON’T DREAM IT’S OVER ...... 21
4 PRIVATE RENTAL MARKET ...... 22
4.1 PROFILE OF THE PRIVATE RENTAL MARKET IN QUEENSLAND...... 23
4.2 ‘RENT BIDDING’ PRACTICES...... 24
4.2.1 ‘Rent bidding’ practices and their prevalence ...... 25
4.2.2 Likely future trends in rent bidding ...... 25
4.2.3 Some rent bidding practices constitute misleading or deceptive conduct ...... 25
4.2.4 Suggested response to rent bidding practices ...... 26
4.2.5 Real Estate Institute of Queensland information on advertising rental properties...... 27
4.3 COMMONWEALTH RENT ASSISTANCE SCHEME ...... 27
5 CAUSES OF, AND SOLUTIONS TO, THE HOUSING AFFORDABILITY SITUATION ...... 29
5.1 FACTORS CONTRIBUTING TO HOUSING AFFORDABILITY ...... 29
5.2 POSSIBLE SOLUTIONS TO IMPROVING HOUSING AFFORDABILITY...... 42
5.2.1 Queensland Government’s Housing Affordability Strategy ...... 43
5.2.2 Federal Labor’s ‘New Directions for Affordable Housing’ ...... 48
5.2.3 Statements made by the Federal Government ...... 51
APPENDIX A – JOINT MINISTERIAL MEDIA STATEMENT ...... 53
APPENDIX B – JOINT MINISTERIAL MEDIA STATEMENT...... 55
APPENDIX C – MINISTERIAL MEDIA STATEMENT...... 57
APPENDIX D – JOINT MINISTERIAL MEDIA STATEMENT ...... 59
APPENDIX E – JOINT MINISTERIAL MEDIA STATEMENT...... 60
APPENDIX F – JOINT MINISTERIAL MEDIA STATEMENT...... 61
RECENT QPL RESEARCH PUBLICATIONS 2007...... 63
Housing Affordability
EXECUTIVE SUMMARY
High levels of home ownership, and the aspirations of young people and families towards home ownership, have long been considered one of the hallmarks of Australian culture. However, recent reports of a ‘crisis’ in the affordability of housing in Australia have caused many people to question just how attainable ‘the great Australian dream’ is, how attainable it will be for future generations, and what this means for the Australian culture. The concern lies with not only homebuyers but also, increasingly, those in the private rental market. Some commentators have, however, disputed the existence of such a crisis (pages 1-5). This Research Brief: ▪ examines the concept of ‘housing stress’ and provides information on the number of households, both homebuyers and renters, in that circumstance (pages 5-8); ▪ discusses a selection of recent reports/other information relevant to the issue of housing affordability, including: - the HIA/Commonwealth Bank Affordability Report (page 9); - the Demographia International Housing Affordability Survey: 2007 (pages 10-11); - a report of the Urban Development Institute of Australia, An Industry Report into Affordable Home Ownership in Australia (pages 11-14); - statistics on median weekly rents in Queensland collated by the Residential Tenancies Authority (pages 14-16); - information on private rental market vacancy rates in Queensland collated by the Office of Economic and Statistical Research (pages 16-17); - the 2006 Census (page 17); - a report of the Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making (pages 18-20); and - a report of the St Vincent de Paul Society, Don’t Dream it’s Over (pages 21-22); ▪ profiles the private rental market in Queensland and considers a recent report on rent bidding practices (pages 22-28); and ▪ identifies some of the possible causes of (pages 29-42), and solutions to (pages 42-51), the apparent housing affordability concerns. This includes a consideration of the Queensland Government’s ‘Housing Affordability Strategy’ (pages 43-48), the widely reported Federal Labor policy ‘New Directions for Affordable Housing’ (pages 48-51) and statements made by the federal government on the issue of housing affordability (page 51). Information in this Research Brief is current to 30 September 2007.
Housing Affordability Page 1
1 INTRODUCTION
High levels of home ownership, and the aspirations of young people and families towards home ownership, have long been considered one of the hallmarks of Australian culture. The goal of owning one’s own home is a widely held aspiration in our society. To some it signifies security, to others perhaps an economic legacy, and to others the cornerstone of societal stability, morale or even national pride. The realistic possibility of home ownership is often conceptually linked to a level of satisfaction with lifestyle and financial security and the hope of young generations that they can have a secure and prosperous future and live their personal version of the great Australian dream.1
As one commentator recently said: Home ownership is seared into our aspirations, a physical symbol of financial stability and success. Striving to achieve the dream – a patch of earth and a place to call home – dominates the way many of us work and play.2
However, recent reports of a ‘crisis’ in the affordability of housing in Australia have caused many people to question just how attainable ‘the great Australian dream’ is, how attainable it will be for future generations, and what this means for the Australian culture. [Experts] warn the problem will get worse. They also say it might be permanent. They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.3
One article put the potential situation as follows: An average house in an average suburb, with an average mortgage – a decade or so ago, it almost would have been a birthright. But not now.4
Unlike the past, the current focus on housing affordability extends beyond homebuyers to include people in rental accommodation. Larger rents have placed burdens on people saving for their first home, and on low to middle-income earners whose only option is to rent and who are facing greater competition for affordable
1 Urban Development Institute of Australia (UDIA), An Industry Report into Affordable Home Ownership in Australia, 2007, p 9. This report is discussed in part 3.3 of this Research Brief.
2 William Birnbauer, ‘Dream home or bleak house?’, Age, 22 July 2007.
3 Leon Gettler, ‘Australian dream fades as cost sends some to ghetto’, Age, 30 July 2007.
4 ‘The Australian nightmare: can we find a better way’, Age, 2 September 2007, p 1.
Page 2 Queensland Parliamentary Library housing. For both homebuyers and renters, concern exists about the ability of people to afford decent housing in a community of their choice and within a reasonable distance to their place of employment.
Accompanying the concerns about housing affordability are reports of: • financial counsellors providing emergency food vouchers to as many people with mortgages as to those in public housing;5 • families experiencing housing stress even when both partners work;6 • mortgage stress affecting young families in middle-suburbia, and not just ‘battlers’;7 • more Australians foregoing basic necessities such as food, health care and heating and cooling costs in order to meet their housing costs;8 • growing public housing waiting lists;9 • affordable housing going under contract before sale advertisements are posted on the internet;10 • fears that society may divide into the ‘haves’ and the ‘have nots’, with some people owning two or more properties and others none;11 and • renting becoming ‘mainstream’ and long-term, rather than a transitional state for people saving for their first home.12
The effects of housing stress, particularly for those in the private rental market, have been identified by the St Vincent De Paul Society as follows: Housing stress does more than just reduce household spending power. It has a significant effect on people’s ability to get a job; it adds stress to relationships; makes it difficult for children to be educated; and, in extreme cases, can lead to
5 William Birnbauer and Renee Switzer, ‘Housing crunch a political time bomb’, Age, 22 July 2007.
6 Phil Bartsch, ‘City of lost dreams’, Courier Mail, 2 June 2007, p 54.
7 Peter Weekes, ‘Stress grips mortgage belt as rates rise’, Sydney Morning Herald, 19 August 2007.
8 ‘Housing pressure bites poor’, Age, 6 March 2007, p 1.
9 ‘I won’t be blaming the Government: Rudd’, Sydney Morning Herald, 26 July 2007.
10 Leigh Lalonde, ‘Rates and rents gut home hopefuls (first home buyers)’, Courier Mail, 20 January 2007, p 63.
11 John McCarthy, ‘Rich times can’t hide home truth’, Courier Mail, 9 June 207, p 50.
12 Tanya Plibersek, ‘Once a phase, renting becomes a way of life’, Sydney Morning Herald, 25 July 2007.
Housing Affordability Page 3
homelessness. It also divides our cities and regions into separate enclaves of affluent and poor. For many, housing stress makes spending on essential items like clothes, healthcare and food more difficult. It turns holidays and modest treats into rarer luxuries. …[I]t forces people to move to cheaper accommodation. … This uncertainty and continual migration can be devastating for children. Its effects can be measured in lower school results and poorer psychological and physical health. The stability of the family unit may also be threatened. … As our central cities become high-income ghettos we are losing our social diversity. Having to live ever further from places of work, education and social interaction is reducing people’s quality of life and making our cities less efficient and less sustainable as people are forced to endure long commuting times.13
Despite these reports, some have disputed the existence of a ‘crisis’ in housing affordability. For example, the federal government and some economists have said that increasing debt levels show that people are feeling more confident about the future.14 The Federal Treasurer, the Hon P Costello MP, recently said: Where you have record numbers of people joining the market and … prices are going up, for the 70 per cent of Australians who own or are buying a home, that’s not a crisis, that’s the kind of outcome they would want to see.15
Similarly, a recent article in the Business Review Weekly said: [N]ot everyone agrees there’s a problem. After all, it’s hard to say that prices are unaffordable, with so many buyers and little sign of flagging demand.16
The article then states that: Commonwealth bank economist Joseph Capurso says there’s no evidence that a large swathe of aspiring home-owners is being locked out of the market. If that were so, he argues, there’d be a larger proportion of households renting. But there’s only been a slight shift, to about 27%. Reserve Bank governor Glenn Stevens says while there’s a small rise in the proportion of problem loans, “household balance sheets for most people are actually good, confidence is high, the economy is flexible, on the whole it’s working pretty well”.17
13 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, July 2007, pp 2-3. This report is discussed in part 3.8 of this Research Brief.
14 Ben Schneiders, ‘Housing stress spreads for renters’, Age, 21 July 2007.
15 Penelope Debelle, ‘Labor ups ante on home pitch’, Age, 31 July 2007.
16 Roy Eccleston, ‘Home front’, Business Review Weekly, 28 August 2007, pp 40-43, at p 42.
17 ‘Home front’, Business Review Weekly, p 42.
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Deputy Governor of the Reserve Bank, Ric Battellino, has been quoted as saying that “household debt is concentrated in the hands of those who can most afford it and is a sign of rising affluence rather than financial stress”.18 In the same article, Mr Batellino said: While the build-up of household debt is often portrayed as being driven by younger couples trying to buy their first home, a more accurate description is that it is mainly being driven by older, higher-income households that are trading up to higher- quality or better-located houses, buying investment properties and taking out margin loans to buy shares. These are all signs of rising affluence. … Higher-income households are the ones that have the capacity and the financial security to take on debt. It would be a mistake, therefore, to conclude that a rising ratio of debt to income is necessarily a sign of financial stress among households.
Further, Bill Evans, chief economist of Westpac, for example, has said that much of the increase in ‘mortgage stress’ stems from people taking on bigger loans and more debt, most of which they can service.19
While many Australians have seen their wealth increase through increasing home values, many are also concerned about the effects on their children and their ability to enter the housing market. This is one dilemma that makes the situation with housing affordability so complex. If you’re a baby boomer parent, you’re probably torn. You’re happy to see the value of your own property keep rising, but how are your children going to get into the market?20
Professor Judy Yates, a housing economist at Sydney University, has said: I think this generation could be the first for about 100 years that will be less-well housed than their parents … And that’s hard to come to terms with.21
A recent report on housing affordability in Australia picked up on this dimension to the housing affordability issue by stating: The potential for younger generations to be ‘priced out’ of home ownership poses some serious questions about the future of our society and the issue of intergenerational equity.22
18 ‘Debt a sign of affluence, says Reserve deputy’, Sydney Morning Herald, 26 September 2007, p 1.
19 Nassim Khadem, ‘One million squeezed on home costs’, Sydney Morning Herald, 12 July 2007. See also, for example, Ross Gittins, ‘Debt not a problem, on balance’, Sydney Morning Herald, 5 September 2007.
20 Robert McDonald, ‘There goes the house’, Courier Mail, 7 July 2007, p 54.
21 Matt Wade, ‘The rich will get richer; the poor will move away’, Sydney Morning Herald, 7 August 2007. For another article discussing the generational dimension to housing affordability, see ‘Dream home or bleak house?’, Age. 22 UDIA, An Industry Report into Affordable Home Ownership in Australia, 2007, p 9.
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For those who believe, or perhaps hope, that housing affordability will improve, Professor Yates has said: I think there has been a structural shift in the cost of housing, not just a cyclical one.23
This Research Brief: • examines the concept of ‘housing stress’ and provides information on the number of households, both homebuyers and renters, in that circumstance; • discusses a selection of recent reports/other information relevant to the issue of housing affordability; • profiles the private rental market in Queensland and considers a recent report on rent bidding practices; and • identifies some of the possible causes of, and solutions to, the apparent housing affordability concerns.
In examining the issue of housing affordability, this Research Brief focuses on homebuyers and those in the private rental market. Issues relating to public and community housing are not considered in significant detail.24
Information in this Research Brief is current to 30 September 2007.
2 HOUSING STRESS
‘Housing stress’ occurs when people in the lowest 40% of income distribution spend more than 30% of their income on housing and housing-related costs.25
The number of Australian households, both homebuyers and renters, reportedly in housing stress varies quite widely, with one estimate being half a million.26 Another report states that about 171,000 households are under ‘mild mortgage
23 ‘The rich will get richer; the poor will move away’, Sydney Morning Herald. 24 This limitation is made for the sake of brevity. Issues concerning public housing were considered in Queensland Parliamentary Library (Renee Easten), ‘The Housing Bill 2003 (Qld)’, Research Brief, No. 2003/19, August 2003. 25 ‘City of lost dreams’, Courier Mail. The same definition for ‘housing stress’ was used in a presentation by the National Centre for Social and Economic Modelling (NATSEM), University of Canberra, in a presentation to the National Summit on Housing Affordability which was held in Canberra in June 2004 (see http://www.housingsummit.org.au/05/media/hardingPresentation.pdf, downloaded on 15 October 2007). The St Vincent De Paul Society in its recent report, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, also adopted the same definition (see p 2). This report is discussed further in part 3.8 of this Research Brief.
26 Caitlin O’Toole, ‘More feeling stress of home payments’, Australian Financial Review, 28 February 2007, p 5.
Page 6 Queensland Parliamentary Library stress’, and about 70,000 are under ‘severe mortgage stress’.27 Other reports suggest that 10% of homeowners are experiencing mortgage stress and a similar proportion of renters are also stretching their budgets.28
Recently, an article, referring to information from the Australian Bureau of Statistics, reported that: • about one million Australian households are in housing stress nationally, due to either mortgage repayments or rent; • almost half of all households below the median household income of about $53,000 are in rental stress; • the number of families with children struggling with higher mortgage repayments has almost doubled in five years to 490,000 families; and • over the same period, the number of single-parent families in mortgage stress more than doubled to 62,000.29
In Queensland, an ‘alarming’ 307,000 households are said to be in housing stress.30 Another report has pointed to 97,000 Queensland households being in mortgage stress and 119,000 being in rental stress.31 More than 750 Queenslanders have had their homes repossessed so far this year because they could not meet their mortgage repayments.32 Apparently, about 25% of Queensland households are experiencing mortgage stress.33
For renters, those in Queensland have been identified as the worst affected, with
27 Brendan Swift, ‘Mortgage stress could escalate’, Australian Financial Review, 19 September 2007, p 9. Note that the terms ‘mild mortgage stress’ and ‘severe mortgage stress’ are not defined in this article.
28 Mark Phillips, ‘Super funds find a new home in housing market’, Australian Financial Review, 8 March 2007, p 1. For additional reporting on the numbers see, for example, ‘One million squeezed on home costs’, Sydney Morning Herald; ‘Home front’, Business Review Weekly, p 42; and HIA, ‘Higher rates tip more into mortgage stress’, Media Release, 17 August 2007.
29 ‘Parents in mortgage stress soar’, Age, 28 August 2007, p 1.
30 Lachlan Heywood, ‘Slim wage rise as home stress soars – struggle for housing is worst here’, Courier Mail, 6 July 2007.
31 HIA, ‘Gold and Sunshine Coasts dominate housing stress’, Media Release, 3 September 2007.
32 Clinton Porteous, ‘More lose properties as crisis takes hold’, Courier Mail, 24 September 2007, p 10.
33 HIA, ‘Gold and Sunshine Coasts dominate housing stress’, Media Release.
Housing Affordability Page 7 some reports stating that about 17% are experiencing housing stress34 and other suggesting a higher figure, such as around 37% of households.35
The Gold Coast has been labelled Australia’s least affordable region, and the fifth most ‘stressed’ city nationally for housing affordability, with 30.3% of households in housing stress and more than 22,500 people living in ‘severe housing stress’.36 This compares to 26.8% of Sunshine Coast households (equal to the proportion of Sydney households), 22.2% of far north Queensland households and 22% of Brisbane households.37
Michael Matusik, a property analyst, was recently quoted as saying that he does not believe the affordability problems experienced in the southeast Queensland market will ever resemble those being faced in Sydney: Affordability is strained but not to the extent of Sydney. Brisbane is not at crisis point yet and I don’t believe it will reach it.38
Many agree that housing stress is felt most acutely by people in the private rental market, either as long-term renters or those endeavouring to purchase their first home.39 The most ‘at-risk’ demographics are said to be blue-collar families and single-parent families.40
Unlike the past, when housing affordability focussed on homebuyers, the housing stress of people in the private rental market is being given greater attention, and this trend is likely to continue. The number of renters in financial stress is predicted to increase by nearly 50% over the next three years, possibly raising the proportion of people in the private rental market experiencing housing stress to half of all renters.41
34 ‘More feeling stress of home payments’, Australian Financial Review. See also Torny Jensen, ‘High-cost housing stress – Brisbane the toughest capital city for renters’, Courier Mail, 17 September 2007, p 14.
35 HIA, ‘Gold and Sunshine Coasts dominate housing stress’, Media Release.
36 ‘City of lost dreams’, Courier Mail and ‘Slim wage rise as home stress soars – struggle for housing is worst here’, Courier Mail.
37 ‘Slim wage rise as home stress soars – struggle for housing is worst here’, Courier Mail.
38 Michelle Hele and Leigh Lalonde, ‘City heading for housing crisis’, Courier Mail, 24 February 2007, p 32.
39 ‘One million squeezed on home costs’, Sydney Morning Herald.
40 ‘High-cost housing stress – Brisbane the toughest capital city for renters’, Courier Mail.
41 ‘Housing stress spreads for renters’, Age.
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For those anticipating a ‘correction’ in the property market which will ease housing affordability (similar to share market corrections), Saul Eslake, chief economist at the Australia and New Zealand Banking Group, has said: [This perspective ignores] a fundamental difference between shares and residential real estate. Although [shares] have, over long periods, typically been at least as rewarding an investment as real estate, no one has to own shares. If shares are widely perceived to be overvalued, enough investors will reduce their exposure to shares (that is, sell them) to push their prices down to levels that will eventually be perceived as fair or undervalued. On the other hand, we have to live somewhere. And in Australia, we generally prefer to live in our own dwelling than someone else’s, if we can. Very few Australians are going to respond to being told that their property is overvalued by “shorting” the property market; that is, by selling their residence, renting for a while and hoping to re-enter the housing market at a lower price. The transaction costs as well as the personal inconvenience represent major barriers to anyone [doing that]. … So when house prices do reach a level at which the marginal would-be buyer can no longer afford to buy, it’s turnover that drops … , rather than prices. Prices do not fall across the board unless interest rates and/or unemployment start rising by amounts sufficient to force some existing owners to become sellers.42
3 SELECTED REPORTS RELEVANT TO HOUSING AFFORDABILITY
Discussed below are a selection of recent reports/other information relevant to the issue of housing affordability. This includes: • the HIA/Commonwealth Bank Affordability Report; • the Demographia International Housing Affordability Survey: 2007; • a report of the Urban Development Institute of Australia, An Industry Report into Affordable Home Ownership in Australia; • statistics on median weekly rents in Queensland collated by the Residential Tenancies Authority; • information on private rental market vacancy rates in Queensland collated by the Office of Economic and Statistical Research; • the 2006 Census; • a report of the Property Council of Australia, Beyond Reach: A Workforce
42 Saul Eslake, ‘More bricks and mortar will solve housing squeeze’, Australian Financial Review, 12 March 2007, p 63.
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Housing Crisis in the Making; and • a report of the St Vincent de Paul Society, Don’t Dream it’s Over.
3.1 HIA/COMMONWEALTH BANK AFFORDABILITY REPORT
The HIA/Commonwealth Bank Affordability Report uses Commonwealth Bank house price data to measure the ratio of average household disposable income to the qualifying income required to meet payments on a typical dwelling.43
The affordability report for the June 2007 quarter showed that: • the housing affordability index was at its lowest level since inception in 1984; • the index fell by 2.7% compared to the March 2007 quarter and was 6.5% lower than the June 2006 quarter; • the monthly loan repayment on a typical first-home mortgage was $2,506, accounting for 30.8% of an average first-homebuyer’s income; • the monthly loan repayment on a typical first-home mortgage in Brisbane was $2,591, accounting for 31.9% of an average first-homebuyer’s income; and • the monthly first-home loan repayment in regional Queensland was $2,540, accounting for 31.2% of an average first-homebuyer’s income.44
43 Housing Industry Association (HIA), ‘Housing affordability hits new low’, Media Release, 13 August 2007. For relevant media releases, see www.hia.com.au and click on ‘latest news’. The HIA/Commonwealth Bank Affordability Report is one of the most widely reported measures of home loan affordability in Australia (see Parliament of Australia. Department of Parliamentary Services, Parliamentary Library, ‘Home loan affordability – measurements and trends’, Research Note, No. 8 of 2006/07, 9 November 2006. The Australian Parliamentary Library publication examines the most widely reported measures of home loan affordability in Australia and their limitations. The other measures discussed are the Real Estate Institute of Australia (REIA) Home Loan Affordability Indicator and the BIS Shrapnel Home Loan Affordability Index).
44 HIA, ‘Housing affordability hits new low’, and HIA, ‘Housing affordability in Qld at a low ebb’, Media Release, 13 August 2007. See also Larissa Dubecki, ‘Housing affordability slumps to record low’, Age, 13 August 2007.
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3.2 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY SURVEY: 2007
In early 2007, the 3rd annual Demographia International Housing Affordability Survey was published.45
The survey covers 159 major housing markets in Australia, Canada, New Zealand, Ireland, the United Kingdom and the United States. It uses the ‘median house price to median household income multiple’ (‘median multiple’) to rate housing affordability as follows:
Rating Median Multiple Severely unaffordable 5.1 and over Seriously unaffordable 4.1 to 5.0 Moderately unaffordable 3.1 to 4.0 Affordable 3.0 or less
The survey states that: In recent decades the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes. This historic affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in Australia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and the United States. The most pervasive housing affordability crisis is in Australia, with an overall Median Multiple of 6.6. Affordability is only marginally better in New Zealand (6.0), Ireland (5.7) and the United Kingdom (5.5). On the other hand, the national Median Multiple in Canada is 3.2, indicating that housing is one-half as expensive relative to incomes as in Australia. The national median multiple in the United States is 3.7.46
The median multiples, and corresponding affordability, of the Australian capital cities were:47
45 Pavletich Properties Limited, 3rd Annual Demographia International Housing Affordability Survey: 2007, downloaded on 8 August 2007 from http://www.landcom.com.au/downloads/File/dhi-ix2005q3.pdf. For relevant media articles see, for example, ‘Rates and rents gut home hopefuls (first home buyers)’, Courier Mail and Matthew Denholm, ‘Australia’s housing ‘least affordable’’, Australian, 23 January 2007, p 6.
46 3rd Annual Demographia International Housing Affordability Survey: 2007, p 1.
47 3rd Annual Demographia International Housing Affordability Survey: 2007, p 32 (for 2006, 3rd quarter).
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City Median Multiple Affordability National rank* International rank** Adelaide 6.5 Severely 5 27 unaffordable Brisbane 6.1 Severely 6 30 unaffordable Canberra 4.9 Seriously 8 62 unaffordable Darwin 5.6 Severely 7 40 unaffordable Hobart 7.0 Severely 3 20 unaffordable Melbourne 6.6 Severely 4 23 unaffordable Perth 8.0 Severely 2 11 unaffordable Sydney 8.5 Severely 1 7 unaffordable * ‘National rank’ is the city’s rank for affordability compared to other Australian cities, with ‘1’ being the least affordable. ** ‘International rank’ is the city’s rank for affordability compared to the other 159 surveyed markets in Australia, Canada, New Zealand, Ireland, the United Kingdom and the United States, with ‘1’ being the least affordable.
3.3 URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA, AN INDUSTRY REPORT INTO AFFORDABLE HOME OWNERSHIP IN AUSTRALIA
In August 2007, the Urban Development Institute of Australia (UDIA) released a report, An Industry Report into Affordable Home Ownership in Australia,48 the purpose of which was to: • more accurately identify the scope of the problem of declining affordability of home ownership in a national context; • identify and comment on the current status of affordability and its causes in each state and territory; and • identify problems and make recommendations49 to address problems that are of
48 UDIA, An Industry Report into Affordable Home Ownership in Australia, August 2007, downloaded on 16 August 2007 from http://www.udia.com.au/html/national_housing_affordability_report.cfm. See also Torny Jensen, ‘Affordability plunges – only five out of 22 regions are within reach, says housing industry’, Courier Mail, 6 August 2007, p 13.
49 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 8.
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national significance and require federal, state and local government intervention.50
The report assesses housing affordability by comparing the proportion of the houses sold in a particular region with what the population of that region could actually afford to buy. By assuming that the average household is willing to spend 30% of their income on repayments and have managed to save a 10% deposit, it compares house prices to the size of the loan the average household would be able to service at prevailing interest rates. It therefore categorises the level of affordability based on what proportion of the houses in a region the average household would be able to purchase.51
The report contains research on 70 population centres around Australia, classifying their affordability as follows: • ‘affordable’ – the average household could buy at least 51% of the residences; • ‘some constraints’ - the average household could buy between 31% and 50% of the residences; • ‘seriously constrained’ - the average household could buy between 16% and 30% of the residences; and • ‘unaffordable’ - the average household could purchase fewer than 15% of the residences.52
For detached housing, the report found that: • in 2001 - 96% of areas were affordable, 1% had some constraints, 3% were seriously constrained and none were unaffordable; and • in 2006 - 39% of areas were affordable, 11% had some constraints, 23% were seriously constrained and 27% were unaffordable.53
For attached housing: • in 2001 - all areas were affordable; and • in 2006 - 67% of areas were affordable, 23% had some constraints, 6% were seriously constrained and 4% were unaffordable.54
The report found that, overall, in 2006: • South Australia was affordable;
50 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 5.
51 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 13.
52 UDIA, An Industry Report into Affordable Home Ownership in Australia, pp 6, 13.
53 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 13.
54 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 14.
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• Victoria had some pressures on affordability; • Queensland, New South Wales and the Australian Capital Territory had serious constraints on affordability; and • Western Australia had an affordability crisis.55
The following information is provided in relation to detached house sales, median price and growth:56
State/Territory No. sold Median price (2006) Growth in $ 2001 - 2006 NSW 63,755 $455,500 167% Vic 69,663 $322,750 158% Qld 70,997 $317,000 221% SA 23,591 $272,500 186% WA 40,498 $415,500 258% ACT 4,839 $397,750 195% Australia 273,343 $363,000 194%
In relation to Queensland, the report states that “the average Queensland house- buying household has an affordability gap of nearly $100,000, being the difference between what can be readily borrowed and the costs of a typical secondhand suburban detached house”. The report also says that since 1993 house prices in Queensland have risen by a factor of 5.53 while Queensland wages have risen by a factor of 2.88.57
For detached housing, the report rates the affordability of various parts of Queensland in 2006 as follows: • affordable - Rockhampton, Gladstone, Bundaberg, Ipswich and Toowoomba; • some pressures on affordability - Townsville/Thuringowa, Hervey Bay/Maryborough, outer Brisbane and Logan; • serious constraints on affordability - Cairns, Mackay/Whitsundays, Caboolture, Pine Rivers, Redcliffe, middle Brisbane and Beaudesert; and • an affordability crisis - Noosa, Maroochydore, Caloundra, inner Brisbane, Redland, and the Gold Coast.58
For attached housing, affordability is rated as follows: • affordable - Cairns, Townsville/Thuringowa, Mackay/Whitsundays,
55 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 7.
56 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 12. 57 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 36. 58 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 79.
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Rockhampton, Gladstone, Bundaberg, Pine Rivers, middle Brisbane, outer Brisbane, Logan, Ipswich, Beaudesert and Toowoomba; • some pressures on affordability - Caboolture, inner Brisbane, Redland and Gold Coast; • serious constraints on affordability - Hervey Bay/Maryborough, Maroochydore and Redcliffe; and • an affordability crisis - Noosa and Caloundra.59
3.4 RESIDENTIAL TENANCY AUTHORITY, MEDIAN WEEKLY RENTS
Each quarter, the Residential Tenancies Authority (RTA) releases statistical information on the median weekly rents in Queensland for various accommodation options.
Set out below are the median weekly rents for selected accommodation options in selected locations between June 2002 and June 2007.60
Median weekly rents for one bedroom flats/units
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $138 $155 $170 $185 $200 $230 Bundaberg $90 $90 $100 $130 $120 $135 Cairns $120 $130 $145 $160 $165 $185 Gladstone $100 $120 $140 $110 $155 $123 Gold Coast $175 $190 $205 $220 $240 $250 Mackay $100 $100 $110 $130 $170 $200 Sunshine Coast $125 $130 $150 $160 $180 $190 Toowoomba $90 $110 $105 $107 $115 $120
59 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 79. 60 These tables are prepared from statistical information provided on the RTA website, http://www.rta.qld.gov.au/Median_rents.cfm. Note that the private rental market is discussed further in part 4 of this Research Brief.
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Median weekly rents for two bedroom flats/units
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $190 $200 $220 $240 $260 $300 Bundaberg $115 $125 $135 $145 $155 $170 Cairns $145 $150 $170 $185 $210 $230 Gladstone $135 $165 $165 $145 $165 $190 Gold Coast $195 $220 $240 $260 $280 $300 Mackay $125 $130 $140 $165 $200 $250 Sunshine Coast $165 $185 $200 $220 $230 $250 Toowoomba $125 $125 $135 $150 $160 $160
Median weekly rents for three bedroom flats/units
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $225 $240 $260 $280 $310 $350 Bundaberg $140 $145 $160 $180 $190 $250 Cairns $225 $230 $250 $290 $320 $320 Gladstone $180 $220 $220 $190 $220 $250 Gold Coast $206 $235 $250 $280 $295 $325 Mackay $175 $175 $195 $225 $290 $350 Sunshine Coast $200 $240 $250 $270 $280 $320 Toowoomba $160 $160 $190 $220 $220 $240
Median weekly rents for two bedroom houses
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $195 $210 $225 $240 $260 $285 Bundaberg $125 $140 $160 $165 $180 $185 Cairns $170 $180 $200 $220 $230 $240 Gladstone $150 $200 $190 $170 $160 $220 Gold Coast $210 $230 $260 $265 $280 $300 Mackay $145 $160 $165 $200 $255 $260 Sunshine Coast $175 $190 $220 $230 $240 $265 Toowoomba $140 $150 $160 $170 $180 $185
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Median weekly rents for three bedroom houses
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $210 $225 $240 $260 $280 $315 Bundaberg $145 $160 $185 $200 $215 $230 Cairns $190 $200 $230 $250 $270 $295 Gladstone $190 $220 $220 $200 $225 $280 Gold Coast $245 $270 $290 $310 $330 $350 Mackay $175 $185 $207 $250 $310 $350 Sunshine Coast $215 $240 $260 $270 $290 $320 Toowoomba $165 $175 $190 $200 $215 $225
Median weekly rents for four bedroom houses
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Brisbane $250 $265 $285 $300 $330 $370 Bundaberg $165 $200 $220 $250 $255 $280 Cairns $250 $280 $290 $310 $330 $350 Gladstone $230 $280 $270 $250 $280 $330 Gold Coast $280 $300 $330 $350 $360 $390 Mackay $210 $235 $270 $300 $390 $420 Sunshine Coast $260 $280 $300 $325 $340 $380 Toowoomba $220 $230 $250 $270 $280 $280
3.5 OFFICE OF ECONOMIC AND STATISTICAL RESEARCH, DATA ON VACANCY RATES
The Office of Economic and Statistical Research provides information on vacancy rates for rental properties throughout Queensland.
Set out below are rental housing vacancy rates for five regions around Queensland from September 2004 to June 2007.61
61 These tables are prepared from statistical information provided on the Office of Economic and Statistical Research website, http://www.oesr.qld.gov.au/publications/briefs/industry/rental- housing-vacancy-rates-qld/index.shtml. Note that the private rental market is discussed further in part 4 of this Research Brief.
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Qld Inner Rest of Brisbane Gold Rest of Brisbane Brisbane Surrounds Coast Qld Sep 04 2.5% 2.2% 1.8% 2.9% 2.3% 2.9% Dec 04 2.6% 2.8% 2.6% 3.3% 2.1% 2.6% Mar 05 3.0% 1.5% 1.6% 2.9% 5.0% 3.0% Jun 05 2.9% 1.5% 2.0% 2.4% 4.2% 3.3% Sep 05 2.6% 1.8% 2.3% 2.7% 2.8% 3.1% Dec 05 2.4% 2.1% 1.8% 2.2% 2.3% 2.7% Mar 06 2.3% 1.2% 1.7% 2.1% 2.8% 2.7% Jun 06 1.9% 1.3% 1.5% 1.7% 2.7% 2.0% Sep 06 2.0% 1.5% 1.4% 1.9% 2.8% 2.1% Dec 06 2.6% 1.8% 1.9% 2.2% 3.8% 2.7% Mar 07 2.1% 2.0% 1.5% 1.6% 2.2% 2.5% Jun 07 2.8% 1.4% 2.3% 1.7% 3.6% 3.6%
3.6 2006 CENSUS
The 2006 Census shows that, nationally: • 32.6% of private dwellings were fully owned in 2006 (compared to 39.7% in 2001), 32.2% were being purchased (compared to 26.5% in 2001) and 27.2% were being rented (compared to 26.3% in 2001); • the median weekly rent in 2006 was $190 (compared to $145 in 2001), and the median monthly housing loan repayment was $1,300 (compared to $867 in 2001); and • 14.9% of rental properties were rented through a state or territory housing authority (compared to 17.1% in 2001).62
For Queensland, the 2006 Census shows that: • 30.4% of private dwellings were fully owned in 2006, 31.4% were being purchased and 30.0% were being rented; • the median weekly rent in 2006 was $200 and the median monthly housing loan repayment was $1,300; and • 10.7% of rental properties were rented through the state housing authority.63
62 2006 Census QuickStats: Australia, ‘Dwelling Characteristics’.
63 2006 Census QuickStats: Queensland, ‘Dwelling Characteristics’.
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3.7 PROPERTY COUNCIL OF AUSTRALIA: BEYOND REACH: A WORKFORCE HOUSING CRISIS IN THE MAKING
In July 2007, The Residential Development Council, a division of the Property Council of Australia, released a report, Beyond Reach: A Workforce Housing Crisis in the Making.64
The report provides information on the cost of housing to low to middle-income earners and those in ‘essential’ occupations (such as police officers, teachers and nurses). It aims to show the difficulty experienced by some workers in finding housing near their workplace.
The report has relied on two measures of affordability: • no more than 30% of household income should service housing costs; and • house prices should cost no more than three to four times median household income in order to be affordable.65
The following ‘household types’ are considered by the report: • full-time primary school teacher and full-time administrative assistant; • full-time police officer with a partner who is not employed; • full-time ambulance officer and full-time nurse; • full-time public servant; • full-time electrician and part-time retail shop assistant; and • full-time child care worker.
The findings of the report regarding the affordability of housing to these household types in the various major centres in Queensland are shown below.
In interpreting the findings, note that: • ‘median multiple’ for an area means median house price for the area as a multiple of gross income; • the percentages that are shown reflect the proportion of gross income needed to service mortgage repayments or rent; and • the shaded boxes show situations in which the housing is considered unaffordable.
64 The Residential Development Council (Property Council of Australia), Beyond Reach: A Workforce Housing Crisis in the Making, July 2007, downloaded on 17 August 2007 from http://www.propertyoz.com.au/pdf/RDC_BeyondReach_010807.pdf.
65 For other assumptions made in the report, see pages 1 to 2 of the report. These include not taking into account overtime or government benefits paid to workers or their households.
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Full-time primary school teacher and full-time administrative assistant66
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 3.2 30% 18% 16% 12% Mitchelton 3.7 35% 30% 16% 13% (Brisbane) Springfield 3.1 28% N/A 14% 10% (Brisbane) Gold Coast 4.2 39% 30% 19% 16%
Full-time police officer with a partner who is not employed67
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 7.0 62% 37% 34% 24% Mitchelton 8.2 72% 62% 33% 27% (Brisbane) Springfield 6.7 59% N/A 29% 20% (Brisbane) Gold Coast 9.2 81% 62% 40% 34%
Full-time ambulance officer and full-time nurse68
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 3.7 33% 20% 18% 13% Mitchelton 4.4 38% 33% 18% 14% (Brisbane) Springfield 3.6 32% N/A 15% 11% (Brisbane) Gold Coast 4.9 43% 33% 21% 18%
66 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 4-5. Assumes an annual gross income for such a household in Queensland of $91,797. 67 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 6-7. Assumes an annual gross income for such a household in Queensland of $44,111.
68 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 8-9. Assumes an annual gross income for such a household in Queensland of $82,680.
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Full-time public servant69
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 5.0 44% 26% 24% 17% Mitchelton 5.8 51% 44% 23% 19% (Brisbane) Springfield 4.7 42% N/A 20% 14% (Brisbane) Gold Coast 6.5 57% 44% 28% 24%
Full-time electrician and part-time retail shop assistant70
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 6.0 53% 32% 29% 21% Mitchelton 7.0 62% 53% 28% 23% (Brisbane) Springfield 5.8 51% N/A 25% 17% (Brisbane) Gold Coast 7.9 69% 53% 34% 29%
Full-time child care worker71
Location Median Purchasing Purchasing Renting a Renting a multiple a house a unit house unit Cairns 10.2 90% 54% 49% 35% Mitchelton 11.8 104% 90% 48% 38% (Brisbane) Springfield 9.7 86% N/A 42% 29% (Brisbane) Gold Coast 13.3 117% 90% 58% 50%
69 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 10-11. Assumes an annual gross income for such a household in Queensland of $62,544.
70 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 12-13. Assumes an annual gross income for such a household in Queensland of $51,412.
71 Property Council of Australia, Beyond Reach: A Workforce Housing Crisis in the Making, pp 14-15. Assumes an annual gross income for such a household in Queensland of $30,440.
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3.8 ST VINCENT DE PAUL SOCIETY, DON’T DREAM IT’S OVER
In July 2007, the St Vincent de Paul Society released a report, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market.72
The report contains a foreword by Dr John Falzon, chief executive officer of the National Council of the St Vincent Paul Society, which includes the following: The pressure on our homeless services has never been greater. And one of the chief causes is the parlous state of the private rental market. Today our homeless services are assisting not just people with drug, alcohol and mental health problems but also increasing numbers of working families who can’t pay the rent. In fact, nearly 50% of people coming into homeless services across Australia are private renters in trouble. Many thousands of families are on the edge of homelessness … . Many of our volunteers are visiting families living in run down boarding houses, caravans or tiny flats that aren’t meant for families. … It’s time to focus national attention on the needs of renters. … [P]rivate renters today comprise only a fifth of all households, but well over half of all households in housing stress – with a third of those in housing crisis. … Today we know how to create low-density, low-income housing that really works. Sadly, though, its construction has all but stopped. Government housing policies … are not addressing directly enough the real problem – the lack of affordable low-income rental housing … . We believe it’s time to address shortage of low-income housing head on – by constructing more of it. That’s why this report calls for a serious increase in government direct investment in public and social housing for low-income families. …
The report centres on “the important but overlooked fact that renting privately has now become the only housing option for low-income households”. It claims that: [D]espite the importance of the rental sector to so many Australians, debate and policy making is focussed almost exclusively on home ownership. The plight of renters – especially of low-income renters – is being ignored.73
The report points to research, undertaken by the Australian Housing and Urban Research Institute in 2006, which provides the following information on the
72 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, July 2007, downloaded on 20 August 2007 from http://www.vinnies.org.au/UserFiles/File/DONT%20DREAM%20ITS%20OVER%20- %20St%20Vincent%20de%20Paul%20Report.PDF.
73 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, p 1.
Page 22 Queensland Parliamentary Library proportion of the lowest 40% of income households that are in ‘housing stress’ (with housing stress existing if more than 30% of household income is spent on housing costs) or in ‘housing crisis’ (if more than 50% of household income is spent on housing costs):74
Tenancy type Households in stress Households in crisis Outright owner 82,000 70,000 Home purchaser 265,000 134,000 Public renter 40,000 5,000 Private renter 460,000* 192,000 Total 847,000 401,000 * This reduces to 345,000 when adjusted for rental allowance.75
The report also contains a number of case studies to illustrate the problems facing low to middle-income families in the private rental market.76
4 PRIVATE RENTAL MARKET
As already mentioned, the current focus on housing affordability extends beyond homebuyers to include those in the private rental market. It is this latter group which is likely to face greater attention in the future.
Parts 3.4 and 3.5 of this Research Brief provide information on steadily increasing median weekly rents in Queensland and low vacancy rates for a range of accommodation options. These conditions have combined in a way that has affected low to middle-income households for whom renting through the private housing market is their only option. They have also affected households saving for their first home, particularly single people and one-income households.77
Reports have emerged of: • prospective tenants taking up to two months to find suitable rental accommodation, with most submitting five applications before they secure a property; and
74 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, p 7.
75 The Commonwealth Rent Assistance Scheme is discussed in part 4.3 of this Research Brief.
76 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, pp 4-5.
77 Anthony Marx, ‘Bursting at seams’, Courier Mail, 5 January 2007, p 4.
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• overcrowded inspections and ‘rent bidding wars’, which are apparently becoming more common (‘rent bidding’ is discussed further in part 4.2 of this Research Brief).78
Statements have also been made that “Australia’s rental crisis is now so bad that paying the landlord is causing more stress than paying off mortgages”.79 There are reports that rents will increase this year at their fastest rate since 1989, and that they will increase by a further five to seven per cent over the next few years.80
This part of the Research Brief: • provides a profile of the private rental market in Queensland; • discusses a recent report of the Residential Tenancies Authority, Rent Bidding; and • provides information on eligibility for, and payments under, the Commonwealth Rental Assistance Scheme.
4.1 PROFILE OF THE PRIVATE RENTAL MARKET IN QUEENSLAND
On 23 April 2007, the Queensland Government endorsed a discussion paper prepared by the Residential Tenancies Authority (RTA) which sought feedback on proposed changes to the Residential Tenancies Act 1994 (Qld).81
The discussion paper profiles the residential tenancy market in Queensland, and provides the following information: • in 2003-04, 483,500 (about 32.0%) of Queensland’s 1,526,400 households were renting, with 81.0% renting from private landlords. The majority of the remainder (13.6%) were in public housing; • there is predicted further growth in the proportion of Queensland households renting, to 40% of households within 10 years; • there is a trend towards denser housing, with the number of rented flats, units
78 Patrick Lion, ‘Renters facing long wait in housing’, MX, 22 March 2007, p 4.
79 Erica Thompson, ‘Rental squeeze worsens worries – wellbeing under threat’, Courier Mail, 7 February 2007, p 3.
80 Fleur Anderson, ‘Affordability crisis feeds rent increases’, Australian Financial Review, 1 August 2007, p 13.
81 RTA, Tenancies Act Review – Policy Review Paper, 2007, downloaded on 6 August 2007 from http://www.rta.qld.gov.au/zone_files/Docs/policy_review_paper-tenancies_act_review.pdf. Hon P Beattie MP, Premier and Minister for Trade, and Hon R Schwarten MP, Minister for Public Works, Housing and Information and Communication Technology, ‘Revamp of Residential Tenancies Act to suit changing times’, Ministerial Media Statement, 23 April 2007.
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and townhouses in Queensland increasing by about 21% between 1996 and 2001. These dwellings represented about 40% of all rental accommodation in 2001, up from about 37% in 1996; • tenancies averaged 12.2 months for houses and 10.7 months for flats/units in 2005-06; • people in share accommodation are the most likely to rent (74.4% of ‘group households’ rent even though this group comprises only 4.0% of all households), followed by 64.5% of sole parent families, 37.5% of lone person households and 11.6% of couples without children; • the vast majority (87.6%) of rental properties are managed by licensed real estate agents; and • in 2001, 30.1% of occupied dwellings in Queensland were rented compared to 26.3% nationally.82
4.2 ‘RENT BIDDING’ PRACTICES
Reports emerged in late 2006 of ‘rent auctions’ and ‘rent bidding’ taking place as the private rental market tightened. It was claimed real estate agents and landlords were conducting ‘auctions’ between prospective tenants in order to achieve increased rents. Prospective tenants were also apparently: • offering greater than the asking rent in an attempt to secure a tenancy; or • attending ‘open houses’ and being urged to ‘make an offer’ in circumstances where there was no asking rent.83
In December 2006, the Hon R Schwarten MP, Minister for Public Works, Housing and Information and Communication Technology, requested the Residential Tenancies Authority (RTA) to commission research into rent bidding in Queensland.
In March 2007, the Minister released the resulting report, Rent Bidding.84
82 RTA, Tenancies Act Review – Policy Review Paper, pp 9-13.
83 Darrell Giles, ‘Housing warning as rents take off’, Sunday Mail, 29 October 2006, p 9; Ainsley Pavey, ‘Bidding war as rentals dry up’, Sunday Mail, 7 January 2007, p 27.
84 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, January 2007, downloaded on 6 August 2007 from http://www.rta.qld.gov.au/zone_files/Rent_bidding/rent_bidding_final_report_30_jan_07.pdf. Hon R Schwarten MP, Minister for Public Works, Housing and Information and Communication Technology, ‘Report into rental bidding released’, Ministerial Media Statement, 6 March 2007. The Residential Tenancies Authority also released a Rent Bidding Information Sheet, http://www.rta.qld.gov.au/zone_files/Rent_bidding/rent_bidding_flyer.pdf.
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4.2.1 ‘Rent bidding’ practices and their prevalence
The report lists the following practices as providing a “continuum” of possible rent bidding activities, and discusses their likely prevalence: • where the advertised rent is fixed and does not alter: occurs for the overwhelming majority of rental properties; • where prospective tenants, of their own initiative, offer more than the advertised rent: probably the most common practice and estimated to occur with between 5% and 10% of tenants; • where the agent requests prospective tenants to offer more than the advertised rent: difficult to estimate the prevalence, but likely to be increasing; • where a rental range is advertised, such as ‘$225 to $270’ or ‘offers above $230’: no Queensland agents appeared to be using this practice; • where no rent is advertised: found, in the report, to be used by two Queensland agencies for some of their properties; and • where a ‘rent auction’ is conducted: does not appear to have occurred formally in Australia, and is unlikely to take place.85
4.2.2 Likely future trends in rent bidding
In terms of the future likelihood of various rent bidding practices in the absence of any government intervention, the report says: • tenant and agent-initiated offers of rents greater than an advertised rent are likely to become more common; • advertising a rental range, or advertising without specifying a rent, is likely to become more prevalent, particularly in areas with low vacancy rates, however it is unlikely these practices will ever become the “market standard”; and • formal rent auctions are “extremely unlikely” to occur, due to the cost and effort associated with organising them and the fact that landlords do not choose prospective tenants solely for the amount of rent they will pay.86
4.2.3 Some rent bidding practices constitute misleading or deceptive conduct
The report concludes by stating: “Rent bidding” is a symptom of low rental vacancy rates. A number of actual and potential behaviours associated with rent bidding are criticised strongly by stakeholders.
85 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, pp 1-3.
86 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, pp 3-5.
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However, the specific detriment about which we should be concerned is where these behaviours are misleading or deceptive – and not just the unfortunate consequences of a shortage in the supply of rental housing. The conclusion is that some elements of rent bidding are misleading and deceptive.87
The following rent bidding practices are identified as potentially misleading or deceptive: • where an agent requests a prospective tenant to offer more than the advertised price; • where a rental range is advertised and that range is unrealistic or where there is no intention to consider an offer made within the range; • where an agent falsely tells one prospective tenant that another has offered a higher rent.88
Other rent bidding practices, while considered unlikely to be misleading or deceptive, were viewed to be not “consumer friendly”.89
4.2.4 Suggested response to rent bidding practices
The report suggests that: Current consumer protection legislation is adequate to deal with the issue. What is needed is a concerted and specific education campaign, primarily targeting real estate agents, about their obligations not to mislead or deceive consumers. Any breaches of trade practices laws/fair trading laws should, of course, be prosecuted.90
The report does not support addressing rent bidding in the following ways: • banning the advertising of rental properties without a specified rent and/or legislating so that agents/landlords cannot accept more than the advertised rent; • requiring agents/landlords to make application and selection processes more transparent by requiring them to set out why one particular tenant was chosen in comparison to another.91
The report closes by stating:
87 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, p 10.
88 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, pp 8-9.
89 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, p 11.
90 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, p 11.
91 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, pp 12-13.
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[T]he core issue of scarcity is best addressed by additional, affordable housing.92
4.2.5 Real Estate Institute of Queensland information on advertising rental properties
The Real Estate Institute of Queensland (REIQ) has released a practice note with advice on advertising rental properties in Queensland. This includes: • obtaining specific advice from the landlord about what rent they wish to receive and advertising the highest instructed amount; • communicating expressions of interest to the landlord; • advising the landlord if the desired rent is substantially more or less than the market rental of the property; and • offering the property for rent at a price which accords with the landlord’s written instructions.93
4.3 COMMONWEALTH RENT ASSISTANCE SCHEME
A person qualifies under the Commonwealth Rent Assistance Scheme if they:94 • receive a pension payable under the Social Security Act 1991 (Cth); • receive more than the base rate of Family Tax Benefit if they have dependent children; • receive an allowance or benefit if they do not have dependent children and are over 25 years of age, partnered or under 25 years of age and living permanently or indefinitely apart from parents or guardians; and • meet certain residence requirements.
An applicant must also be paying more than a certain amount of rent.
Rent assistance payment rates from 1 July 2007 are as follows:
92 Creative Sparks Pty Ltd (commissioned by the RTA), Rent Bidding, p 13.
93 The REIQ practice note is summarised by the RTA at http://www.rta.qld.gov.au/information_on_rent_bidding_for_agents.cfm.
94 Information on the Commonwealth Rent Assistance Scheme is available from http://www.centrelink.gov.au/internet/internet.nsf/payments/rent_assistance.htm.
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For applicants with no dependent children
Situation Max. Not payable if Max. payment is made fortnightly fortnightly rent is less if fortnightly rent is payment than more than Single $105.40 $93.80 $234.33 Single, sharer $70.27 $93.80 $187.49 Couple $99.40 $152.60 $285.13 One of a couple $105.40 $93.80 $234.33 separated due to illness One of a couple $99.40 $93.80 $226.33 temporarily separated
For applicants with dependent children
Situation Max. Not payable if Max. payment is made fortnightly fortnightly rent is less if fortnightly rent is payment than more than Single, 1 or 2 $123.76 $123.34 $288.35 children Single, 3 or more $140.00 $123.34 $310.01 children Couple, 1 or 2 $123.76 $182.56 $347.57 children Couple, 3 or 4 $140.00 $182.56 $369.23 children
A recent report of the St Vincent de Paul Society95 commissioned research by the National Centre for Social and Economic Modelling to determine how much additional rent assistance would be required for all households in the private rental market to be free of housing stress. The finding of that research was that the mean ‘rent gap’ (the difference between what households are paying in weekly rent and 30% of their weekly income) is about $74 per household, or $3,850 per year. The report states that an additional $1.33 billion per year would be required to eliminate private renter housing stress in Australia through the rent assistance program.96
95 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market. This report is discussed in greater detail in part 3.8 of this Research Report.
96 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, p 8.
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5 CAUSES OF, AND SOLUTIONS TO, THE HOUSING AFFORDABILITY SITUATION
There is disagreement about the causes of the current housing affordability situation and what can be done to improve it.
This part of the Research Brief identifies: • some of the apparent causes identified by various commentators; and • some of the possible solutions, including a discussion of: − the Queensland Government’s ‘Housing Affordability Strategy’; − a recent policy of the Federal Labor Party, ‘New Directions for Affordable Housing’, which has attracted considerable media coverage; and − statements made by the federal government on the issue of housing affordability.
5.1 FACTORS CONTRIBUTING TO HOUSING AFFORDABILITY
Opinion differs about the apparent causes of the current housing affordability situation, for homebuyers as well as those in the private rental market. However, most acknowledge that the issue is complex and that a combination of factors, rather than one or two, is likely to have contributed to the situation.
By way of example, the following list demonstrates the range of possible causes. It was prepared by the Urban Development Institute of Australia (UDIA), a stakeholder with a particular interest in the issue of housing affordability: • restrictions in land supply in some markets; • ‘holding charges’ incurred by developers when development cannot proceed as and when planned due to extensive delays in processes for approving future sub-division and development; • costs associated with the preparation of development applications; • undersupply of housing in a number of markets; • substantial increases in infrastructure charges; • increases in taxes and charges including the introduction of the Goods and Services Tax; • interest rate increases; • the ripple effect on housing markets caused by housing prices in key population centres; • additional requirements imposed on new home purchasers for enhanced services; • lack of infill sites for higher density dwellings; • the trend towards the construction of larger dwellings, although this is balanced against declining lot sizes in some locations;
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• policies that restrict land supply as a means of encouraging higher density and consolidation of population; • increased construction costs, particularly for higher density dwellings; • skills shortages; • costs of compliance with increased environmental requirements; and • demand pressures, which may have increased due to the accessibility of finance, growth in household incomes, or the movement between investment classes.97
From a different perspective, the St Vincent de Paul Society has pointed to the following causes of increasing housing stress: • low investment in public housing; • demographic shifts and increases in the number of households including through household break-up; • the tendency for affluent young Australians to want to live in the inner-city, which increases rents and forces low-income earners out of even relatively low- standard, unrenovated housing; • the long economic boom which has raised incomes which have been fed into housing costs; • housing allowances, including rental subsidies for tenants, which have had little effect on increasing the supply of rental housing and, many argue, serve only to increase rents; • shifts in fiscal subsidies to home buyers and owners which have increased demand and housing prices, forcing more low to middle-income earners out of the housing market; and • the combination of low interest rates, negative gearing for rental properties and the lower taxing of capital gains.98
Discussed below in greater detail, and in no particular order, are some of the possible causes.
The cost of housing, the desire of existing homeowners for better houses and increased demand
Ross Gittins, economics editor for the Sydney Morning Herald, has linked decreasing housing affordability to the greater cost of housing and our desire for
97 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 16. This report is discussed in greater detail in part 3.3 of this Research Brief.
98 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, pp 8-9. This report is discussed in part 3.8 of this Research Brief.
Housing Affordability Page 31 better homes, rather than recent interest rates increases.99
Mr Gittins says that “the bigger problem is how much you have to borrow these days”. In answering the question of why house prices have risen so much, he says this is “partly because the average home keeps getting bigger and better, but mainly because the demand for homes far outstripped the supply”.100
In terms of why demand so far outstripped supply as to more than double the price of homes, Mr Gittins says that this is “mainly because the return to low inflation and the consequent halving in mortgage interest rates permitted people to borrow so much more”. He says: People didn’t have to react to the increase in their borrowing power by borrowing more, but many of them did. They decided it was the perfect opportunity to do what they’d long wished they could afford to do: trade up to a better house. And because so many people had the same idea at pretty much the same time, the main thing they achieved was to bid up the prices of essentially the same bunch of houses. So the housing boom of the late ‘90s and early ‘00s didn’t involve a large number of renters finally being able to afford to buy. Nor was there all that much building of additional homes on the outskirts of cities. No, first home buyers hardly got a look in. For the most part the boom involved many existing home owners seeking a better place. And their idea of a “better” place tended to be one closer to the centre of the city, closer to the beach or closer to the harbour. … The housing boom was mainly about existing home owners fighting over a fixed supply of well-positioned land. That’s why prices rose so much.101
In terms of supply and demand, Mr Gittens puts the argument as follows: [T]he price of houses seems likely to keep rising because demand is still running ahead of supply. It follows that the way to make homes more affordable is either to reduce demand … or to increase supply. This is where the idea of releasing more land on the outskirts may help … . I think there’s a good case for governments to subsidise the building of low-cost rental accommodation. That’s because there’s a lot of “housing stress” among renters and because adding to the total stock of dwellings indirectly helps first home buyers, as do rents that are lower than otherwise, leaving people with more scope to save for a deposit.
99 See, for example, Ross Gittins, ‘A housing illusion we buy every time’, Sydney Morning Herald, 11 July 2007.
100 ‘A housing illusion we buy every time’, Sydney Morning Herald.
101 ‘A housing illusion we buy every time’, Sydney Morning Herald.
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But here’s the point so many people find hard to understand: anything you could do to make it easier for people to afford to pay the existing prices is likely to be counterproductive. That’s because you’re adding to demand, not adding to supply. When you increase the $7000 first home owners’ grant, or cut the stamp duty on conveyancing, or introduce a subsidised home saving scheme, or arrange for home buyers to share the equity in their home in return for a free loan, you’re adding to people’s ability to pay. And when you add to the ability to pay you’re merely making it easier for prices to stay high or go higher. … The reason the public finds it so hard to grasp this simple point is our habit of viewing things from our own perspective, not a system-wide perspective. Boosting the ability to pay would work if you were the only person who benefited. But when all the other buyers you’re competing with also benefit, your individual advantage is lost as the market price moves against you.102
The First Home Owner Grant is available to assist people purchasing their first home. Some 995,000 Australians have taken advantage of the grant since 2000. Some have called for the grant ($7,000) to be increased,103 as it has not changed in the seven years since its inception. In response to these calls, the Federal Government has argued that: You have to be careful in this area that if all you do is give everybody an increased capacity to buy, you can actually drive prices up further.104
Similar to the statements made by Ross Gittens, Saul Eslake, chief economist at the ANZ Bank, has said: A key lesson for those concerned about improving housing affordability, whether for buyers or renters, is that policies that work only on the demand side of the housing market are doomed to fail. Anything that puts additional cash in the hands of buyers (such as grants or stamp duty concessions) or renters (such as cash assistance) with a view to enabling them to buy or rent more expensive houses results merely in more expensive houses. Instead, policy needs to focus on increasing the supply of housing particularly low- cost housing and reducing the time taken to bring land and housing to the market.105
102 ‘A housing illusion we buy every time’, Sydney Morning Herald.
103 Clinton Porteous, ‘Battle for home help’, Courier Mail, 7 July 2007, p 29.
104 ‘First home grant loses its value’, Courier Mail.
105 Saul Eslake, ‘More bricks and mortar will solve housing squeeze’, Australian Financial Review, 12 March 2007, p 63. Another article criticising increases to the first home owner grant is ‘Don’t give them more: first home-buyer grant is already too generous’, Australian (editorial), 14 June 2007, p 11.
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Favourable tax treatment of property for owner-occupiers and investors
Numerous commentators have said that a factor contributing to the housing affordability situation is the tax-free status of housing for owner-occupiers and the favourable tax treatment for investors, particularly in terms of capital gains tax discounts and negative gearing.106
Despite this, it should be noted that recent taxation and superannuation changes saw some investors move their funds out of property.107
Failure to release sufficient land for development and planning restrictions
The Federal Government has argued that the failure of the states to release sufficient land for development has contributed to housing affordability difficulties.108 This view is supported by a number of interested stakeholders, particularly those in the development industry, who also lay blame on escalating upfront local government charges for new developments and increasingly complex planning requirements.109 For example, a report commissioned by the Residential Development Council, which is part of the Property Council of Australia, found that state and local governments need to change planning policies and release more land in order to alleviate decreasing housing affordability. It states that there is currently a shortage of 13,000 sites, which will increase to nearly 185,100 in 20 years. In relation to south-east Queensland, the report says that an excess supply of 24,032 lots will become a shortage of 62,142 in the next two decades.110
On the other hand, other commentators have questioned how significant land release policies actually are. For example, Rory Robertson, senior economist at Macquarie Bank, has been quoted as saying that releasing more land would only help “at the margin” and that the solution is “for people to move out onto the fringes”: Expand the fringes as aggressively as is feasible … over time you will find it’s easier to make cities bigger than to make average prices fall.111
106 See, for example, ‘The rich will get richer; the poor will move away’, Sydney Morning Herald.
107 Graham Joyce, ‘No room to move’, Business Review Weekly, 23 August 2007, p 52.
108 See, for example, Josh Gordon, ‘Rent rising at its fastest since 1998’, Age, 4 July 2007.
109 See, for example, ‘There goes the house’, Courier Mail.
110 Marsha Jacobs, ‘A drought of another kind’, Australian Financial Review, 13 January 2007, p 14; Joseph Kerr, ‘Housing crisis to worsen’, Australian, 13 January 2007; Leigh Lalonde, ‘Housing squeeze looms’, Courier Mail, 13 January 2007, p 13.
111 Nassim Khadem, ‘Funding fall weakens housing claims’, Age, 5 July 2007.
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Mr Robertson has also been reported as saying that the importance of restricted land on urban fringes had been “exaggerated” and that the housing market was always going to have trouble satisfying the huge surge in demand that came with low interest rates.112
Additionally, the Local Government Association of Queensland (LGAQ) has been reported as saying that land availability is not the real issue, and that housing affordability reflects high demand rather than any particular shortage of supply.113
In terms of local government infrastructure charges for new developments, which developers pass on to new home buyers, many point to the inequity of people in established suburbs having not had to make similar contributions. For example, example, Ross Elliott, executive director of the Residential Development Council, has said: If you bought a $1.35 million home in Ascot it would not have in its entire history paid any upfront levies for what you would have to say are fairly good amenities in the area. If you bought that, you would pay about $47,000, or 3.54 per cent of the cost, in stamp duty. If you buy a new three-to four-bedroom home in Redlands for $460,000, there is $62,000 in taxes and charges – and that’s 13.4 per cent of the costs. Battlers are paying more than millionaires.114
In a similar way, the Business Review Weekly recently said: The generational unfairness argument was underlined in a Residential Development Council study which compared how a $1.8 million home in Mosman, Sydney, attracted taxes of $84,490 when sold, compared with a north-west Sydney home-land package costing $570,240 that included nearly $200,000 in taxes and charges.115
Stamp duty
The Business Review Weekly, in April 2007, reported the findings of a poll of 550 people conducted by Terry Ryder, a real estate commentator. The poll found that 28% of people believe high buying costs such as stamp duty are the biggest issue confronting buyers. This compares to 9% of people who believe interest rates are the biggest issue, 34% who believe low affordability is the biggest issue, and 29% who believe low returns are the biggest issue. Mr Ryder said: Stamp duty is a big concern on its own, much bigger than interest rates, and acts as
112 Tina Perinotto, ‘States reject blame for housing crisis’, Australian Financial Review, 24 January 2007, p 49.
113 ‘There goes the house’, Courier Mail.
114 ‘Rich times can’t hide home truth’, Courier Mail.
115 ‘Home front’, Business Review Weekly, p 43.
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a huge deterrent to property investors.116
Real Estate Institute of Australia president, Graham Joyce, has said the following in relation to stamp duty: It is a transaction tax which discriminates against property as it is not levied against other asset classes.117
Differing opinion does, however, exist about the influence of stamp duty on housing affordability.
Stamp duty on residential conveyances is tipped to reach $8 billion nationally in 2007-08.118
The following table shows the amount of stamp duty payable on the purchase of a home119 in Queensland:120
Purchase price Stamp duty Purchase price Stamp duty $200,000 $2,000 $450,000 $7,750 $250,000 $2,500 $500,000 $9,500 $300,000 $3,000 $550,000 $11,500 $350,000 $4,250 $600,000 $13,500 $400,000 $6,000 $650,000 $15,500
The following table shows the amount of stamp duty payable by first-home buyers in Queensland:121
116 Chris Larsen, ‘Stamp duty deters buyers’, Business Review Weekly, 12 April 2007, p 12.
117 ‘Stamp duty deters buyers’, Business Review Weekly.
118 ‘Castles in the sky: State governments are driving Australia’s housing crisis’, Australian (editorial), 21 March 2007, p 15.
119 In this instance, ‘home’ means principal place of residence. Higher stamp duty applies for investment property.
120 This data has been calculated using the transfer duty calculator on the Office of State Revenue website, www.osr.qld.gov.au.
121 This data has been calculated using the transfer duty calculator on the Office of State Revenue website, www.osr.qld.gov.au.
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Purchase price Stamp duty Purchase price Stamp duty $200,000 $0 $450,000 $7,150 $250,000 $0 $500,000 $9,500 $300,000 $0 $550,000 $11,500 $350,000 $1,650 $600,000 $13,500 $400,000 $4,400 $650,000 $15,500
Societal changes and our cultural ‘fixation’ on property
Home ownership has long been held in high regard in the Australian psyche.
Significant societal changes over the past three to four decades have impacted fairly significantly on our aspirations for home ownership.
Ross Gittins recently provided some insight on the impact of these changes on housing affordability: [T]he difficulty people are having affording a home loan is largely of our own making. … The true problem is that our homes are at the centre of our materialistic ambitions. As our incomes grow in real terms over time we want to put much of the increase into our homes. When a change in social attitudes meant girls started getting better educations and staying on in the workforce after marriage and childbirth, the first two-income families had the greatest advantage: they could afford to buy a better house than other families. But as two-income families became the norm, that advantage was lost. Almost all families could afford a more expensive home – which made all homes more expensive. … In the 1980s an inflation rate that averaged 8 per cent meant double-digit mortgage interest rates. Obviously, this limited the amount people could afford to borrow and, hence, the prices they could pay for their homes. In the 1990s … [there was] … a return to low inflation. Over the course of the decade mortgage interest rates halved. There were three ways we could have reacted to this favourable development. People could have left their mortgage payments unchanged, knowing this would mean they paid off their mortgage many years earlier. Or they could have cut their mortgage payments in line with the fall in interest rates, leaving them with more to spend on other things … . Or they could have greatly increased the size of their mortgage – roughly doubled it – without any increase in repayments and thus afforded to move to a better house. … [M]ost people … opted for the better house. But because so many people did this at about the same time, the main thing they achieved was to bid up the prices of
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homes; more than double them, in fact. … No matter what good fortune comes our way – rising real incomes, a second income for the family, the halving in interest rates – most of it goes into our homes. Now, if our fixation on housing meant we wanted to buy more of them – two homes for every family – that wouldn’t be so bad. … Similarly, if we just wanted bigger, more opulent homes, that wouldn’t be so bad. … And we know how much money goes into renovations and extensions. Even so, with rising incomes we could handle bigger, flasher houses without much bother. No, the real problem is that what most of us aspired to is better-located homes – homes that are closer to the centre of the city, closer to the beach or closer to the harbour. That’s a problem because the supply of well-located land is fixed. … In the mid-1980s the median Australian house price was four times average annual earnings. Today, it’s seven times. That’s the fundamental reason housing has become so hard to afford. And it’s largely our own doing. All of us who have been home owners for years have done it to all those who’d like to be home owners. The actions of governments have played some role, but not a huge one. … [L]et’s not kid ourselves … : so great is our preoccupation with our homes that young people will still bust a gut to become home owners. That’s the problem – we complain like mad, but we still try to do whatever it takes to make it onto the housing merry-go-round.122
Many commentators have also pointed to young Australians staying in education longer, getting married and having children later, and travelling more often as some of the reasons for delaying home ownership, rather than being ‘shut out’ by high prices.
Others argue that there is a “phenomenon” of people “unwilling to live in suburbs in their price bracket” with a desire for “‘McMansions’ … with ducted cleaning systems, airconditioning and plasma screens”. There have also been calls for young people to “follow in the footsteps of their parents and to head to the suburbs” to avoid higher prices in inner-city areas.123 Other commentators have cautioned of the need to be mindful about distortions in the perceptions of an overpriced market as housing preferences have changed significantly. There is a trend to build bigger and more elaborate dwellings, with the average floor area of new houses now 34% larger than in 1986 and the homes more likely to be made of
122 Ross Gittins, ‘Housing crisis: we did it ourselves’, Sydney Morning Herald, 25 July 2007.
123 Jessica Irvine, ‘Move to the suburbs, young buyers told’, Sydney Morning Herald, 5 July 2007. See also Dennis Atkins, ‘Parties play with phrase for response’, Courier Mail, 28 September 2007, p 15.
Page 38 Queensland Parliamentary Library more expensive materials.124
Often, these perspectives are balanced by statements that people have a right to be “aspirational”.125 It should also be recognised that the benefits of cheaper housing in outer-lying areas can sometimes be off-set by the stress of commuting.126
Interest rate changes – earlier decreases and more recent increases
Interest rates in Australia declined dramatically as inflation shifted from being high and volatile in the 1970s and 1980s to comparatively low and stable since the mid- 1990s.
In August 2007, the Reserve Bank of Australia announced a 0.25% increase in the cash rate to 6.5%.127 This was the ninth successive interest rate rise since May 2002, and resulted in interest rates being at their highest level since December 1996. The standard variable mortgage rate increased from 8.05% to 8.3%.128
124 John McCarthy, ‘Rates and rents gut home hopefuls (rate rise)’, Courier Mail, 20 January 2007, p 62.
125 Patricia Karvelas, ‘Need for McMansions ‘fuelling affordability crisis’, Australian (via News.com.au), 24 July 2007. See also David Uren, ‘Housing stress sparks inquiry’, Australian, 18 July 2007, p 2.
126 ‘Rental squeeze worsens worries – wellbeing under threat’, Courier Mail.
127 Reserve Bank of Australia, ‘Statement by Glenn Stevens, Governor Monetary Policy’, Media Release, 8 August 2007.
128 ‘It’s the price of prosperity’, Sydney Morning Herald, 9 August 2007.
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The following table shows the change to monthly repayments on various loan amounts as a result of this interest rate increase:129
Loan size 8.05% 8.30% Additional $ per mth $100,000 $775.13 $791.79 $16.66 $150,000 $1,162.70 $1,187.69 $24.99 $200,000 $1,550.26 $1,583.59 $33.33 $250,000 $1,937.83 $1,979.49 $41.66 $300,000 $2,523.39 $2,375.37 $49.99 $350,000 $2,712.96 $2,771.28 $58.32 $400,000 $3,100.53 $3,167.18 $66.65
The monthly repayment on an average new mortgage in Queensland of $235,000 increased to $1,860.72, up $39.16.130
Ease with which housing finance is obtained
As competition between financiers remains fierce, reports have surfaced about how the current level of mortgage stress is related to the ease with which housing finance is obtained; that lenders are approving loans without inspecting properties, are offering large amounts to borrowers who have no deposit and are encouraging buyers to take on debts that would commit a significant proportion of their income.131
The House of Representatives Standing Committee on Economics, Finance and Public Administration recently completed an inquiry into home lending practices and processes. As part of the inquiry, the committee hosted a roundtable public hearing on 10 August 2007 with a range of key government and industry stakeholders.132
The committee’s report on the inquiry, Home loan lending – Inquiry into home loan lending practices and the processes used to deal with people in financial
129 ‘Rate hike highest in 10 years’, Business Review Weekly, 16-22 August 2007, p 19.
130 ‘Rate hike highest in 10 years’, Business Review Weekly.
131 Jessica Irvine, ‘Home loans on tap: no deposit, no inspection’, Sydney Morning Herald, 13 July 2007.
132 Parliament of Australia. House of Representatives Economics, Finance and Public Administration Committee, ‘House Economics Committee inquiring into home lending practices’, Media Alert, 17 July 2007. For transcripts, see http://www.aph.gov.au/hansard/reps/commttee/R10406.pdf (downloaded on 4 October 2007).
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Population increases
Population increases have been also been identified as a factor contributing to housing affordability difficulties.
In 2006, Australia’s population increased by 293,000 people, or 1.43%, to 20.85 million people.135 It has been reported that immigration figures are estimated to be about 152,000 this year, to which there needs to be added a further 13,000 people on humanitarian visas, 25,000 New Zealanders who are not included in the official statistics, more than 80,000 people who enter on temporary four-year work visas and a few thousand more in other categories.136
In terms of population increases in Queensland, a recent report stated: In the 20 years to 2006 the population of Queensland grew by 1,416,768 and between 2004 and 2026 the population of Queensland is anticipated to grow by a further 1,695,879 with the population projected to reach 5,583,956. In the year ending 30 June 2005 Queensland’s share of Australian population growth was 35.8 per cent, well above its 19.6 per cent share of existing Australian population. The largest share of the state’s population growth is expected to occur in the South
133 For a copy of the report, see http://www.aph.gov.au/house/committee/efpa/banklending/report/fullreport.pdf (downloaded on 4 October 2007).
134 Parliament of Australia. House of Representatives Economics, Finance and Public Administration Committee, ‘House Economics Committee to table home lending report next Monday’, Media Alert, 13 September 2007. For relevant media articles see, for example, Fleur Anderson, ‘States under fire over mortgages’, Australian Financial Review, 18 September 2007, p 1; ‘Give credit code a chance’, Australian Financial Review (editorial), 18 September 2007, p 62; and Fleur Anderson’ Federal control of non-bank sector in sight’, Australian Financial Review, 19 September 2007, p 8.
135 ‘Affordability crisis feeds rent increases’, Australian Financial Review.
136 Tim Hughes, ‘Home crisis blame game – the Commonwealth started the whole problem and it should finish it’, Courier Mail, 14 July 2007, p 71.
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East Queensland region (including Brisbane, Gold Coast and Sunshine Coast) with around 75 per cent of total growth occurring in this area. The Wide Bay-Burnett region (including Hervey Bay) and Far North Queensland region (including Cairns) are expected to have second and third-highest household growth. Sustained strong interstate migration from New South Wales has been a mainstay of Queensland population growth in the last decade … . Queensland is also drawing an increasing share of overseas migrants … . ABS estimates that Queensland’s resident population increased by a net 76,400 in the year to June 2006, equating to 1.9 per cent growth over the recent year, the population growth rate has however slowed from the peak of almost 89,000 in 2004- 05.137
Between 2001 and 2006, Queensland’s population reportedly grew by 400,000, increasing from 3.63 million to 4.09 million.138 The Premier, the Hon A Bligh MP, more recently quoted Queensland’s population as being 4.162 million people.139
The Hon A Fraser MP recently, in his capacity as then Minister for Local Government, Planning and Sport, provided the Queensland Parliament with the following information regarding population growth in this State: • population growth in the south-east corner between the 2001 census and the 2006 census averaged 66,000 people per year, with an extra 19,100 people per year for Brisbane and 16,700 for the Gold Coast; and • growth across the south-east was 2.6% and the overall rate for Queensland was 2.4%, compared to 1.3% nationally.140
A recent article referred to figures from the Australian Bureau of Statistics that showed: • by 2031 Queensland will overtake Victoria to become Australia’s second- largest state; • Brisbane’s population will more than double from 1.8 million to 3.6 million by 2041, and will be 4.2 million in 2051; and • Queensland’s total population is expected to climb from 4 million to 6.5
137 UDIA, An Industry Report into Affordable Home Ownership in Australia, p 38. This report is discussed in greater detail in part 3.3 of this Research Brief.
138 Daryl Passmore, ‘Hidden Queensland – 38,100 more of us than expected’, Sunday Mail, 26 August 2007, p 13.
139 Hon A Bligh MP, Premier, ‘Qld continues to lead nation on population growth’, Ministerial Media Statement, 24 September 2007.
140 Hon A Fraser MP, Minister for Local Government, Planning and Sport, ‘Population growth’, Ministerial Statement, Hansard, 22 August 2007, p 2739.
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million in 2031 and 8.5 million in 2051.141
Interestingly, increases to the total number of households have outstripped increases to population, with one article stating that in the five years to June 2006, the number of households rose by 9.4% compared to a 6.2% increase to population over the same period, as households get smaller due to family structure changes and an ageing population.142
5.2 POSSIBLE SOLUTIONS TO IMPROVING HOUSING AFFORDABILITY
The possible solutions suggested to improve the housing affordability situation include: • a direct investment by government to increase the supply of public and social housing;143 • calls to get private investors involved in public housing;144 • a national housing affordability policy;145 • tapering negative gearing for higher value properties to make it more attractive to invest in affordable housing;146 • incentives for developers to provide housing at below-market rents for those on lower incomes;147 • shared equity schemes which give households the benefits of any capital growth in the value of their housing;148 • parents helping their children to buy their home, by allowing them to stay at home longer, gifting a deposit to them or providing equity in their own home as
141 Lisa Allen, ‘Let’s all move to Queensland’, Australian Financial Review, 12 May 2007, p 19.
142 ‘No room to move’, Business Review Weekly.
143 St Vincent De Paul Society, Don’t Dream it’s Over: Housing Stress in Australia’s Private Rental Market, p 9.
144 Catharine Munro, ‘Call for tax breaks to reduce growing army of homeless’, Sydney Morning Herald, 24 July 2007.
145 Phil Bartsch, ‘No end to crisis – financial stress tipped for buyers and renters’, Courier Mail, 21 July 2007; Brendan Gleeson, ‘Away from home’, Courier Mail, 1 June 2007, p 29.
146 ‘Call to attract more investors in low-cost housing’, Australian Financial Review.
147 Leigh Lalonde and Melanie Christiansen, ‘Plan to meet cheap housing emergency’, Courier Mail, 21 March 2007, p 18.
148 ‘Call to attract more investors in low-cost housing’, Australian Financial Review.
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security for loans to their children;149 • allowing young people to use their superannuation as a home deposit;150 • providing first-home buyers with tax breaks of up to $15,000 per year for the first five years of their loan;151 • calls for interest payments on mortgages to be tax deductible;152 • allowing developers to bypass height restrictions in order to have more affordable housing closer to the city;153 and • freeing up land supply and local governments ceasing to recoup infrastructure charges from developers but instead paying for the infrastructure through debt which is then paid off in rates.154
Considered in greater detail below are: • the Queensland Government’s ‘Housing Affordability Strategy’; • Federal Labor’s ‘New Directions for Affordable Housing’; and • statements made by the federal government on the issue of housing affordability.
5.2.1 Queensland Government’s Housing Affordability Strategy
On 25 July 2007 the Queensland Government announced its ‘Housing Affordability Strategy’, describing it as follows: The Housing Affordability Strategy is a multi-faceted response that will fast-track available land, particularly in the south-east corner, speed up the approvals process and standardise infrastructure charges across the state. It is a comprehensive approach by the State Government across those areas of our responsibility that can affect house prices. It will cut that red tape that can add tens of thousands of dollars to the price of a home and make sure that release of land keeps pace with the needs of our rapidly
149 See, for example, Colin Brinsden, ‘First home buyers to increase share of housing market – report’, CCH, 5 September 2007.
150 Fleur Anderson, ‘Call for action on housing’, Australian Financial Review, 20 June 2007, p 4.
151 Jano Gibson and Jacob Saulwick, ‘Tax break proposed to help first home buyers’, Sydney Morning Herald, 23 August 2007.
152 ‘The Australian nightmare: can we find a better way’, Age.
153 Michelle Hele, ‘Council ups stakes – building rules bent to boost supply of affordable inner- city housing’, Courier Mail, 26 May 2007, p 7.
154 ‘Rich times can’t hide home truth’, Courier Mail.
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growing population. … The Productivity Commission, Reserve Bank and other commentators generally agree that pressure on housing affordability is a combination of market forces, particularly cheaper housing finance. While the State Government has limited ability to influence market forces, we have harnessed a range of areas in which we can make a difference.155
Key features of the strategy
The key features of the Housing Affordability Strategy are: • a new Urban Land Development Authority; • changes to local government infrastructure charging; • more timely decisions on planning and development applications; and • ‘transit oriented developments’, which will provide a range of dwellings in ‘state-of-the-art examples of modern urban living’.156
Some aspects of the strategy, including the establishment of the Urban Land Development Authority, were implemented with the passage of the Urban Land Development Authority Act 2007 (Qld), which was assented to on 11 September 2007.
Urban Land Development Authority
The new Urban Land Development Authority has power to: • acquire and consolidate land suitable for new housing and ensure it moves quickly to the market; • take responsibility for development approvals on land under its control; • undertake planning, management and delivery of strategic urban redevelopment sites, initially at Fitzgibbon, North Shore (Hamilton), Bowen Hills, Woolloongabba and the Mackay Showgrounds; and
155 Hon P Beattie MP, Premier and Minister for Trade, and Hon A Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure, ‘New strategy a blueprint for housing affordability’, Ministerial Media Statement, 25 July 2007 (a copy is provided in Appendix A of this Research Brief). The Urban Land Development Authority Bill 2007 (Qld) was introduced into the Queensland Legislative Assembly on 22 August 2007.
156 ‘New strategy a blueprint for housing affordability’, Ministerial Media Statement. For an information brochure on the strategy, see http://www.oum.qld.gov.au/docs/pdf/Queensland_Housing_Affordability.pdf (downloaded on 5 October 2007).
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• require developers to include public and affordable housing on these sites.157
In announcing the Urban Land Development Authority, the Government said: The new authority will accelerate the release of surplus land and ensure there are no unnecessary delays in its development. The authority will take over responsibility for development approvals on land under its control, cutting months off the process and delivering potential savings of $15,000-$20,000 to homebuyers. It will also take control of strategic areas of inner-city land earmarked for urban renewal to ensure developments are world-class precincts that cater for a diverse range of accommodation. On sites nominated by the Queensland Government, the role of the authority will be to undertake land use planning, amalgamation and acquisition of sites, and then on- sell land to the private sector with approvals in place. The new authority will have the power to deliver a range of housing styles to meet the changing needs of the community and can attach conditions of sale to require a component of affordable housing. … Its role will include amalgamation of land parcels within designated areas and being a one-stop shop for planning and development approval.158
The appointment of Bill Grant as the first chairman of the Urban Land Development Authority was announced on 21 September 2007.159
Local government infrastructure charging
The Housing Affordability Strategy requires changes to local government infrastructure charging in an effort to ensure homebuyers are not unfairly charged for the provision of roads, water and sewerage. Council infrastructure charging schemes will be reviewed by the Queensland Competition Authority and disputes between developers and councils will be decided by the Building and Development
157 These points are made taken from: ‘New strategy a blueprint for housing affordability’, Ministerial Media Statement; and Hon P Beattie MP, Premier and Minister for Trade, and Hon A Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure, ‘More land to be released under sweeping reforms’, Ministerial Media Statement, 25 July 2007 (a copy is provided in Appendix B of this Research Brief). Reference should also be made to the Urban Land Development Authority Act 2007 (Qld).
158 ‘More land to be released under sweeping reforms’, Ministerial Media Statement.
159 Hon A Bligh MP, Premier, and Hon P Lucus MP, Deputy Premier and Minister for Infrastructure and Planning, ‘Bligh welcomes Grant as new land authority chair’, Ministerial Media Statement, 21 September 2007 (a copy is provided in Appendix C of this Research Brief).
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Tribunal.160
The changes to local government infrastructure charging were described as follows: New rules covering infrastructure charges that councils levy on developers will help ensure transparency and set a template to be followed across the state. Infrastructure charges vary wildly from council to council and from year to year. The industry has been crying out for certainty. Charges are passed on by developers to homebuyers, so it is essential to ensure the costs – which can account for one-fifth of the price of a house-and-land package – are fair. There is also the concern that money is being spent on a variety of things other than infrastructure, which becomes another unfair impost on homebuyers. …[D]evelopers will have the … opportunity for disputes over charging to be resolved by the Building and Development Tribunal. This will help ensure the true cost of providing infrastructure can be independently evaluated. … Councils will continue to determine the proportion of infrastructure costs recovered, infrastructure networks charged for, and any new charges. … By next June, all local governments will be required to develop Priority Infrastructure Plans, which set out councils’ plans for their key infrastructure networks. Attached to these PIPs are Infrastructure Charges Schedules, which divide up the infrastructure costs between the beneficiaries.161
More timely planning and development applications
The Housing Affordability Strategy requires the Integrated Planning Act 1997 (Qld) to provide the Queensland Government with power to ensure planning and development applications are decided as quickly as possible, thereby minimising the holding costs of developers which are subsequently passed on to home buyers.
In announcing these changes, the Government said: Development holding costs during the assessment period can add between $15,000 to $20,000 a dwelling. This is a cost passed on to the home buyers, but it can be significantly reduced by a more effective planning and development assessment
160 ‘New strategy a blueprint for housing affordability’, Ministerial Media Statement. See also Steven Wardill and Patrick Lion, ‘Council costs add pressure to buyers’, Courier Mail, 26 July 2007, p 5. Reference should also be made to the Urban Land Development Authority Act 2007 (Qld).
161 Hon P Beattie MP, Premier and Minister for Trade, and Hon A Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure, ‘New move to tackle infrastructure charges’, Ministerial Media Statement, 25 July 2007 (a copy is provided in Appendix D of this Research Brief).
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system.162
This aspect of the strategy is directed at: • improving the efficiency and timeliness of the development system, particularly in relation to high-growth areas; • enabling the Planning Minister to resolve conflicts between agencies early in the assessment process including a new power to direct that a decision be made; • regulating to require structure planning for major urban and development areas; and • enabling councils to deal with low risk approvals through a simplified process.163
It is hoped these changes will reduce development approval processes to between six and nine months instead of up to four years.164
Transit oriented developments
A component of the Housing Affordability Strategy will be the ‘transformation’ of Bowen Hills and Woolloongabba, two of Brisbane’s inner suburbs, into ‘state-of- the-art examples of modern urban living’.165 Bowen Hills and Woolloongabba have been earmarked for fresh new commercial and residential developments that will take advantage of their fast, reliable transport links and proximity to the CBD. The Bowen Hills railway station will be the focal point for a transit oriented development that will encourage vibrant medium to high-density living combined with a mix of shops, restaurants, offices and public spaces. The Woolloongabba site will capitalise on the Busway Station. The redevelopments will provide a wide variety of accommodation styles, including affordable housing, to cater for Queensland’s shifting demographics. …
162 Hon P Beattie MP, Premier and Minister for Trade, and Hon A Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure, ‘Planning and development made easier for the Smart State’, Ministerial Media Statement, 25 July 2007 (a copy is provided in Appendix E of this Research Brief). Reference should also be made to the Urban Land Development Authority Act 2007 (Qld).
163 ‘Planning and development made easier for the Smart State’, Ministerial Media Statement.
164 ‘Council costs add pressure to buyers’, Courier Mail.
165 Hon P Beattie MP, Premier and Minister for Trade, and Hon A Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure, ‘Beattie government ushers in new era for inner-city living’, Ministerial Media Statement, 25 July 2007 (a copy is provided in Appendix F of this Research Brief).
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The … projects, to be undertaken in partnership with the Brisbane City Council, will improve community awareness of transit oriented developments and showcase their benefits. … Transit oriented development is a key component of the SEQ Regional Plan … . … [T]he State Government plans encourage TODs across the state. $9 million had been allocated in the 2007-08 State Budget to plan the Bowen Hills and Woolloongabba developments and to establish a TOD coordination unit in the Office of Urban Management. … Over the next two years, the coordination unit will focus on: − major transport nodes and state landholdings within 10km of the Brisbane CBD; − key Regional Activity Centres identified in the SEQ Regional Plan; and − major new state public transport infrastructure.166
5.2.2 Federal Labor’s ‘New Directions for Affordable Housing’
In early July 2007, Federal Labor Leader Kevin Rudd MP released a paper on housing affordability, New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families.167 The paper has received considerable media coverage.
A few weeks later, on 26 July 2007, Mr Rudd convened a ‘housing affordability summit’.
Reasons for, and indicators of, decreasing housing affordability
The paper identifies the following reasons for declining housing affordability: • rising interest rates; • demand outstripping the supply of new homes; • land release and infrastructure charges and planning processes; and • the rising costs of building a house.168
The paper also discusses the following matters in making the point that housing in
166 ‘Beattie Government ushers in new era for inner-city living’, Ministerial Media Statement.
167 Australian Labor Party (ALP), New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families, June 2007, downloaded on 7 August 2007 from http://www.alp.org.au/download/now/new_directions_for_housing_affordability_final13.pdf.
168 ALP, New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families, pp 9-13.
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Australia is now less affordable than at any other time: • eight interest rate rises since 2002;169 • an increase in the annual income needed to buy a median priced home, from $38,390 in 1996 for Brisbane to $93,509 in 2007; • Reserve Bank data which shows that, in aggregate, Australian households are spending a record 9.5% of their disposable income simply paying off the interest on their mortgage; • an average mortgage repayment to income ratio for typical first home mortgages of 30.7%, up from 17.9% in 1996; • a decrease in housing affordability, as measured by the HIA-Commonwealth Bank Affordability index, of 40% from 167.5 in 1996 to 97.8 today; and • a reduction in the proportion of young Australians aged 18 to 34 owning or paying off their own home from 48% to 44% between 1993-94 and 2003-04, together with a decrease in the proportion of all house purchases being by first home buyers from 21.8% in June 1996 to 17.5% in February 2007.170
Pressures associated with decreasing housing affordability
The paper indicates the following pressures as being associated with a reduction in housing affordability: • families having to make certain trade-offs in order to meet increasing repayments; • parents worrying about the home ownership prospects of their children; • the increasing difficulty finding affordable rental accommodation faced by families saving for a home; and • diminishing options in terms of social housing or emergency accommodation for low-income and disadvantaged Australians.171
Possible options in tackling housing affordability
The paper lists a range of policy options directed at addressing housing affordability that will be considered by Federal Labor ‘over the next few months’: • keeping downward pressure on interest rates; • promoting home ownership – governments working together to reduce costs,
169 Note that this report preceded the 0.25% interest rate rise on 8 August 2007.
170 ALP, New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families, pp 2-10.
171 ALP, New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families, p 4.
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possible reforms to the First Home Owner Grant, tax incentives for home deposit savers, shared equity schemes and addressing unscrupulous lending practices; • increasing the supply of affordable rental properties – capital grants or loans to social housing providers, low-income housing tax credits, a ‘national affordable rental incentive’, doubling the depreciation allowance, reforming the Commonwealth Rent Assistance Scheme and tenancy reform; • social housing – a ‘national affordable housing agreement’, increased funding for the building of new public housing stock, public-private partnerships, resourcing homeless accommodation services and addressing indigenous housing.172
Housing affordability summit
Federal Labor’s ‘housing affordability summit’ was attended by property experts, economists, academics, business leaders and state housing ministers.
The agenda included discussion of the following topics: • how best to help first home buyers; • public and community housing; and • investment in private rental housing.173
Subsequent to the summit, Mr Rudd has announced a number of additional initiatives, including: • a $500 million plan for the Commonwealth to subsidise infrastructure charges levied by local governments on new housing developments. It was said that the scheme would benefit 50,000 new home buyers over five years with savings of up to $20,000 each, and the money would be allocated to local government, either alone or in partnership with developers, and be passed on when new land parcels were sold;174 and • a $600 million policy targeted at encouraging more investment in affordable housing. The scheme would assist 50,000 families secure a home at a guaranteed 20% less than the local rental rate for up to 10 years. Means testing would apply and occupants would be forced to move if their circumstances improved. Institutional investors would receive a $6,000 annual tax incentive
172 ALP, New Directions for Affordable Housing – Addressing the Decline in Housing Affordability for Australian Families, pp 19-30.
173 A copy of the agenda is available at http://www.housingsolutions.alp.org.au/download/now/housing_affordability_agenda.pdf.
174 ‘Labor ups ante on home pitch’, Age; Lachlan Heywood and Torny Jensen, ‘Labor fund builds up housing hopes’, Courier Mail, 31 July 2007, p 11.
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for 10 years for each dwelling built, provided they rented it at 20% below the market rate for the area, and at least $2,000 per year in direct or in-kind support from state governments such as through reduced stamp duty or infrastructure charges, fast-tracked approvals and tenancy management services. There are estimates that the plan would save $50 per week for tenants paying $250 per week rent, $70 for those paying $350 per week and $90 for those paying $450 per week.175
5.2.3 Statements made by the Federal Government
At the date of publication of this Research Brief, the Federal Government had not released a comprehensive housing affordability policy similar to the policy of the Federal Labor Party discussed in part 5.2.2 of this Research Brief.176
To some extent, one aspect of the Federal Government’s view on the housing affordability situation seems to accord with the sentiments of the Reserve Bank governor and deputy governor discussed in the introduction to this Research Brief.177 That is, that the increase in people’s wealth as a result of increasing house prices is not necessarily a bad thing, and that increasing household debt is most concentrated in the hands of those who can afford it and is a sign of our recent prosperity, particularly when considered in the context of increasing asset levels.
Recent statements of the Federal Government concerning the issue of housing affordability have included: • discussion of moves to releasing large parcels of Commonwealth-owned land for housing; • requests for the states to also identify potential land for release; • ensuring unemployment rates continue to stay low; • calls for the states to reduce their taxes and stamp duties on property; and • calls for states to reform land-release policies land.178
175 ‘Rudd to help stressed out renters’, News.com.au (online), 13 August 2007; Michelle Grattan, ‘Rudd offers respite for rent battlers’, Age, 13 August 2007. 176 See Matthew Franklin, ‘PM told to deliver on housing’, Australian, 19 September 2007, p 1. 177 See pages 3-4 of this Research Brief. 178 See, for example, Matthew Franklin, ‘Housing pitch to counter Rudd’, Australian, 13 September 2007, p 1; Fleur Anderson, ‘Land sale plan fails to please’, Australian Financial Review, 20 September 2007, p 10; ‘Rent rising at its fastest since 1998’, Age; ‘Land sale plan fails to please’, Australian Financial Review; Hon P Costello MP, Federal Treasurer, transcript of doorstop interview, 19 September 2007; Hon P Costello MP, Federal Treasurer, transcripts of interviews on ABC radio, 19 and 21 September 2007.
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APPENDIX A – JOINT MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure
Hon Peter Beattie MP, Premier and Minister for Trade
Wednesday, July 25, 2007
NEW STRATEGY A BLUEPRINT FOR HOUSING AFFORDABILITY
The Beattie Government today revealed a sweeping new strategy to ensure more Queenslanders can achieve the dream of owning their own home. The Housing Affordability Strategy is a multi-faceted response that will fast-track available land, particularly in the south-east corner, speed up the approvals process and standardise infrastructure charges across the state. It is a comprehensive approach by the State Government across those areas of our responsibility that can affect house prices. It will cut that red tape that can add tens of thousands of dollars to the price of a home and make sure that release of land keeps pace with the needs of our rapidly growing population. And it will ensure that a variety of dwellings come on to the market to make it as easy as possible for young people to get a foot in the door. The strategy follows other initiatives by the Government to keep the price of homes within reach of ordinary Queenslanders, such as cuts in stamp duty and the abolition of mortgage duty. It will apply across Queensland with immediate actions to focus on areas where housing and economic growth pressures are already high such as the south-east region, regional activity centres and mining areas. Key planks of the strategy include: • Establishment of an Urban Development Authority with sweeping powers to acquire and consolidate land suitable for new housing and ensure it is moved quickly to the market. The authority will undertake planning, management and delivery of strategic urban redevelopment sites, initially at Fitzgibbon and North Shore (Hamilton), Bowen Hills and Woolloongabba in Brisbane and at the Mackay Showgrounds. The authority will have the power to require developers to include public and affordable housing on these designated sites. • A shake-up of council infrastructure charging so that homebuyers across the state are not slugged unfair amounts for the provision of roads, water and sewerage. The Queensland Competition Authority will review Council’s infrastructure charging schemes. Disputes between developers and Councils will be decided the Building and Development Tribunal. • New powers for the State Government to ensure planning and development applications are decided as quickly as possible. This will minimise the holding costs incurred by developers and passed on to home buyers. • Development of Transit Oriented Developments to provide a range of dwellings in state- of-the-art examples of modern urban living, initially at Bowen Hills and Woolloongabba in inner-Brisbane. The state’s median house price had more than doubled from about $160,000 in 2001 to $325,000 at December 31, far outstripping the increase in average household incomes.
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The Productivity Commission, Reserve Bank and other commentators generally agree that pressure on housing affordability is a combination of market forces, particularly cheaper housing finance. While the State Government has limited ability to influence market forces, we have harnessed a range of areas in which we can make a difference. For example, economic analysis indicates delivering more efficient development approvals could take at least $15,000 off the costs of a house and land package. Local Government and Planning Minister Andrew Fraser said the strategy also catered for Queensland’s rapid change in demographics by providing a range of dwellings. “The Government’s Household Projections – Queensland Local Government Areas 2007 document shows that households without children will become more common than the traditional family-with-kids residence in Queensland over the next five years," Mr Fraser said. “For the first time in our history, the traditional set-up containing mum and dad and their kids is no longer the most common type of household in Queensland and we have to plan for that.” Media inquiries: Premiers Office 3224 4500 Deputy Premiers Office 3224 6900
© The State of Queensland (Department of the Premier and Cabinet) 2006. Housing Affordability Page 55
APPENDIX B – JOINT MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure Hon Peter Beattie MP Premier and Minister for Trade Wednesday, July 25, 2007 MORE LAND TO BE RELEASED UNDER SWEEPING REFORMS The State Government will establish a powerful body to slash red tape as it frees up land across the state for new housing projects. The Urban Land Development Authority is the centrepiece of the State Government’s Housing Affordability Strategy launched today. The new authority will accelerate the release of surplus land and ensure there are no unnecessary delays in its development. The authority will take over responsibility for development approvals on land under its control, cutting months off the process and delivering potential savings of $15,000-$20,000 to homebuyers. It also will take control of strategic areas of inner-city land earmarked for urban renewal to ensure developments are world-class precincts that cater for a diverse range of accommodation. On sites nominated by the Queensland Government, the role of the Authority will be to undertake land use planning, amalgamation and acquisition of sites, and then on-sell land to the private sector with approvals in place. The new authority will have the power to deliver a range of housing styles to meet the changing needs of the community and can attach conditions of sale to require a component of affordable housing. The Government has nominated five initial development sites at Woolloongabba, Bowen Hills, Northshore (Hamilton), Fitzgibbon and Mackay Showgrounds. These sites cover more than 700 hectares of land and deliver housing for more than 20,000 Queenslanders. This new body has been given unprecedented powers to get the job done. The authority has been developed after consultation with the industry and targets the issues they rate as stumbling blocks, primarily bottlenecks in the development approvals process. We’ve listened to the industry’s advice on how to make housing more affordable and this is their chance to show us they are fair dinkum. The authority’s job is to provide the strong leadership that ensures owning a home stays within reach of ordinary Queenslanders. It’s role will include amalgamation of land parcels within designated areas and being a one- stop shop for planning and development approval. It’s a radical approach, but at its heart is this government’s commitment to keep home ownership within reach of ordinary Queenslanders. I must stress that it will not allow developers to sidestep environmental laws. This is a long overdue move to slash the duplication and red tape that is needlessly contributing to prices that make it hard for young Queenslanders to buy their own place. Operation of the Authority, including its role and institutional arrangements, will be
© The State of Queensland (Department of the Premier and Cabinet) 2006. Page 56 Queensland Parliamentary Library
outlined in legislation to be introduced next month and it will begin operating by November. Media inquiries: Premiers Office 3224 4500 Deputy Premiers Office 3224 6900
© The State of Queensland (Department of the Premier and Cabinet) 2006. Housing Affordability Page 57
APPENDIX C – MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Premier and Hon Paul Lucas, Deputy Premier and Minister for Infrastructure and Planning Friday, September 21, 2007 Bligh welcomes Grant as new land Authority chair Former South Bank chief Bill Grant will become the first chairman of the new Urban Land Development Authority, Premier Anna Bligh announced today. “Bill’s appointment to the authority shows that I want this new body to be run by high calibre, well-qualified people determined to help improve housing affordability and urban planning in Queensland,’’ said the Premier. “Mr Grant’s strong leadership as chief executive of South Bank Corporation ensured that the parklands is one of the state’s great assets, helping Brisbane become the envy of other state capitals.’’ “The ULDA will be one of the key drivers of change in the way Queensland’s urban areas are developed.’’ Deputy Premier and Infrastructure Minister Paul Lucas, the Minister responsible for the Authority, said it was an important part of the Government’s Housing Affordability plan. “It will also bring suitable Crown land to market as quickly as possible,” he said. The authority will consist of nine people, Mr Grant as chair, six others yet to be appointed and the Department heads of the Departments of Infrastructure and Planning and Treasury. Mr Lucas said that Mr Grant’s appointment allows him to be consulted on the selection of other appointees as well as a chief executive and staff for the new authority. Ms Bligh said Mr Grant’s will be appointed to the authority for a period of five years. Media contact: Premier’s Office 3224 4500 [Mr Grant’s curriculum vitae attached]
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CURRICULUM VITAE William Hamilton GRANT PROFESSIONAL QUALIFICATION Company Directors Diploma (Credit pass) University of New England and Australian Institute of Company Directors Certifies Commercial Mediator Australian Commercial Disputes Centre Marketing Management Certificate Institute of Administration, University of New South Wales Associate Diploma in Local Government Charles Sturt University Industrial Law Course University of Sydney (Post Graduate Studies – Department of Law) RECENT EMPLOYMENT EXPERIENCE CEO South Bank – Brisbane – 1997 – June 20005 EXPERIENCE RELEVANT TO THIS APPOINTMENT CEO South Bank – Brisbane – 1997 - June 2005 CEO Newcastle City Council – April 1992 - Jan 1997 CRI Project Management, Regional Manager Indonesia Nov 1989 - Feb 1992 CEO Gosford City Council Aug 1982 - Feb 1988 OTHER BOARD MEMBERSHIPS CURRENT Brisbane Airport Corporation New Hope Corporation Life Without Barriers (National Disabilities org) Queensland Performing Arts Trust (Trustee and Deputy Chair) PREVIOUS South Bank Business Association MEMBERSHIP OF AND/OR AFFILIATION WIRTH PROFESSIONAL BODIES, CLUBS AND ORGANISATIONS: Advisor Brisbane Development Association Business Advisor Arkhefield Architects
© The State of Queensland (Department of the Premier and Cabinet) 2006. Housing Affordability Page 59
APPENDIX D – JOINT MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure Hon Peter Beattie MP Premier and Minister for Trade Wednesday, July 25, 2007 NEW MOVE TO TACKLE INFRASTRUCTURE CHARGES The Queensland Competition Authority will monitor spiralling infrastructure charges as part of the State Government’s Housing Affordability Strategy. The move, in response to consultation with the housing industry, is an Australian-first that will keep infrastructure charges in check and help ensure the price of new housing is achievable for most Queenslanders. New rules covering infrastructure charges that councils levy on developers will help ensure transparency and set a template to be followed across the state. Infrastructure charges vary wildly from council to council and from year to year. The industry has been crying out for certainty. Charges are passed on by developers to homebuyers, so it is essential to ensure the costs — which can account for one-fifth of the price of a house-and-land package — are fair. There is also the concern that money is being spent on a variety of things other than infrastructure, which becomes another unfair impost on homebuyers. Under this strategy, developers will have the long-awaited opportunity for disputes over charging to be resolved by the Building and Development Tribunal. This will help ensure the true cost of providing infrastructure can be independently evaluated. Developers have told the Government that providing certainty will allow them to pass on savings to homebuyers. We have delivered and now it is up to them. Other initiatives in the strategy include allowing third-party financing of trunk infrastructure through financial institutions or Infrastructure Bonds. Councils will continue to determine the proportion of infrastructure costs recovered, infrastructure networks charged for, and any new charges. Developer charges will remain the major mechanism for funding infrastructure in new development areas. What the strategy seeks to do is ensure these charges are transparent and fair. By next June, all local governments will be required to develop Priority Infrastructure Plans, which set out councils’ plans for their key infrastructure networks. Attached to these PIPs are Infrastructure Charges Schedules, which divide up the infrastructure costs between the beneficiaries. The Queensland Housing Affordability Strategy, which also addresses the land and housing supply pipeline, is part of the State Government’s ‘Keeping the Australian Dream Alive’ election commitment. Media inquiries: 3224 4500
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APPENDIX E – JOINT MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure and Hon Peter Beattie MP Premier and Minister for Trade Wednesday, July 25, 2007 PLANNING AND DEVELOPMENT MADE EASIER FOR THE SMART STATE Changes to the State’s Integrated Planning Act will make development assessment systems more efficient thereby improving housing affordability. The major strategy we announce today will give the State Government the power to speed up development. Development holding costs during the assessment period can add between $15,000 to $20,000 a dwelling. This is a cost passed on to the home buyers, but it can be significantly reduced by a more efficient planning and development assessment system. The Government will immediately amend the Integrated Planning Act 1997 to: • improve the efficiency and timeliness of the development system, particularly in relation to high-growth areas; • enable the Planning Minister to resolve conflicts between agencies early in the assessment process including a new power to direct a decision to be made; • regulate to require structure planning for major urban and development areas; and • enable councils to deal with low risk approvals through a simplified process. This is all about delivering achievable changes that benefit the State’s home buyers. Media inquiries: Premiers Office 3224 4500 Deputy Premiers Office 3224 6900
© The State of Queensland (Department of the Premier and Cabinet) 2006. Housing Affordability Page 61
APPENDIX F – JOINT MINISTERIAL MEDIA STATEMENT
Hon Anna Bligh MP, Deputy Premier, Treasurer and Minister for Infrastructure Hon Peter Beattie MP Premier and Minister for Trade Wednesday, July 25, 2007 BEATTIE GOVERNMENT USHERS IN NEW ERA FOR INNER-CITY LIVING Two of Brisbane’s inner suburbs will be transformed into state-of-the-art examples of modern urban living under a multimillion-dollar component of the Beattie Government’s Housing Affordability Strategy. Bowen Hills and Woolloongabba have been earmarked for fresh new commercial and residential developments which take advantage of their fast, reliable transport links and proximity to the CBD. The Bowen Hills railway station will be the focal point for a transit oriented development that will encourage vibrant medium to high-density living combined with a mix of shops, restaurants, offices and public spaces. The Woolloongabba site will capitalise on the Busway Station. The redevelopments will provide a wide variety of accommodation styles, including affordable housing, to cater for Queensland’s shifting demographics. At the same time, TODs will help to curb urban sprawl and preserve green open space. They also make more efficient use of land and infrastructure, and reduce dependence on cars, decreasing greenhouse gas emissions and easing traffic congestion. The Bowen Hills and Woolloongabba projects, to be undertaken in partnership with the Brisbane City Council, will improve community awareness of transit oriented developments and showcase their benefits. They create energetic communities in which people can live closer to work, shops and community facilities, and give them the freedom to choose their preferred transport, be it walking, cycling, buses or trains. Transit oriented development is a key component of the SEQ Regional Plan, which provides a framework for ensuring the region’s growth is properly managed and our quality of life is protected. While Brisbane’s limited remaining greenfield sites and heavy concentration of state- funded public infrastructure make Bowen Hills and Woolloongabba ideal places to begin, the State Government plans encourage TODs across the state. $9 million had been allocated in the 2007–08 State Budget to plan the Bowen Hills and Woolloongabba developments and to establish a TOD coordination unit in the Office of Urban Management. The funding is a portion of the $45 million identified in the South East Queensland Infrastructure Plan and Program 2007–2026 to facilitate TODs in the region. We will need to accommodate one million more people in the region by 2026. This population growth and the trend towards smaller household sizes means we will need around 575,000 new dwellings. To prevent urban sprawl from swallowing our remaining open spaces, the SEQ Regional Plan proposes nearly half will be situated in existing urban areas. Transit oriented development will be critical to the achievement of more compact towns and cities in the region. TODs will help the region’s 18 councils to meet their dwelling
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targets in strategies that are currently being developed. Over the next two years, the coordination unit will focus on: • major transport nodes and state landholdings within 10km of the Brisbane CBD • key Regional Activity Centres identified in the SEQ Regional Plan, and • major new state public transport infrastructure. The existing Transit Oriented Development Task Force—comprising representatives of State agencies, local government, academia and the development industry—will continue in its role as a high-level advisory body.
Media inquiries: 3224 4500
© The State of Queensland (Department of the Premier and Cabinet) 2006.
RECENT QPL RESEARCH PUBLICATIONS 2007 2007/01 Homework for the 21st Century Feb 2007 2007/02 Tackling Graffiti – Summary Offences and Other Acts Amendment Bill 2006 (Qld) Feb 2007 2007/03 Ban on Speed Camera Alerts: Summary Offences and Other Acts Amendment Bill 2006 (Qld) Feb 2007 2007/04 Random Drug Driving Tests under the Transport Legislation and Another Act Amendment Bill Feb 2007 2006 (Qld) 2007/05 ‘Wrongful Life’: the High Court decisions in Harriton v Stephens and Waller v James; Waller v Feb 2007 Hoolahan 2007/06 Comprehensive Regulation of the Security Industry: the Security Providers Amendment Bill Feb 2007 2006 (Qld) 2007/07 Harmonisation of Sports Drug Testing Legislation – the Sports Drug Testing Amendment Bill Mar 2007 2006 (Qld) 2007/08 ‘Ice Pipes’: Prohibition on Sale, Supply and Display under the Health and Other Legislation Mar 2007 Amendment Bill 2007 (Qld) 2007/09 Protection for Good Samaritans under the Civil Liability (Good Samaritan) Amendment Bill Apr 2007 2007 (Qld) 2007/10 Implementing Recommendations of the Review of the Mental Health Act 2000 (Qld); the Health Apr 2007 and Other Legislation Amendment Bill 2007/11 Our Binge Drinking Culture Apr 2007 2007/12 Restrictions on Young Drivers Under the Transport Legislation and Another Act Amendment Act Apr 2007 2007 (Qld) 2007/19 Smoking in Cars Carrying Children Jul 2007 2007/23 Trail Bikes – Issues and Challenges Sep 2007 2007/25 Amending Queensland’s Cultural Heritage Protection Legislation: the Queensland Heritage and Oct 2007 Other Legislation Amendment Bill 2007 (Qld) 2007/27 Housing Affordability Oct 2007
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