AHURI: Quarterly Housing Monitor
Volume 2 Number 3 May 1997
ISSN 1324-9282

Australian Housing and Urban Research Institute

Should you wish to obtain a hard copy of this issue of QHM, please e-mail your request with your fax number to h.georgiou@ahuri.edu.au

In this issue:

Housing cost burden for low income households#

Access to different housing tenures is very much a function of income. Eighty per cent of households purchasing their dwelling generally have incomes in the top 60 per cent, while public renters are almost entirely in the lower 40 per cent of incomes (Figure 1). Private renters tend to cluster in lower to middle incomes, while outright owners are spread evenly across the income range. This last pattern reflects the age distribution of owners, with many older Australians no longer in the workforce owning their homes outright. It also illustrates the importance of income for access to home ownership, and the segregation by tenure that occurs in Australia's housing markets.

Figure 1. Income by tenure. Household income levels, for main tenure groups, Australia, 1997 (per cent)

source: AHURI Quarterly Housing Monitor

Of the three tenure groups with recurrent housing costs (excluding outright owners), income is not only important for access to housing, but the amount of income expended on housing will determine both housing adequacy and the amount of money available for other necessities. Low income households, those in the lowest 40 per cent of the income distribution, are most vulnerable to having to pay excessive proportions of their income on housing. As an index of how much housing costs affect people's livelihood, it is generally accepted that low income households are likely to find housing costs a burden if those costs take up more than 30 per cent of their total household income.

The widening gap in the housing cost burden for low income private renters compared to those with mortgages apparent in the September quarter remained constant for November 1996. The proportion of low income renters paying more than 30 per cent of their income on rent remained high at 70 per cent, while the proportion of low income purchasers in housing cost burden was 42 per cent (Figure 2). This difference is the result of two factors: the increasingly tight private rental market in Australia resulting in increased rents, and at the same time historically low mortgage interest rates making home purchase more affordable. The efficacy of public housing in assisting low income groups is apparent through the much lower levels of housing costs stress in this sector.

Figure 2. Per cent of low income renting and purchasing households paying greater than 30 per cent of gross household income on rent or mortgage, by quarter, May 1995-Nov 1996, Australia

source: AHURI Quarterly Housing Monitor



# The Housing Cost Burden Indicator measures the proportion of households who pay more than 30 per cent of their gross household income on direct housing costs, i.e. rent or mortgage payments. A household is likely to find housing costs a burden when they exceed 30 per cent of its gross household income.


Low income private renters and the housing cost burden

Despite the fact that renters are a relatively small tenure group, their generally lower incomes make them susceptible to high and rising housing costs. Hitherto, the role of public housing to provide secure and affordable housing to low income earners has provided affordable housing for some. However, public housing has not kept pace with the growing need, and low income households are increasingly dependent on the private rental market.

As outlined above, there is a high incidence of excessive housing costs in the private rental market for low income households. The supply and cost of private rented housing is influenced by a wide range of factors including housing prices, inflation, returns relative to other investments, and the very varied motivations of the owners of rental property. The private rental market does not respond in a straightforward manner to changes in need. In periods where vacancy rates are low and rents are rising, as at present, the less well off have difficulty finding suitable and affordable housing.

Many of these private renters are quite vulnerable. Over two thirds of low income private renters in housing cost burden are either unemployed (22 per cent) or not in the labour force (47 per cent). Part-time workers are also adversely affected, with 30 per cent of all part time workers privately renting being both low income and facing excessive housing costs.


Household employment status and tenure

Household income is very much a function of employment status and the number of income earners in the household. In recent years there has been an increase in the proportion of both households with multiple income earners, and those with no one in the workforce. Home purchase for many households is now premised on the availability of two incomes. The relationship between the labour force status of households, and tenure is shown in Figure 3.

In particular it illustrates the dominance of multiple incomes amongst purchasers (over 60 per cent). On the other hand 60 per cent of those in public housing have no one in the labour force. The large proportion of those owning outright and having no one in the labour force is due to the fact that two thirds of these are over the age of 65, a figure that is likely to increase in future. The almost even distribution of the three labour force status categories among private renters is further evidence of the complex role that this sector plays, but the fact that around 30 per cent are not in the labour force emphasises the vulnerability of this group.

Figure 3. Tenure by number of income earners in household, Australia, 1995-1996


source: AHURI Quarterly Housing Monitor


Mobility patterns

Household movement is a key element in the expression of housing demand as most changes in housing consumption necessitate a relocation from one address to another.

Australia's residential turnover rate is one of the constants of our housing market. We are a more mobile population than most. In the year to November 1996, 19.1 per cent of households moved in the previous 12 months.

Residential mobility is partly related to changes in housing consumption (newer, larger, better location), by households who are composed of the same individuals, and partly to changing household structure. Nearly half of all moves were made by households which remained constant. Of those households that changed, approximately 5.7 per cent were people leaving their parent's home to rent. But home leavers accounted for 16 per cent of all movers, some of whom went into ownership, others who came from rented dwellings.

Inter-tenure mobility

One important factor in housing market dynamics is movement related to a desire or need to change tenure. The relatively stable tenure distribution in Australia is a result of a balance between those entering home ownership and those leaving. Shifts in this balance could indicate future changes in the tenure distribution.

The movement from rental to owner occupied homes accounts for 13.9 per cent of moves, with a larger proportion moving from owner occupation to renting (14.6 per cent). However, because one-third of these represent offspring leaving the parental home, we must account for these, and the adjusted figures are shown in Table 1. This leaves still a relatively high 9.2 per cent 'falling out of home ownership'.

Table 1. Inter-tenure moves, 12 months to November 1996

Tenure move per cent
Leaving home to rent

5.7

Owning to rent

9.2

Rent to owning

13.9

Within owner occupation

17.8

Within rent

45.2

Other

8.2

source: AHURI Quarterly Housing Monitor

Those leaving the parental home were generally young. The age of leaving home is a function of financial independence which is determined by job availablility, incomes, and housing availability and cost. Most of those who moved from home went into one of three different household types: 20 per cent formed couples, 24 per cent were living alone, and 37 per cent went into shared housing. The remainder were in households with children.

Age and housing tenure

The home ownership rate in Australia is among the highest in the world. Some 44 per cent of all households own their homes outright, and 26 per cent are in the process of purchasing. The other 30 per cent of households are at present living in rental properties, or in some other tenure relationship (such as boarding). AHURI's survey figures show that public rental tenants consist of about 8 per cent of households, while private renters are about 16 per cent. For many of these households, especially the young, private rent is a temporary tenure useful for particular lifestyles or while saving for a deposit. Yet, for others, and for public tenants, too, renting may be a permanent tenure. Home ownership for them is either not possible or not wanted.

The two characteristics most closely associated with tenure are age and income. Income differences by tenure are shown in Figure 1, which demonstrates the importance of income for entry into home purchase, something beyond the scope of most public renters, and some private renters.

The variation of tenure with age illustrates the housing career patterns that typify Australia's housing markets. Private renting is heavily skewed to younger ages, while outright home ownership is skewed in the opposite direction (Figure 4). Almost 80 per cent of the older age groups have achieved home ownership. The higher rate of living in outright ownership amongst those under 25 years is the result of children continuing to live at the parental home until their mid to late 20s.The age of purchasers rises sharply for those aged 25-34 and peaks at 44 per cent for those aged 35-44. Public housing is the only tenure not to show strong variation by age.

The age distribution of the population affects the propensity to own. The ageing population, and the very high home ownership rates among older Australians mean that any change in ownership rates at younger ages will take some time to affect the total home ownership rate. To be able to identify any long term trend in home ownership rates we need information on previous age-specific home ownership and residential mobiltiy rates.

Figure 4. Age for main tenure groups, Australia, 1997 (per cent)

source: AHURI Quarterly Housing Monitor

Housing type and attitudes

The regular AHURI survey continues to gauge attitudes to medium density housing as part of a concern for varying dwelling types and their possible effects on urban form.

Opinions of the acceptability of medium density in the local area have leveled off at moderate acceptability. Only 29 per cent of respondents in November 1996 replied that they regarded medium density housing 'not very acceptable' compared with 34 per cent in May 1995. The change from quarter to quarter since May 1995 is shown in Table 2.

However, despite the improving acceptability of medium density generally, there appears to be no change in the proportion of people who would choose medium density if they were to move in the next five years. When asked if it was likely the respondent would move to a medium density dwelling in the next five years, 73 per cent of those surveyed in November 1996 said it was 'not at all likely', compared to 71 per cent in November 1995, and 74 per cent in September 1996 (Table 3).

Opinions of medium density housing and the likelihood of moving into it vary markedly by both household type and dwelling type. The household type with the greatest proportion well-disposed to medium density are singles over the age of sixty (15.4 per cent said 'very acceptable', and 26 per cent 'not very acceptable'), and the least well-disposed are couples with no children (9 per cent said 'very acceptable' and 36 per cent 'not very acceptable'). However the range of responses indicates that medium density housing has a consistent level of acceptability across all household types. This acceptance is reflected in the likelihood of moving to medium density which is lowest for singles over sixty years, and highest for young singles.

Those already living in higher density housing are the most well-disposed to medium density housing, and show the greatest likelihood of moving to medium density in the next five years. Over 25 per cent of those now living in flats and units said it is very likely they will move to medium density in the next five years, whereas only 6 per cent of those in detached houses had a similar response. Similarly, 20 per cent of residents of flats said medium density is very acceptable, and only 13 per cent said it is not very acceptable compared with 7 per cent and 36 per cent for detached house residents. These figures are in part the result of the tenure and mobility patterns, but also likely express continuation and justification of the preferences they show by their current housing choice.

Table 2. Acceptability of Medium Density Housing in the Local Area, by Quarter, 1995-1996 (per cent)

 

Very
acceptable

Acceptable

Not very
acceptable

Don't
know

May 1995

9

52

34

5

Aug 1995

8

54

34

4

Nov 1995

10

54

32

3

Feb 1996

8

55

32

5

May 1996

11

56

30

3

Sept 1996

10

59

28

3

Nov 1996

10

56

29

5

source: AHURI Quarterly Housing Monitor

Table 3. Likelihood of moving to Medium Density Housing in the next five years, by Quarter, 1995-1996 (per cent)

 

Very
likely

Somewhat
likely

Not at all
likely

Don't
know

Nov 1995

11

11

71

7

Feb 1996

9

12

73

6

May 1996

10

12

73

5

Sept 1996

9

12

74

5

Nov 1996

9

12

73

6

source: AHURI Quarterly Housing Monitor

Technical Notes

These indices are used to compare groups internal to the survey based on a sample size of some 3,000 respondents per quarter, rather than attempting to estimate the number of persons who may correspond to the groups reported. If estimates are attempted, there may be difficulties with the weighting the ABS use for their survey when trying to extrapolate particular groups, and the estimation errors can become quite large for small groups. Orders of magnitude may be safely extrapolated, but more specific estimates will not be reliable.

The AHURI Quarterly Housing Monitor contains housing indicators derived from the Australian Bureau of Statistics' Population Survey Monitor. The most recent survey was carried out in November 1996. The third quarter Population Survey Monitor is usually held in August, but was delayed for a month due to the five-yearly Census being held in August 1996.

THE STATEMENTS IN THE AHURI QUARTERLY HOUSING MONITOR ARE NOT TO BE CITED WITHOUT ATTRIBUTION

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