Last week the Australian Bureau of Statistics (ABS) released their biennial Housing Occupancy and Costs data for the 2017-18 financial year.
The release has too much data to cover off in full in just one blog post so this week’s blog will cover off on some of the details surrounding housing costs as a share of gross household income.
The first chart above highlights housing costs for different type of household occupants over time.
Owners without a mortgage see little of their gross household income utilised for housing costs (3.0%) and it has seen very little change over time.
Owners with a mortgage are spending 15.9% of their household income on housing costs and this share has actually been trending lower since it peaked in 2005-06 at 19%.
This decline likely reflects the ongoing decline in mortgage rates.
While owners have seen housing costs take-up less of their household income over time renters are spending 20.2% of their income on housing costs.
The figure is slightly lower than it was two years earlier however; it shows that housing costs for renters are more expensive than those for owneroccupiers with a mortgage.
This likely reflects that renters typically have lower gross household incomes than those with a mortgage, and that mortgage holders are generally reducing their debt payments over time as they pay down their principal.
The second chart shows housing costs as a share of household income based on the household quintile.
The first quintile being the 20% of households with the lowest incomes and the fifth quintile being the 20% of households with the highest incomes.
The chart clearly shows that the lower the income of the household the greater share of their income household income is dedicated to housing costs.
Although households within the fifth quintile generally have more expensive housing, they proportionately spend much less of their income on housing.
- Also read:The best property blogs and websites
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – February 2024
- Also read:Sydney’s Rental Market Trends and Forecasts
- Also read:2024 Property Outlook: analysing the impact of inflation, tax cuts and market dynamics
- Also read:198 Sydney suburbs where you can still buy a property for under $1 million
This chart really highlights the challenge for lower income households in securing housing, whether that be rental or owner-occupied housing.
Although flats or apartments are typically more affordable than semi-detached properties and separate houses, those living in flats or apartments have consistently spent a greater share of their
household income on housing costs while separate houses, which are typically the most expensive property type, sees those people living in them typically spending less of their income on housing
The likely reason for this being that while the number of houses that are estimated to be rented (1,592,300) is greater than the number of units rented (788,300) 75.8% of all separate houses are occupied by owners compared to just 25.7% of flats or apartments.
As previously stated, renters typically have lower incomes than owners do and equally the differential between the cost of renting a house or apartment is, at least at a citywide or national level, not significantly different.
Although this has been a very shallow dive into the data, it highlights the challenge of securing housing for those on lower incomes.
Lower income households spend more of their income on housing than those on higher incomes.
Unfortunately, there doesn’t appear to be many policies that have effectively addressed these challenges.
Public housing construction has collapsed over the past two decades and many state governments continue to sell-off their properties.
Left to the private sector, where profits are rightly king, and without incentives on offer to focus more on affordable housing for those on lower incomes, it seems unlikely that the problem of unaffordable housing for lower income earners will effectively be addressed.
In some states and territories governments require a proportion of new developments to be set aside for social or low income housing.
The federal government has introduced the National Rental Affordability Scheme in the past but its take-up was not particularly strong.
While there have been some attempts to address the affordability challenge for lower income earners to-date they have been of minimal success and it is clear more needs to be done.