Housing Affordability
2nd Response to the inquiry into housing affordability and supply in Australia
Housing…meets a variety of deeply personal needs, including those for shelter and (ideally) security. It provides a sense of attachment… and, for many people, contributes to their sense of identity.
We are in the midst of a housing affordability crisis. The inquiry identifies it as a matter of public concern, but it tends to only be for those that are non-homeowners and yet to be property buyers. Only until the flow-on effect of reductions in homeownership rates has an impact on the upper classes and older generations, that own in many cases more than one property, I think the recommendations will go un-attempted.
It is very important to define what housing affordability is, as Occubuy attempts to provide a new pathway to those that would never be able to afford to purchase a home otherwise. This means rather than speeding up a likely home purchase or increasing a buyer’s purchasing power (that worsens the crisis), Occubuy will look to close the wealth gap that is forever widening as a result of increasing house prices. Occubuy is looking to provide affordable homeownership.
As per Jonathan Rochford’s comments in the inquiry; The focus is on ensuring that the average income earner can afford to purchase an average property.
There are current social and affordable housing (renting) schemes, as well as first home buyers schemes supported by the government, however, while they provide solutions, they all tend to not improve the household’s living situation over a long period. The current home buying schemes extend the capacity of borrowers who would otherwise not be able to afford the home (20% deposit), therefore putting further pressure on the housing market, and widening the gap.
Occubuy wants to assist these households that fit this criterion, right down to those that are considered low to medium-income earners, as right now they are not being given the best solutions to better their overall lives.
“Households who rent are in financial stress, defined as skipping a meal, accessing charity, pawning something or not heating the home!”
Through our research, we have found these social and affordable housing criteria are rigid and take a blanket approach to individual situations. These methods are outdated and don’t consider personal situations. In this last year, we have seen housing prices in some areas increase up to 30%, and this data and criteria are unable to adjust accordingly! “A household’s affordability situation can improve or deteriorate over time as a result of economic variations, job loss, illness, taxation changes, and many other factors.”
These criteria’s are generally state or national-based and rarely take into consideration localised issues, like higher home prices and increased cost of living in certain local councils. If individuals have lived in a certain place for an extended period or are employed in these local areas, Occubuy doesn’t want them to be forced out due to lower-income brackets. We see this typically in essential workers’ scenarios. One point we didn’t consider that was highlighted in the inquiry was the flow-on effect and impact on these employers trying to find staff in locations where there are higher housing costs. Longer commute times impact the quality of work-life and work productivity balances. Australians need to be able to live happy, healthy, and productive lives as a result of their housing situations.
Affordability both from an individual’s capacity to purchase a first home and/or the ability of renters to afford current housing costs has worsened since COVID. The issue we have seen is that renting does not improve a household’s financial situation. It gets more difficult for them and further away from owning their own home. Spending dead money on rent is becoming a predictable cycle for those on wages that don’t allow for additional savings for a deposit. With the cost of living increasing rapidly due to the effects of inflation and macro events housing affordability and accessibility are diminishing.
Housing purchase prices, cost, and time required to save for a deposit are what are making homeownership less unlikely for the younger generations. As dwelling prices grow faster than household incomes, owning a home for renters is becoming further out of reach. Property prices are now eight times the median income.
COVID-19 accelerated the extension of these problems and brought them to light. Younger Australians and low to medium-income earners have borne the brunt of the negative financial impacts of the pandemic. A lot of the industries affected by COVID were those in this income bracket meaning it has put homeownership further out of reach of this cohort.
Domain highlighted how challenging it is to save a housing deposit and submitted that in 2021 it took first home buyers in most capital cities on average between two to nine months longer to save a housing deposit, than it took in 2020.31 According to Domain, in Sydney it now takes a couple, with both partners working full-time, seven years and one month to save an entry-priced housing deposit.
Considering that we have closed our borders for the last two years and have taken immigration out of the picture when there is an additional influx of migrants to fill the low employee numbers and shortage of skilled labour, it seems to us that there will be no end to these pressures.
We have explained in our prior response what owning a home not only means to the welfare of its owners but also to the community. “At its most basic level, housing fulfils our human need for shelter.” Outlines Mr. Eslake. Housing affordability issues contribute to or are the main driver for growing societal wealth and intergenerational wealth inequalities in Australia. Housing affordability = wealth equality and vice versa.
Occubuy wants to educate how building wealth in an asset like a property provides security both financially and physically.
“ …the inability of a growing proportion of Australians to attain homeownership is contributing to a widening in the inequality in the distribution of wealth between those who own property and those who don’t.” Mr. Eslake
“ …the long-term decline in rates of homeownership have been most exacerbated in low-income cohorts, so that would suggest that you have widening wealth inequality perpetuated through Australia’s housing system.” Ms. Owen from CoreLogic
There hasn’t been a time throughout our lives that Australia hasn’t needed an Occubuy solution more than they do now. Occubuy is creating a housing asset class that is meeting the needs and aspirations of as large a proportion of Australians as it did a quarter of a century ago.
https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability
