Indicator: Housing

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Summary of results

Housing affordability has declined in the ACT, as throughout Australia, due to higher property prices. This, and the availability of rental properties, have also driven rental prices higher.

The affordability of housing for those entering the property market has become a major issue. The availability of public housing in the ACT also declined, although this was partially offset by an increase in community housing.

About 8% of low income residents were found to be living in unaffordable housing. ACT housing prices increased dramatically during the reporting period. The median dwelling price increased from $168,000 in the September 2000 quarter to $318,200 in the June 2003 quarter (Housing Industry Association).

What the results tell us about the ACT

Housing affordability dropped

Planning, land use policies and building controls limiting the supply of land for housing and the increasing scarcity of land in high-value locations contributed to higher housing prices. Taxes, such as stamp duty, infrastructure charges and the goods and services tax, were also contributing factors. But the main cause was demand outstripping availability.

Demand greater than supply

Demand for housing in the ACT was driven by many factors, including historically low interest rates, higher real incomes, growth in investment housing, deregulation of capital markets (leading to less restrictive deposit requirements and borrowing limits) and the First Home Owners Grant. Also, population growth, migration towards urban centres, and trends towards fewer people per household and larger, more expensive houses caused extra demand.

Rising housing prices lead to bigger loans

Despite low interest rates, rising housing prices resulted in a decline in home loan affordability, because of increases in the size of home loans. This trend was observed in both the Home Loan Affordability Indicator (see Figure in the downloadable pdf) released by the Real Estate Institute of Australia and the AMP, and the Housing Affordability Index (Figure 2 in the downloadable pdf) released by the Housing Industry Association and the Commonwealth Bank.

Figure 1: Home loan affordability indicator, ACT and Australia Source: Real Estate Institute of Australia 2003

Figure 2: Housing Affordability Index, ACT and Australia. Source: Housing Industry Association 2003

Home loan affordability declined

Although the Home Loan Affordability Indicator showed affordability remained higher in the ACT than nationally, owing to the higher average incomes of ACT residents, the Housing Affordability Index showed affordability to be lower in the ACT than nationally. This is because the Housing Affordability Index uses a single national measure of income, while the Home Loan Affordability Indicator uses State and Territory measures.

Although the Home Loan Affordability Indicator showed affordability remained higher in the ACT than nationally, owing to the higher average incomes of ACT residents, the Housing Affordability Index showed affordability to be lower in the ACT than nationally. This is because the Housing Affordability Index uses a single national measure of income, while the Home Loan Affordability Indicator uses State and Territory measures.

Deposits harder to save

The dramatic increase in house prices also increased the difficulty for first home buyers of raising a deposit. Even though many private rents were of a similar level to a mortgage, without a deposit home ownership remains unattainable.

The situation was exacerbated as high rents made it difficult to save for a home deposit. Stories of people living with their parents into their late twenties and thirties to save enough to purchase property were commonplace during the reporting period.

Rent more expensive

Increasing house prices have also led to a dramatic decline in the availability of affordable private rental housing in recent years. Trend data from the Affordable Housing Taskforce show that in 1998, 57% of new private leases were affordable for households at the fortieth income percentile. By 2002 the proportion had fallen to 19%.

Accommodation harder to find

Low vacancy rates in the ACT also caused pressure on rental housing prices. In June 2002 the vacancy rate for Canberra (2.7%) was lower than for all other capital cities except Hobart (2%). By contrast the vacancy rate was 4.1% in Sydney and 4.2% in Melbourne.

Commonwealth Rent Assistance (CRA) is the primary measure for addressing housing affordability in the private rental market. It is a nontaxable supplementary payment available to those receiving income support payments or higher than the base rate Family Tax Benefit Part A.

Despite deterioration in rental affordability, the number of income units supported by CRA in the ACT remained stable. At 30 June 2002, 8375 income units were supported by CRA in the ACT, compared with 8395 at 30 June 2001 and 8312 at March 2000 (SCRCSSP, 2003).

Equity implications of housing affordability trends

Rising house prices cause equity issues, as they deliver capital gains to owner–occupiers and especially investors, but contribute to housing stress for those renting or entering into ownership. Intergenerational equity may be emerging as an issue here.

As Sydney Morning Heraldcolumnist, Ross Gittens, put it: it’s the parents and grandparents of present and future first home buyers who’ve gained most from the remarkable rise in house prices over the past 30 years.’

Ultimately, however, this may lead more to inequity within future generations than to intergenerational inequity. Housing wealth is likely to be redistributed to the children of current beneficiaries of the housing boom. By contrast the children of property-less ‘Baby Boomers’ and ‘Generation Xers’ will not share in this redistribution.

Welfare implications

During the reporting period the number of tenancies managed by ACT Housing decreased, following a decrease in public housing stock. The number of rebated tenancies increased over the reporting period, although the number of people supported by rental rebate decreased (see Table 1 below).

Social housing comprises public housing (provided by ACT Housing) and community housing provided by not-for-profit organisations. Social housing is funded by the Commonwealth State Housing Agreement. Eligibility for social housing is based on an income test, but access is restricted by availability.

Given the increasing costs of home ownership and private rental housing, social housing has become increasingly important for people on low incomes. Because social housing rents are capped at 25% of income (or market rent, whichever is highest), affordability is not a significant problem. However public housing residents experience a disproportionate rate of disadvantage. A 2002 study of disadvantage found that although public housing accounts for about 10% of ACT households, 31.8% of disadvantaged households were living in public housing (NATSEM, 2002).

The ACT has consistently had a higher provision of public housing than the national average. Public housing currently accounts for about 10% of the total housing stock compared with about 5% nationally. However, ACT public housing stock, as a proportion of the total housing stock, has declined by about 8% since 1996. The decline in public housing was partly offset by an increase in community housing. In 1999–2000 there were 312 community housing dwellings. This number grew to 401 in 2000–01, and 434 in 2001–02 (SCRCSSP 2003).

Table 1: Changes in public and community housing and numbers receiving rent rebate, ACT, 2000–03
Category July 2000 June 2003
Public housing tenancies 11,213 11,180
People supported by public housing 25,591 24,402
Public housing tenancies receiving rent rebate (including Community Housing) 9,135 9,220
People supported by public housing receiving rental rebate (including Community Housing) 25,519 19,514

Source: Data supplied by ACT Housing, 2003

Longer wait for public housing

In the ACT, the waiting time for public housing applicants in the ‘highest need’ category more than doubled, from 52 days in 1999–2000 to 110 days in 2001–02. Waiting times for public housing are considered an inappropriate indicator of the efficiency and effectiveness of meeting demand, but it was raised as a major issue in all consultations undertaken on behalf of the Affordable Housing Taskforce.

The 2002 Needs Analysis of Homelessness in the ACT estimated that in the ACT up to 5350 people may experience homelessness each year; and that 1250–1750 may experience homelessness at any one time. This may include 120–315 people sleeping rough each night and many more in stopgap, emergency, short-term accommodation and in insecure tenure.

During the January 2003 bushfires 414 urban homes and 87 rural homes were destroyed, including 81 ACT Housing dwellings. A further 315 homes were damaged (McLeod, 2003). In the aftermath, increased demand for rental properties contributed to higher prices for rental housing, increased demand for building work drove new house prices higher, and the need for emergency accommodation reduced the availability of public housing.

Government actions

The ACT Government has been examining the issue of housing affordability in the ACT. The Housing Affordability Taskforce was established and its final report was released in December 2002.

Both the Government and the Taskforce have emphasised a whole-of-government and community approach to housing, as many factors that influence housing affordability are beyond the control of the ACT Government.

The ACT Government is currently drafting the Canberra Spatial Plan, a strategic planning document for managing urban growth and development. The spatial plan will identify areas for future housing development, to ensure demand for a range of housing options is met.

In 2002–03, $3 million in grants was paid to promote growth in the community-housing sector in the ACT. The money was shared by six community housing organisations.

Data sources and references

ACT Affordable Housing Taskforce 2002, Affordable Housing in the Australian Capital Territory: Strategies for Action , ACT Government, Canberra.

Australian Bureau of Statistics June 2003a, Building Activity (Cat. No. 8752.0). Australian Bureau of Statistics June 2003b, Housing Finance for Owner Occupation(Cat. No. 5609.0).

Bill A, Lloyd R & Harding A 2002, 2002, Addressing Disadvantage in the ACT: Locating poverty in the ACT , National Centre for Social and Economic Modelling (NATSEM) University of Canberra/ACT Government, Canberra.

Gittens, R 20/12/2003, ‘Housing boom a big game of musical chairs’, Sydney Morning Herald , Fairfax, Sydney. Housing Industry Association & Commonwealth Bank 2003, Housing Affordability Index.

McLeod, R 2003, Inquiry into the Operational Response to the January 2003 Bushfires , ACT Government, Canberra.

Productivity Commission 2003, First Home Owners: Issues Paper, September 2003 , Productivity Commission, Canberra. Real Estate Institute of Australia & AMP 2003, Home Loan Affordability Indicator.

Reserve Bank of Australia 2003, Productivity Commission Inquiry on First Home Ownership November 2003: Submission by the Reserve Bank of Australia .

Steering Committee for the Review of Commonwealth/State Service Provision (SCRCSSP) 2003, Report on Government Services 2003 , AusInfo, Canberra.

Additional data supplied by ACT Housing

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