ACT State of the Environment 2007

Indicator: Housing affordability


Affordable housing is 'housing that is safe, appropriate and accessible' with the cost representing 30% or less of the gross household income for the lowest two quintiles. Without such housing being available to everyone, communities share the burden of the associated adverse effects: financial stress, poor health, sanitation and nutrition, and even homelessness.

This indicator at present focuses on measures of the availability and adequacy of housing. Low housing affordability (the proportion of income spent on mortgages and rent) increases demand for rental assistance and public housing and if that is not met, homelessness statistics accelerate. Housing is both a consumption good and an investment. While house sales affect the economy, the affordability of housing has strong social equity implications and therefore is a community responsibility of high importance.

The current community expectation of separate household dwellings involves high environmental costs, as does the current trend of continually increasing population as essential to revenue growth. The effect of both drivers needs to be examined and addressed.

This connection is evident in Canberra, as in many other cities and larger towns in Australia where population growth keeps pace with land releases for urban development, so housing demand continues to cause increased land prices, making housing affordability highly dependent on mortgage interest rates. The impact of pressure to develop remaining lands carries potential social, economic and ecological threats for present and future generations. Pressure to redevelop existing urban areas can also have a serious impact where this removes small areas of valuable ecosystems and/or irreversibly changes local streetscapes for the worse.

What the results tell us about the ACT

Affordable housing is 'housing that is safe, appropriate and accessible' with the cost representing 30% or less of the gross household income. A place to live that is safe, affordable and culturally appropriate is a basic human need. Without such housing being available to everyone, communities share the burden of the associated adverse effects: financial stress, poor health, sanitation and nutrition, and even homelessness.

Aggregate affordability indicators, such as the REIA Home Loan Affordability Indicator, suggest that house prices and rents in the ACT are among the most affordable in the country when the community's generally high incomes are taken into account. However, the capacity of households to purchase houses in Canberra deteriorated between 2001 and 2007. The generally high level of affordability in the ACT masks the difficulty for low- to moderate-income households to purchase housing.

The decline in housing affordability recorded in the previous report (2000–03) continued through the current reporting period, increasing the difficulties for new entrants to the property market, and for existing mortgage holders and renters below the ACT median income level ($68,000 in 2005–06; HASG 2007).

The average price rise of all residential housing in the ACT (from $318,200 in June 2003 to $424,000 in June 2007) is a slowing of the steep increase in the previous two reporting periods. This needs to be considered within the context of annual household income changes. Table 1 summarises affordable house prices by income; for example, a household earning $50,000 per annum can only afford a property costing up to $210,000. Properties around $210,000 are under-represented in the ACT market making up around 8% of available properties based on 2005–06 housing prices and bank lending criteria.

Table 1: Affordable house prices by income
Category 30% of gross income 40% of gross income Bank lending
Annual household income
Maximum affordable house price
Affordable houses sold
Maximum affordable house price
Affordable houses sold
Maximum affordable house price
Affordable houses hold
25,000 14 96,000 0.7 128,000 1.8 101,000 0.8
50,000 35 193,000 6.5 256,000 14.9 211,000 8.1
75,000 53 289,000 26.3 385,000 63.6 395,000 66.4
100,000 65 385,000 63.6 513,000 85.9 576,000 90.7
125,000 79 481,000 83.0 642,000 93.5 723,000 95.6
150,000 86 578,000 90.8 770,000 96.6 869,000 97.5

Source: HASG 2007, Report of the Affordable Housing Steering Group, ACT Government

In the December quarter 2007, the ACT ranked first in terms of home loan affordability across all jurisdictions; the Northern Territory recording the second highest level.

Housing affordability in the ACT fell by 2.1% from 48.3 to 47.3 in the December quarter 2007. Over the year to December 2007 the Territory's Home Loan Affordability Indicator was down 6.7%. Nationally, it fell 2.2% from 27.3 to 26.7 in the December quarter 2007, and over the year to the same period the national Home Loan Affordability Indicator fell by 6.3%.

No overall improvement in housing affordability

Though house price growth has been relatively stable since 2004, this followed a period of steep increase – in 2003–04 a median priced house in Canberra cost around six times the Australian median household income, double the 2000–01 ratio (HASG 2007).

The ACT median income household that in 2000–01 could have afforded around 80% of properties sold during the year (without spending more than 40% of their gross income on mortgage repayments), in 2005–06 could afford only 50% of houses sold.

With low rates of unemployment, at the end of the reporting period around 70% of households were able to afford to rent in the private rental market, but the very low vacancy rate and rising rents meant that low- to moderate-income households experienced affordability problems.

Availability and cost of rental housing

Supply of rental accommodation in the ACT increased steadily by around 4000 dwellings during the reporting period, with vacancy rates showing rapid take-up of this housing. Vacancies fell significantly from an average of 3.7% in 2004–05 to an average 2.1% in 2005–06. With a December quarter rental vacancy rate of 1.6% Canberra is well below its longer-run average.

For a household on the ACT median income, more than 90% of the rental stock is affordable, dropping to 34% for households earning $50,000 or less per annum, while a mere 2% of rental stock is affordable for households with an income of $25,000. While the Australian Government rent assistance and eligibility for public housing address the equity implications, this stratification needs analysis and response.

While Canberra has a higher median household income than most other jurisdictions, since December 2001 Canberra has maintained the highest median rents for a three-bedroom house of all capital cities, with no improvement by the December quarter 2006 when the Canberra rent of $330 per week was $15 higher than the next most expensive capital city (Darwin) and $55 higher than Sydney. Median rents for medium density properties in Canberra are similarly high relative to other cities (AMP Banking/REIA 2006; HASG 2007; OCE 2003).

Availability of public housing in the ACT

Under the Commonwealth–State Housing Agreement, the ACT and Australian governments jointly provide $168 million over the period 2003 to 2008 for public and community housing.

As the major source of low-cost rental stock, public housing is the Territory's major affordable housing provider, with most rents income-related to a ceiling of 25% of gross household income. Housing ACT currently manages around 11,500 dwellings, about 9% of the Territory's total housing stock, a level of public housing twice the national average.

The community housing sector provides 0.4% of the Territory's total housing supply and 3.2% of affordable housing, lower than the national average of around 6% (HASG 2007).

Equity implications of housing affordability trends

The reduction in home purchase affordability noted above is more marked for households earning 75% (or less) of ACT median incomes. This figure is close to the Australian median income and in the ACT is represented largely by single income households, or graduates entering the workforce. For this group, the affordable proportion fell from 55% and below to 14% and below over the reporting period. Entry into Canberra's housing market has been severely eroded for these groups, and for the average Australian household, impacting on the attraction and retention of skilled workers and on the social and economic composition of the households comprising the ACT community (HASG 2007).

Welfare implications

Declining housing affordability has adverse economic as well as social impacts. Data additional to market statistics are necessary to track these changes in trends.

Government actions

In response to the housing affordability challenge the ACT Government established the ACT Housing Affordability Taskforce. It released its final Affordable Housing Action Plan in April 2007 that supported the government's emphasis on a whole-of-government-and-community approach to housing. The 2007–08 ACT Budget included commitments of $9.25 million to implement the plan.

The plan is a comprehensive strategy designed to ease housing stress for medium- and low-income households so all members of the ACT community, can access appropriate housing. The effect of the plan on housing affordability will be assessed in the next reporting period.

Data sources and references

ACT Government (2007) ACT Residential Property Market reports 2004–07 available at <>

AMP Banking/REIA Home Loan Affordability Reports 2004–07 available through

HASG Housing Affordability Steering Group 2007, Report of the Affordable Housing Steering Group, ACT Government, available at <>

OCE Office of the Commissioner for the Environment 2003, 2003 State of the Environment Report: Housing indicator, ACT Commissioner for the Environment, ACT Government, Canberra, available at <>

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