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The ever-rising ceiling: Canberra’s continuing housing affordability crisis

Rebecca Vassarotti 12 February 2020 24
Housing affordability

Rising house prices will worsen Canberra’s housing affordability crisis, ACT Greens candidate Rebecca Vassarotti says. Photo: File.

This week there were predictions that ACT’s house prices will continue to rise, with some commentators suggesting growth could be as high as 10 per cent.

While this is sold to us as good news, it’s not. It means that Canberra’s housing affordability crisis is likely to get even worse.

With rising house prices and rents, people with full-time jobs are struggling to make mortgage or rent payments. If you are a single parent, a young person, someone who is underemployed or unemployed, or a retiree, it is almost impossible. Without significant action, more people will be unable to afford a place to call home, pushing them right to the brink of homelessness.

The experts agree that you will be in financial stress if more than 30 per cent of your income is covering your accommodation costs. If this much of your income is required to keep a roof over your head, there’s little left to cover other essentials. It means having to make choices about which other bill payment may need to be delayed. It means cutting back on meals or not going to the doctor when you are sick. It means constant worry that you may lose your home.

Everyone should have a safe and affordable place to live. Without this, people struggle to work or stay connected with friends and families. They are more likely to be affected by physical and mental health issues, and more vulnerable to violence and trauma.

While this is a community that agrees that safe, secure and affordable housing is a right, increasingly in Canberra it is becoming a luxury. Escalating house prices are feeding the problem.

As our population grows, it is also exacerbating a reduction in the proportion of social housing. High average incomes create a squeeze on those at the lower end of the market who are locked out of opportunities in the private rental market.

There are new challenges emerging too. This summer we learned some of the realities of living through a climate emergency, with extended periods of heat and the lingering toxic smoke from bushfires. It means we are now starting to realise that a safe home also means a home that is climate change ready. We need to act to ensure the right to housing refers to a home that is not a hot box in summer, has adequate heating in winter and allows you to breath fresh air. Once again, it is those at the lowest end of the market who are most at risk.

We need to ensure an appropriate standard and quality of all our housing stock, including homes used for private rental. This will need support. Climate-adaptive housing may need to include modifications we haven’t thought of before. We will need to provide support for people to transition to more energy-efficient appliances and energy sources.

And while there have been some initial efforts to look at the issue of renters’ rights, this is still an area that needs more work. There are ways that we can provide more security of tenure and one option used in other international cities is longer-term leases.

We also need to ensure that those who are at the lowest end of the market are able to access public and social housing when they need it. Despite government being the landlord of last resort, there is a need to ensure this type of support is able to be accessed at times of crisis, not months later. This will only happen with a significant investment in new public housing stock. While a significant cost, there is a need to recognise the savings to other parts of our service system – particularly in the health and criminal justice systems that bear the brunt of the economic costs of homelessness.

There is some recognition that there are problems and some tinkering at the edges, but it’s clear that old approaches won’t work. More than a year after the release of the much anticipated ACT Housing Strategy, affordability issues continue to persist.  I think we need a radical rethink of how we respond to our housing affordability issue.

Rebecca Vassarotti is a candidate for the ACT Greens in the upcoming Territory election. She is on a number of volunteer boards of community housing and specialist homelessness services.

What do you think we should do to make housing more affordable in Canberra?


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24 Responses to The ever-rising ceiling: Canberra’s continuing housing affordability crisis
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Darron Marks Darron Marks 11:02 am 16 Feb 20

I think the best analysis points the finger at the reduction in capital gains tax introduced during the Howard era as the beginning of the latest housing bubble.

Self managed super being invested in housing and the consistently high immigration rate. (That is designed to increase building and construction expendature and temporarily increase our GDP statistics to make it look like our economy isn't in recession.)

The weakness of the economy and falling reserve rates are all a factor.

Given that we have not seen across the board pay increases since the GFC. The reality is that these property price rises are unsustaintable and have a direct correlation to a lack of house hold disposable income. Lower spending in retail sales and a massive increase in house hold debt and prevalence of mortgage holders relying on 5 year interest free periods that are mostly due to expire soon.

The once off $1000 government gifts are simple not enough to offset what is amongst the highest household debt to GDP rankings in the world.

Sam Dodimead Sam Dodimead 10:47 am 15 Feb 20

This conversation should focus on helping those who need it rather than this alarmist portrayal of the broader population.

'The experts agree that you will be in financial stress if more than 30 per cent of your income is covering your accommodation costs.'

On this basis where is the evidence to support Canberra households are broadly devoting anywhere 30% of household income to housing costs?

REI Australia's most recent Housing Affordability Report for September Quarter 2019 found ACT residents devoted 19.5% of family income to meeting median loan repayments, or 18.3% meeting median rents. It also found the average mortgage was $409,544 which had reduced by $3,833 Quarter on Quarter. We were the second most affordable jurisdiction for both.

This example of affordability focusses on the cost to service debt. NAB's mortgage calculator shows to borrow $410,000 at an interest rate of 3.19% the repayment would be $408 per week. Borrowing $510,000 would increase the repayment to $508 per week.

People living in ACT have the highest median weekly family income by $581. If the average mortgage size increased by $100,000 or 24.39%, the proportion of weekly family income required to service the debt increases by 3.59%. This demonstrates capacity of household budgets to absorb significantly higher property prices.

    Sam Dodimead Sam Dodimead 3:34 pm 15 Feb 20

    Assid,

    What do you propose as the solution?

    Disruption is fantastic and helps progressive agents grow their businesses. My previous comment explained how affordable Canberra’s property market is and how values could increase significantly yet remain affordable. This is a pillar of strength and provides incredible resilience to adverse market forces. It is also why when conditions become favorable the market is ideally positioned to take advantage of growth.

    Assid Uous Assid Uous 4:58 pm 15 Feb 20

    The solution is a combination of increased land supply, nested with strategic planning for transport infrastructure and the decentralisation of jobs away from the capital cities to grow smaller population centers. Decreased immigration may be needed also to get this under control quickly. And a shift towards land taxes in place of large up front payments for land (which just lines the pockets of bankers). The way this is applied moving forward needs to be mindful of the lump sums already paid to government by existing owners and their mortgage burden. In the end, what we have is a shrinking population cohort sitting on appreciating land holdings paying little tax on their gains, who didn't have to contend with the land use policies now in place that work to restrict land availability in a grossly inequitable attempt to densify cities.

Sue McIntosh Sue McIntosh 11:47 am 13 Feb 20

I feel sorry for the "working poor" who struggle to pay rent, let alone save for a deposit and buy a house. There are too many huge houses being built on over-priced blocks, with very little to choose from for people who prefer a practical smaller-sized home to call their own. Once upon a time people were satisfied with a simple design that suited their needs, not their wants.

Aldo Milin Aldo Milin 11:34 am 13 Feb 20

The Reserve Bank blames money hungry investors for pushing home prices up which is understandable. I would also suggest that the Reserve Bank's policy of consistently lowering interest rates is facilitating that process for obvious reasons. The pot calling the kettle black methinks...

George Brenan George Brenan 9:49 am 13 Feb 20

While the policy remains in place that all sales are to be based on market value rather than having regard to costs, there is a conflicted interest in managing releases so as to maximise returns. The public interest, while covering costs and maintaining quality, is to limit prices so as to maintain and enhance affordability. Current affordable housing policy is a mere sop and a bandaid

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