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Rental supply and housing affordability. Judy Yates University of Sydney. Residential Tenancy Conference Renting in Tasmania 2010-2020: The Next Decade 2 Nov 2010. Overview. Structural trends and outcomes for housing market as a whole at an Australia wide level Tasmania specifics

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rental supply and housing affordability

Rental supply and housing affordability

Judy Yates

University of Sydney

Residential Tenancy Conference

Renting in Tasmania 2010-2020: The Next Decade

2 Nov 2010

overview
Overview
  • Structural trends and outcomes for housing market as a whole at an Australia wide level
  • Tasmania specifics
  • Issues arising
  • Policy responses
australia wide context
Australia wide context

Pressure on house prices and housing affordability is structural not cyclical

Contributed to decline in home ownership amongst younger FHBs

In past decade, supply has not responded adequately to meet increased demand

Combined effect puts pressure on rental market with resultant high incidence of rental stress

deposit gap has increased dramatically

Falling interest rates

Inflationary era; two income households

CGT: investor concession

CGT: O-O exemption

Financial deregulation,

High and steady growth

Deposit gap has increased dramatically….

Source: ABS, RBA

pressures exacerbated by inadequate supply
Pressures exacerbated by inadequate supply…

1990 2000 2010

Source: NHSC Figure 4.1, based on unpublished ANZ data

has resulted in supply shortage
Has resulted in supply shortage…

Source: National Housing Supply Council 2010, Table 4.4

few houses built or sold in 2007 08 were affordable for households with incomes at 3rd decile
Few houses built or sold in 2007-08 were affordable for households with incomes at 3rd decile…..

Source: NAHA Indicators, 2010, Table 2.1

ho rates for young have declined
HO rates for young have declined….

Source: Yates et al (2008)

ho declines most severe in capitals
HO declines most severe in capitals….

Source: from ABS census data collected by Yates et al (2008)

impact on private rental market
Impact on private rental market….

Increased demand from households who previously moved into HO as FHBs

Increased pressure from higher capacity to pay by potential FHBs

private rental trends
Private rental trends

1996, 2001, 2006 Census data, CPI adjusted

rental housing absolute shortage australia
Rental housing: absolute shortage, Australia

Source: NHSC, 2008, Figure 5.9

shortage rental dwellings
Shortage rental dwellings

Note: a + indicates a surplus; a - indicates a shortage

Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

shortage rental dwellings18
Shortage rental dwellings

Note: a + indicates a surplus; a - indicates a shortage

Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

shortage rental dwellings19
Shortage rental dwellings

Note: a + indicates a surplus; a - indicates a shortage

Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

shortage rental dwellings20
Shortage rental dwellings

Note: a + indicates a surplus; a - indicates a shortage

Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

social housing supply has also declined

90,000 dwellings

Social housing supply has also declined…

Social rental dwellings needed to keep pace with household growth

Social rental stock

Source: National Housing Supply Council (2010, Figure 4.7)

what are the key housing challenges for australia
What are the key housing challenges for Australia?

Declining access to home ownership for middle income households

Inadequate supply of affordable and accessible housing for lower income and vulnerable households

how does tasmania compare
How does Tasmania compare???
  • Dwelling price pressures not so severe
    • Demographic pressures not so severe
    • Economic pressures not so severe
  • Housing shortages not so severe
    • Supply has been more responsive
  • But pressures might mount…..
economic pressures less severe
Economic pressures less severe….

Source: ABS Australian National Accounts 5220.001

demographic pressures lower in tasmania
Demographic pressures lower in Tasmania….

Source: ABS Australian Demographic Statistics 3101.02

less driven by overseas migration
Less driven by overseas migration….

Source: ABS Australian Demographic Statistics 3101.01

dwelling completions appear more responsive
Dwelling completions appear more responsive….

Source: ABS Building Activity 8752.0; Australian Demographic Statistics 3101.02

dwelling completions appear more responsive28
Dwelling completions appear more responsive….

Source: ABS Building Activity 8752.0; Australian Demographic Statistics 3101.01

supply shortages less severe in tasmania
Supply shortages less severe in Tasmania….

Source: National Housing Supply Council, 2010 Report, Table A4.2

real house prices have increased faster in hobart than other capitals since mid 2000s
Real house prices have increased faster in Hobart than other capitals since mid 2000s…..

Source: ABS House price indexes 6416.0, CPI adjusted

but are considerably lower than elsewhere
But are considerably lower than elsewhere….

Source: HIA Housing Reports and ABS House price indexes 6416.0, CPI adjusted

but still few houses in 2007 08 were affordable for households with incomes at 3rd decile
But still few houses in 2007-08 were affordable for households with incomes at 3rd decile…..

Source: NAHA Indicators, 2010, Table 2.1

ho declines less in tasmania
HO declines less in Tasmania….

Source: from ABS census data collected by Yates et al (2008)

but change from 1981 to 2001 still significant
But change from 1981 to 2001 still significant ….

Source: from ABS census data collected by Yates et al (2008)

rental housing absolute shortage tas 2006
Rental housing: absolute shortage,Tas 2006

Source: customised tables from ABS generated for in Wulff et al (2009) AHURI positioning paper

2006 shortage rental dwellings in tasmania
2006 shortage rental dwellings in Tasmania….

Note: a + indicates a surplus; a - indicates a shortage

Source: derived from ABS census data used in Wulff et al (2009)

had worsened by 2007 08
Had worsened by 2007-08….

Note: a + indicates a surplus; a - indicates a shortage

Source: ABS SIH 2007-08

what happens when there is a shortfall
What happens when there is a shortfall?...
  • Prices and rents increase
  • Housing stress increases
  • Household formation slows
  • Household size increases
  • Households find insecure or temporary accommodation
  • Households become homeless…
shortfall in dwelling construction projected to increase in tasmania as elsewhere
Shortfall in dwelling construction projected to increase in Tasmania (as elsewhere) …..

NHSC 2010, Table A4.2

shortfall in dwelling construction projected to increase in tasmania as elsewhere42
Shortfall in dwelling construction projected to increase in Tasmania (as elsewhere) …..

NHSC 2010, Table A4.2

policy issues arising
Policy issues arising????
  • How can low income households better access affordable rental housing?
  • What is the appropriate balance between supply side and demand side policies?
  • What is the appropriate balance between support for home ownership vis a vis rental housing (private or social)?
overview of current housing policies
Overview of current housing policies…

Demand side policies for owners dominate

Poorly targeted

Perverse effects

Demand side policies for private renters alleviate but do not eliminate affordability problems

Generally well targeted

Unlikely to have perverse effects

Tax system for investors

Negative gearing adds to demand; offset by land taxes

Not designed to provide incentives to supply low rent dwellings

NRAS

Increasing supply of affordable rental dwellings

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