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Speaking at Thursday (2 February) to Senate select committee on the cost of living, members from the Australian Housing and Urban Research Institute (AHURI) have warned more spending and investment towards affordable housing options in Australia are critical towards addressing cost-of-living issues.
While AHURI agreed with the Senate that construction delays and labour shortages were weighing on the housing market, it reiterated that high housing prices and low affordable housing stock were the real concerns for Australians.
Despite house prices falling 4.51 per cent below their recent peak, house prices are 28.5 per cent above pre-pandemic levels, according to the latest data.
AHURI said the culmination of high rental and property prices alongside a lack of affordable housing options was a real concern for vulnerable Australians.
In particular, lower income women, younger Australians, and Indigenous Australians were the hardest hit by the housing crisis.
AHURI managing director Dr Michael Fotheringham said around one-third of Australians are mortgage holders, one-third are renters, and the other third were outright home owners while just 4 per cent were in affordable housing.
“The renters are a growing group, and the outright owners are a shrinking group. However, rental stock is not growing,” he said.
This comes on the back of “rapidly increasing rents” and low vacancy rates (around 1 per cent), Mr Fotheringham explained.
“The key message in the last 12 months is that rental vacancies have really collapsed,” Mr Fotheringham said.
Australia has not seen these low vacancy levels for “many many decades”, as a result of the high prices.
Indeed, supply chain issues and workforce shortage are all weighing on supply of housing, escalating demand and driving prices, he said.
Construction backlog
According to the ABS, dwellings under construction reached a new record of 244,479 in September, an additional 0.6 per cent increase from the record in June of 243,078, at the same time commencements had dropped.
The construction industry has “ground to a halt” during and since COVID-19, which is beginning to ease as China opens up and migration returns.
While the construction backlog plays a part in housing market costs, there’s a broader issue of financialisation of housing.
Mr Fotheringham explained from one lens, housing is a roof over your head but from another, it is an investment.
“In many ways policy settings have favoured the investment vehicle,” Mr Fotheringham said.
For example, tax settings that favour investors over owner-occupiers have fuelled the high prices.
If policy settings favour investments, “why is there such a shortage in rental properties?” queried the Senate.
Weighing in, head of development at AHURI, Dr Tom Alves, said there was an “even stronger incentive to take an investment property out of the market and put it into short term letting”.
“You can attract much higher yields in the short term, but at the cost of our accommodation supply,” Mr Alves said.
“It’s taking what was an accommodation asset and turning it into a tourism asset.”
More affordable housing investment
While there is ‘no one policy that can make housing more affordable’, AHURI members acknowledged the government’s creation of the National Housing Supply and Affordability Council as well as the $10 billion Housing Australia Future Fund as important steps.
“What it will do is increase the supply of affordable housing,” Mr Alves said but added that more was needed.
Mr Fotheringham explained there was a significant shortage of affordable housing and community housing in Australia when compared to other nations.
For example, there was less than 4 per cent of affordable housing stock in Australia compared to almost 20 per cent in the UK.
A national construction plan is needed, such as the social housing initiative during the GFC that invested around $6 billion into community housing, Mr Fotheringham said.
[Related: Record high housing construction in September: ABS]
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