TY  - RPRT
AU  - Yates, Judith
AU  - Milligan, Vivienne
AU  - Mike, Berry
AU  - Burke, Terry
AU  - Gabriel, Michelle
AU  - Pinnegar, Simon
AU  - Randolph, Bill
CY  - Melbourne
L1  - internal-pdf://3052155486/AHURI_Final_Report_No105_Housing_affordability.pdf
M3  - FR
N1  - AHURI’s third National ��������� Venture (NRV3) focused on analysing Housing Affordability for lower income Australians. This report presents the research findings and policy implications of this venture, specifically with relation to the characteristics of housing issues for lower income Australians. The content of this final report is an amalgamation of ten smaller research papers that covered: conceptualisation of housing affordability problems, stakeholder forums, housing affordability, the economy, financial stress, polarisation, surveys and focus groups, home ownership trends, intergenerational sustainability and evaluations.
In order to address key research questions based around these topics this report utilised literature reviews. So as to approach the problem of housing affordability holistically; quantitative analysis of national housing affordability data and quantitative and qualitative analysis of surveys of people experiencing housing difficulties were included.
The major findings from this report provide key definitional and conceptual foundations for understanding Australian housing affordability issues. This research venture defines housing affordability as:
A tenure-neutral term that denotes the relationship between household income and household expenditure on housing costs. Typically, housing affordability indicators rely on a ratio measure that specifies the acceptable proportion of income to be spent on housing, or on a residual measure that refers to an

acceptable level of absolute residual income once housing costs have been met.
In 2003-04 Australians spent on average 15 per cent of their income on housing costs which represents an increase from 11 per cent in the 1970’s. Taking into account the average amount spent on housing, this research venture found that 15 per cent of Australian households were spending twice the national average on housing costs. This bracket of low income earners who spend 30 per cent or more of their income on housing characterise what this venture defines as ‘housing stress’. The term housing stress (30 per cent of income spent on housing costs by the lowest 40% of income earner) is used by this research as a tool to categorise people at-risk of housing affordability problems. This report found that in Australia, 860,000 people were within these parameters of housing stress and were therefore considered at risk of experiencing housing affordability problems.
Housing affordability problems as defined by this research are characterised by deprivation and occur as a by-product of the costs of housing. Examples of affordability problems include going without meals, inability to provide for children’s school activities or inability to afford proper medical and dental care. The proportion of people who are in housing stress and experience housing affordability problems is 25 per cent.
In their analysis of the Australian population who experienced housing stress and affordability problems certain sub-groups demonstrated that they had a higher propensity for these experiences. Evidence indicated that young people, single people, households with children, private renters, purchasers, working households and capital city households who were also in the low income bracket were more likely to be at risk of housing stress and affordability problems.
Of these groups the one considered most at risk due to their wide ranging and concentrated problems were low-income renters. The proportion of private renters in housing stress who also experience affordability problems is 50 per cent, in comparison to the 25 per cent of the general population.
In order to better qualify the different types and levels of housing stress and the transition into affordability problems Yates et al. (2007) allocate each participant in their surveys to one of seven household archetypes. Of the lower income households who rent, Yates et al. (2007) identify four subgroups in this population: strugglers, backsliders, pragmatists and aspirant purchasers.
Strugglers represent 30 per cent of the national population of low income renters (140,000 people). Their experience of renting is characterised by difficulties paying rent and large financial stress. The people in this category are predominantly single, lone parent households who are not in the workforce. Struggling low income renters will often pay upwards of 50-60 per cent of their income on housing costs and as such will often rent for long periods of time due to inability to save. Backsliders represent 10 per cent of the national population of low income renters (46,000 people). This group consists of people who have previously owned homes and due to severe decreases in income, health problems or loss of partners have lost their houses and slide back into renting.
Pragmatists represent equal amounts of people as Strugglers with 30 per cent or 140,000 people in this group. Pragmatists were paying high levels of income to housing costs; however, this was seen as a trade off for lifestyle and family choices.
Aspirant purchasers represented 30 per cent of the low income renting population (140,000) people. This group consisted mostly of full time workers and households with dual incomes who aimed to own a home in the short or medium term. This group also consisted of older renters who aspired to home ownership and had begun to realise that this was not feasible.

Yates et al. (2007) note that Australian home purchasers can also be separated into different categories, these groups are stretched, focused and ambivalent. People in the stretched category represent 40 per cent of the low income home purchasers (106,000 people). Surveys indicated that this group consisted predominantly of young families whose ability to pay their mortgages had been hampered by increasing interest rates. A result of these increases, people who belong to the stretched category are often taking on extra work be it second jobs or longer hours to contribute to their mortgage repayments. Of those surveyed Yates et al. (2007) found that large proportions were unable to continue repaying their mortgages in the previous year.
People in the Focused group were not having difficulty making repayments; however, a significant amount of their income (50-60%) was being directed towards their mortgages. Focused purchasers were driven to pay off their mortgages as quickly as possible, often working extended hours, living sparsely and jeopardizing family happiness.
The third group of low income home purchasers, Ambivalent purchasers, accounted for 40 per cent of the low income purchasers (106,000 people). This group did not share the drive to home ownership like their two counterparts; their decision to purchase a home was based on the cost benefits of home ownership in comparison to renting. This group was characterised by an appreciation of the positives and negatives of renting and home ownership.
Each of these seven groups were dedicating 30 per cent or more of their income towards their housing costs; according to Yates et al.’s (2007) definition each of these groups were experiencing housing stress. Participants in the Strugglers, Backsliders, Pragmatic, Stretched and Focused groups reported feeling subjectively stressed about their housing costs. The only groups who were not experiencing subjective housing stress were Aspirant purchasers and Ambivalent purchasers. Renters who were in the Strugglers and Backsliders group experienced long-term problems as a result of their housing stress and were the only groups to report being objectively and subjectively housing stressed and having long-term problems as a result of it. Yates et al. (2007) argue that this type of housing stress results in Strugglers and Backsliders “having no foreseeable way out of the affordability problems that arise from their being in housing stress” (Yates at al. 2007 28).
Of the 862,000 Australians with low incomes and housing stress approximately 25 per cent are classified by Yates el al. (2007) as ‘coping but at risk’, 50 per cent are classified as having housing affordability problems and 25 per cent have severe housing affordability problems. Trapped renters (Strugglers and Backsliders) and some stretched purchasers are the people who are experiencing severe housing affordability problems.
Having established the fact that lower income renters and purchasers experience housing stress and affordability problems Yates et al. (2007) discuss the impacts of these negative experiences, noting that the impacts exist across economic and social spheres. Key economic impacts of housing affordability issues occur on macro-economic levels and effect economic efficiency and distributional equity.
Key macro-economic impacts of housing affordability problems are the reduction of general consumption by households with high mortgages, the increased equity for existing home owners rather than the distribution of wealth to potential home owners and inflationary pressures. Yates et al. (2007) argue that the impact of housing affordability problems on the wider economy should be reason for economic policy makers to intervene. Another key impact of housing affordability problems is the increasing financial inaccessibility of housing in metropolitan areas. Rising house prices in inner cities have the potential to create a distance between labour markets and living situations. Yates et al. (2007) contend that this may encourage people to move away from high-cost high-employment locations into low-cost low-employment locations. At this point in the analysis the displacement of housing-to-labour remains a speculation.
If the wealth of existing home owners is supported by increasing housing prices then the potential for intergenerational equity to be compromised increases.
Summation of the risks of increased housing affordability problems is provided by Yates et al. (2007) in table form. This cycle represents how housing affordability problems feed into different areas of society and go beyond affecting individuals in the housing market.
(Yates et al. 2007 35)
“The findings of this extensive study make a compelling case for the need for governments to ameliorate the housing affordability stress currently being experienced by many low-income renters and, to a lesser extent, marginal home buyers, and to improve housing affordability’ (Yates et al. 2007 40).
This report notes that housing policy principles should address the key findings of this report. The main and broad conclusions of this research venture are:

NV  - 60603
PB  - Australian Housing and Urban ��������� Institute Limited
PY  - 2007
RP  - AHURI’s third National ��������� Venture (NRV3) focused on analysing Housing Affordability for lower income Australians. This report presents the research findings and policy implications of this venture, specifically with relation to the characteristics of housing issues for lower income Australians. The content of this final report is an amalgamation of ten smaller research papers that covered: conceptualisation of housing affordability problems, stakeholder forums, housing affordability, the economy, financial stress, polarisation, surveys and focus groups, home ownership trends, intergenerational sustainability and evaluations.
In order to address key research questions based around these topics this report utilised literature reviews. So as to approach the problem of housing affordability holistically; quantitative analysis of national housing affordability data and quantitative and qualitative analysis of surveys of people experiencing housing difficulties were included.
The major findings from this report provide key definitional and conceptual foundations for understanding Australian housing affordability issues. This research venture defines housing affordability as:
A tenure-neutral term that denotes the relationship between household income and household expenditure on housing costs. Typically, housing affordability indicators rely on a ratio measure that specifies the acceptable proportion of income to be spent on housing, or on a residual measure that refers to an

acceptable level of absolute residual income once housing costs have been met.
In 2003-04 Australians spent on average 15 per cent of their income on housing costs which represents an increase from 11 per cent in the 1970’s. Taking into account the average amount spent on housing, this research venture found that 15 per cent of Australian households were spending twice the national average on housing costs. This bracket of low income earners who spend 30 per cent or more of their income on housing characterise what this venture defines as ‘housing stress’. The term housing stress (30 per cent of income spent on housing costs by the lowest 40% of income earner) is used by this research as a tool to categorise people at-risk of housing affordability problems. This report found that in Australia, 860,000 people were within these parameters of housing stress and were therefore considered at risk of experiencing housing affordability problems.
Housing affordability problems as defined by this research are characterised by deprivation and occur as a by-product of the costs of housing. Examples of affordability problems include going without meals, inability to provide for children’s school activities or inability to afford proper medical and dental care. The proportion of people who are in housing stress and experience housing affordability problems is 25 per cent.
In their analysis of the Australian population who experienced housing stress and affordability problems certain sub-groups demonstrated that they had a higher propensity for these experiences. Evidence indicated that young people, single people, households with children, private renters, purchasers, working households and capital city households who were also in the low income bracket were more likely to be at risk of housing stress and affordability problems.
Of these groups the one considered most at risk due to their wide ranging and concentrated problems were low-income renters. The proportion of private renters in housing stress who also experience affordability problems is 50 per cent, in comparison to the 25 per cent of the general population.
In order to better qualify the different types and levels of housing stress and the transition into affordability problems Yates et al. (2007) allocate each participant in their surveys to one of seven household archetypes. Of the lower income households who rent, Yates et al. (2007) identify four subgroups in this population: strugglers, backsliders, pragmatists and aspirant purchasers.
Strugglers represent 30 per cent of the national population of low income renters (140,000 people). Their experience of renting is characterised by difficulties paying rent and large financial stress. The people in this category are predominantly single, lone parent households who are not in the workforce. Struggling low income renters will often pay upwards of 50-60 per cent of their income on housing costs and as such will often rent for long periods of time due to inability to save. Backsliders represent 10 per cent of the national population of low income renters (46,000 people). This group consists of people who have previously owned homes and due to severe decreases in income, health problems or loss of partners have lost their houses and slide back into renting.
Pragmatists represent equal amounts of people as Strugglers with 30 per cent or 140,000 people in this group. Pragmatists were paying high levels of income to housing costs; however, this was seen as a trade off for lifestyle and family choices.
Aspirant purchasers represented 30 per cent of the low income renting population (140,000) people. This group consisted mostly of full time workers and households with dual incomes who aimed to own a home in the short or medium term. This group also consisted of older renters who aspired to home ownership and had begun to realise that this was not feasible.

Yates et al. (2007) note that Australian home purchasers can also be separated into different categories, these groups are stretched, focused and ambivalent. People in the stretched category represent 40 per cent of the low income home purchasers (106,000 people). Surveys indicated that this group consisted predominantly of young families whose ability to pay their mortgages had been hampered by increasing interest rates. A result of these increases, people who belong to the stretched category are often taking on extra work be it second jobs or longer hours to contribute to their mortgage repayments. Of those surveyed Yates et al. (2007) found that large proportions were unable to continue repaying their mortgages in the previous year.
People in the Focused group were not having difficulty making repayments; however, a significant amount of their income (50-60%) was being directed towards their mortgages. Focused purchasers were driven to pay off their mortgages as quickly as possible, often working extended hours, living sparsely and jeopardizing family happiness.
The third group of low income home purchasers, Ambivalent purchasers, accounted for 40 per cent of the low income purchasers (106,000 people). This group did not share the drive to home ownership like their two counterparts; their decision to purchase a home was based on the cost benefits of home ownership in comparison to renting. This group was characterised by an appreciation of the positives and negatives of renting and home ownership.
Each of these seven groups were dedicating 30 per cent or more of their income towards their housing costs; according to Yates et al.’s (2007) definition each of these groups were experiencing housing stress. Participants in the Strugglers, Backsliders, Pragmatic, Stretched and Focused groups reported feeling subjectively stressed about their housing costs. The only groups who were not experiencing subjective housing stress were Aspirant purchasers and Ambivalent purchasers. Renters who were in the Strugglers and Backsliders group experienced long-term problems as a result of their housing stress and were the only groups to report being objectively and subjectively housing stressed and having long-term problems as a result of it. Yates et al. (2007) argue that this type of housing stress results in Strugglers and Backsliders “having no foreseeable way out of the affordability problems that arise from their being in housing stress” (Yates at al. 2007 28).
Of the 862,000 Australians with low incomes and housing stress approximately 25 per cent are classified by Yates el al. (2007) as ‘coping but at risk’, 50 per cent are classified as having housing affordability problems and 25 per cent have severe housing affordability problems. Trapped renters (Strugglers and Backsliders) and some stretched purchasers are the people who are experiencing severe housing affordability problems.
Having established the fact that lower income renters and purchasers experience housing stress and affordability problems Yates et al. (2007) discuss the impacts of these negative experiences, noting that the impacts exist across economic and social spheres. Key economic impacts of housing affordability issues occur on macro-economic levels and effect economic efficiency and distributional equity.
Key macro-economic impacts of housing affordability problems are the reduction of general consumption by households with high mortgages, the increased equity for existing home owners rather than the distribution of wealth to potential home owners and inflationary pressures. Yates et al. (2007) argue that the impact of housing affordability problems on the wider economy should be reason for economic policy makers to intervene. Another key impact of housing affordability problems is the increasing financial inaccessibility of housing in metropolitan areas. Rising house prices in inner cities have the potential to create a distance between labour markets and living situations. Yates et al. (2007) contend that this may encourage people to move away from high-cost high-employment locations into low-cost low-employment locations. At this point in the analysis the displacement of housing-to-labour remains a speculation.
If the wealth of existing home owners is supported by increasing housing prices then the potential for intergenerational equity to be compromised increases.
Summation of the risks of increased housing affordability problems is provided by Yates et al. (2007) in table form. This cycle represents how housing affordability problems feed into different areas of society and go beyond affecting individuals in the housing market.
(Yates et al. 2007 35)
“The findings of this extensive study make a compelling case for the need for governments to ameliorate the housing affordability stress currently being experienced by many low-income renters and, to a lesser extent, marginal home buyers, and to improve housing affordability’ (Yates et al. 2007 40).
This report notes that housing policy principles should address the key findings of this report. The main and broad conclusions of this research venture are:

ST  - Housing affordability: a 21st century problem
T2  - ���������Final Report No. 105
TI  - Housing affordability: a 21st century problem
UR  - /research/final-reports/105
ID  - 273
ER  -