TY  - RPRT
AB  - This is the final report of the project A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
AU  - Wood, Gavin
AU  - Watson, Richard
AU  - Flatau, Paul
L1  - internal-pdf://1127504456/AHURI_Final_Report_No033_A_microsimulation_mod.pdf
M3  - FR
N1  - This research report outlines the development of an econometric model for microsimulation of housing markets in Australia (Wood, Watson, & Flateau 2003). It tests the impacts of specific policy and other interventions on the behaviour of housing consumers – i.e. the types of tenure people will tend to choose, given a particular intervention. It particularly focuses on government fiscal interventions, as these are seen as having 'overriding' influence on all other inputs (3).
The study is based on the national housing market, which is not specific to any one region or type of region. Nonetheless, it provides some useful profiling of housing markets and consumer behaviour, which are of value to the current study.
The study finds that there is an overall preference for home ownership in Australia (36) and considerable 'latent demand for homeownership' (61). However, two sets of constraints prevent many renters from achieving this dream: wealth and income constraints (vi). Wealth constraints refer to a household's ability to save a deposit required to obtain bank finance for home purchase. Income constraints refer to having (or lacking) sufficient income to service the mortgage. The authors find that:
à	 ‘Wealth constraints alone are binding for 27.2% of tenants.
à	Income constraints alone are binding for 4.5% of tenants.
à	Income and wealth constraints together are binding for 62.7% of tenants.’ (vi).
The inability to save an adequate deposit is the 'principle barrier to achieving' homeownership (36, 38). The First Home Owners'Grant (FHOG) was found to be highly successful in assisting those with wealth constraints only (vii).
Some further findings relevant to this study are:
à	A considerable number of older households 'who own their own homes outright, would be able to rent the equivalent amount of housing at a lower economic cost. These homeowners are either prevented from making a preferred choice, or have non-price related reaons for continuing to reside in their current homes as owner-occupiers such as a desire to pass on the family home as a bequest’ (37).
à	A growing number of income units choose rental over ownership on relative price grounds rather than borrowing constraints (42).
à	There are a number of market inefficiencies caused by mortgage lenders’ borrowing criteria (44). These make renting more cost-efficient for some older home owners. They also prevent many from accessing home ownership due to insufficient income to meet underwriting requirements. Variable interest rates and capital gain rates also have a strong influence on housing costs for both renters and owner-ocupiers.
à	Two state government measures that have particular impact on investor decisions to invest in private rental properties are land taxes and stamp duties (46). The progressive structure of land taxes 'acts as a disincentive for landlords to acquire additional rental properties’, thereby preferencing smaller investors over larger ones (48, 56).
à	‘A key determinant of the incentive to invest in private rental accommodation is the tax subsidy regime that applies’ (46).
à	The Low Income Housing Tax Credit scheme in the US and its recent Australian derivative (NRAS) have significant potential at a financial level for attracting investment into affordable rental housing for low-income households (59).
à	The impact of building write-off through the taxation system is unlikely to impact investment decision in favour of low-income rental housing (54).
à	There is some discussion of Home Partnerships ('shared equity') programs. They are most effective in assisting public tenants into home ownership (69). However, it appears there is some reluctance amongst financial institutions to provide high levels of equity for these projects (69).
à	The FHOG and Home Partnerships (HP) primarily assist those in shared living arrangements to form a new household. They therefore do not tend to significantly reduce pressure on rental supply (69).
à	Nonetheless, where some higher income renters are assisted into homeownership through the FHOG, there is a noticeable 'trickle down' effect for affordable rental supply, as they leave lower-cost rental properties (72).
This study demonstrates that homeownership is the prevailing preference amongst housing consumers. The principle barrier to homeownership is the inability to save an adequate deposit to meet bank requirements. The FHOG has been powerful in overcoming this obstacle to home purchase. However, for the vast majority of renters who are locked out of home purchase, the combination of both income and wealth constraints are in effect.
Further findings indicate that government and other institutional interventions have a major impact on the ability of renters to access homeownership. Taxation regimes are the most powerful means of encouraging or deterring investors in rental housing.
Finally, a growing number of renters are choosing this tenure over home ownership despite their capacity for the latter tenure, based on cost efficiencies.

NV  - 80088
PB  - Australian Housing and Urban ÂþÌìÌÃÈë¿Ú Institute Limited
PY  - 2003
RP  - This research report outlines the development of an econometric model for microsimulation of housing markets in Australia (Wood, Watson, & Flateau 2003). It tests the impacts of specific policy and other interventions on the behaviour of housing consumers – i.e. the types of tenure people will tend to choose, given a particular intervention. It particularly focuses on government fiscal interventions, as these are seen as having 'overriding' influence on all other inputs (3).
The study is based on the national housing market, which is not specific to any one region or type of region. Nonetheless, it provides some useful profiling of housing markets and consumer behaviour, which are of value to the current study.
The study finds that there is an overall preference for home ownership in Australia (36) and considerable 'latent demand for homeownership' (61). However, two sets of constraints prevent many renters from achieving this dream: wealth and income constraints (vi). Wealth constraints refer to a household's ability to save a deposit required to obtain bank finance for home purchase. Income constraints refer to having (or lacking) sufficient income to service the mortgage. The authors find that:
à	 ‘Wealth constraints alone are binding for 27.2% of tenants.
à	Income constraints alone are binding for 4.5% of tenants.
à	Income and wealth constraints together are binding for 62.7% of tenants.’ (vi).
The inability to save an adequate deposit is the 'principle barrier to achieving' homeownership (36, 38). The First Home Owners'Grant (FHOG) was found to be highly successful in assisting those with wealth constraints only (vii).
Some further findings relevant to this study are:
à	A considerable number of older households 'who own their own homes outright, would be able to rent the equivalent amount of housing at a lower economic cost. These homeowners are either prevented from making a preferred choice, or have non-price related reaons for continuing to reside in their current homes as owner-occupiers such as a desire to pass on the family home as a bequest’ (37).
à	A growing number of income units choose rental over ownership on relative price grounds rather than borrowing constraints (42).
à	There are a number of market inefficiencies caused by mortgage lenders’ borrowing criteria (44). These make renting more cost-efficient for some older home owners. They also prevent many from accessing home ownership due to insufficient income to meet underwriting requirements. Variable interest rates and capital gain rates also have a strong influence on housing costs for both renters and owner-ocupiers.
à	Two state government measures that have particular impact on investor decisions to invest in private rental properties are land taxes and stamp duties (46). The progressive structure of land taxes 'acts as a disincentive for landlords to acquire additional rental properties’, thereby preferencing smaller investors over larger ones (48, 56).
à	‘A key determinant of the incentive to invest in private rental accommodation is the tax subsidy regime that applies’ (46).
à	The Low Income Housing Tax Credit scheme in the US and its recent Australian derivative (NRAS) have significant potential at a financial level for attracting investment into affordable rental housing for low-income households (59).
à	The impact of building write-off through the taxation system is unlikely to impact investment decision in favour of low-income rental housing (54).
à	There is some discussion of Home Partnerships ('shared equity') programs. They are most effective in assisting public tenants into home ownership (69). However, it appears there is some reluctance amongst financial institutions to provide high levels of equity for these projects (69).
à	The FHOG and Home Partnerships (HP) primarily assist those in shared living arrangements to form a new household. They therefore do not tend to significantly reduce pressure on rental supply (69).
à	Nonetheless, where some higher income renters are assisted into homeownership through the FHOG, there is a noticeable 'trickle down' effect for affordable rental supply, as they leave lower-cost rental properties (72).
This study demonstrates that homeownership is the prevailing preference amongst housing consumers. The principle barrier to homeownership is the inability to save an adequate deposit to meet bank requirements. The FHOG has been powerful in overcoming this obstacle to home purchase. However, for the vast majority of renters who are locked out of home purchase, the combination of both income and wealth constraints are in effect.
Further findings indicate that government and other institutional interventions have a major impact on the ability of renters to access homeownership. Taxation regimes are the most powerful means of encouraging or deterring investors in rental housing.
Finally, a growing number of renters are choosing this tenure over home ownership despite their capacity for the latter tenure, based on cost efficiencies.

ST  - A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
T2  - ÂþÌìÌÃÈë¿ÚFinal Report No. 33
TI  - A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
UR  - /research/final-reports/33
ID  - 260
ER  -