Contributed from Victoria
The latest annual Rental Affordability Index (RAI) shows more than 42 percent of low-income households are now in rental stress and struggling to find money to pay for food, heating, and healthcare. This index is the key annual indicator of rental affordability relative to household income.
A large part of Australia’s population has passed the yardstick where a tenant spending more than 30 percent of their income on rent, they are considered to be in housing stress.
In regional areas it is even worse than in the cities, according to the report.
Worst hit is the unemployed on Jobseeker. Following this are single pensioners, whose housing rental costs take 50 percent of their income. Others suffering badly are those in precarious and part-time employment. The gap between Australia’s rising housing affordability crisis compared with the rest of the world is growing. Evidence of this is the graph below.
Source: Bank for International Settlements and Minack Advisors
Rent affordability is a serious social and economic problem in Australia demanding some answers. Answers are dependent on coming to terms with the main causes and then dealing with them.
A crucial is that housing has become a commodity for a quick profit, rather than a means to provide households with shelter. Driving this is not market demand and supply conditions driven by a low rental vacancy rate. Many properties remain unoccupied.
There is a shift in ownership from occupiers to corporate ownership, often Singapore based entities, holding huge portfolios, and benefiting from generous negative gearing provisions and being able to take advantage of considerable monopoly control. Consider that a large portion of new properties are large scale apartment projects. Monopoly power pushes up rents.
Financial institutions have also been making a killing. Their lifeblood is the creation od debt, and the biggest opportunity for creating debt is the cost of housing. This is now being augmented by a rising interest rate. Excessive dependence on the creation of debt through housing is the principal cause of the housing bubble, and it is this that is the main force pushing up rents.
An added burden is the push to release debt stress by creating even more debt. This is unsustainable. The debt can’t be paid off.
Answering the cost of housing crisis, and with this poverty inducing rents, means the application of measures that will move Australia away from monopolistic supply, reduce the debt burden, and phase out negative gearing provisions for the corporate sector at least.
This must be coupled with ensuring existing properties are available for rental and the introduction of rent control, which sets a maximum ceiling landlords can charge. Then there must be an adequate supply of housing that doesn’t rely on the market. The best way to do this is public investment in much more housing to set the standard and pull down rents overall.
Housing options without going into debt through a costly mortgage must be made available to Australia, not just the poorest among us.
A bonus would be the reduction of the debt crisis and poverty, and this would be good for individuals, households, and the economy.
The financial institutions making a killing out of imposing the cost of housing burden on so many Australians, will have to go elsewhere to profit.