Supply shortages and affordability outcomes in the private rental sector

99 Pages·2015·2.96 MB·English

by  Kath Hulse

Supply shortages and

affordability outcomes

in the private rental

sector: short and longer
term trends
authored by
Kath Hulse, Margaret Reynolds, Wendy Stone
and Judith Yates

for the
Australian Housing and Urban
Research Institute
at Swinburne University of Technology
at The University of Sydney

June 2015

AHURI Final Report No. 241
ISSN: 1834-7223
ISBN: 978-1-922075-91-8
Authors
Hulse, Kath Swinburne University of Technology

Reynolds, Margaret Swinburne University of Technology

Stone, Wendy Swinburne University of Technology

Yates, Judith The University of Sydney
Supply shortages and affordability outcomes in the private
Title
rental sector: short and longer term trends
ISBN 978-1-922075-91-8
Format PDF
Private rental, affordability, affordable housing, supply
Key words
shortages, low rent stock
Editor Anne Badenhorst AHURI National Office
Australian Housing and Urban Research Institute
Publisher
Melbourne, Australia
Series AHURI Final Report; no. 241
ISSN 1834-7223
Hulse, K., Reynolds, M., Stone, W. and Yates, J. (2015) Supply
shortages and affordability outcomes in the private rental
sector: short and longer term trends, AHURI Final Report
Preferred citation No.241. Melbourne: Australian Housing and Urban Research
Institute. Available from:
<http://www.ahuri.edu.au/publications/projects/p51018>.
[Add the date that you accessed this report: DD MM YYYY].

i
ACKNOWLEDGEMENTS
This material was produced with funding from the Australian Government and the
Australian state and territory governments. AHURI Limited gratefully acknowledges
the financial and other support it has received from these governments, without which
this work would not have been possible.
AHURI comprises a network of university Research Centres across Australia.
Research Centre contributions, both financial and in-kind, have made the completion
of this report possible.
The authors would like to thank Dr Maryann Wulff (Swinburne University of
Technology) for her guidance and support for the research.
Our thanks also to Mr Paul Murrin from the ABS Information Consultancy Sydney
office for compiling the customised data files required for this research.

DISCLAIMER
AHURI Limited is an independent, non-political body which has supported this project
as part of its program of research into housing and urban development, which it hopes
will be of value to policy-makers, researchers, industry and communities. The opinions
in this publication reflect the views of the authors and do not necessarily reflect those
of AHURI Limited, its Board or its funding organisations. No responsibility is accepted
by AHURI Limited or its Board or its funders for the accuracy or omission of any
statement, opinion, advice or information in this publication.

AHURI FINAL REPORT SERIES
AHURI Final Reports is a refereed series presenting the results of original research to
a diverse readership of policy-makers, researchers and practitioners.

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full Final Report where anonymity is strictly observed between authors and referees.
ii
CONTENTS
LIST OF TABLES ..................................................................................................... VI
LIST OF FIGURES ..................................................................................................VIII
ACRONYMS ............................................................................................................. IX
EXECUTIVE SUMMARY ............................................................................................ 1
1 INTRODUCTION ............................................................................................... 5
1.1 Public policy context .......................................................................................... 5
1.2 Research into the private rental sector: key approaches .................................... 5
1.3 The research project .......................................................................................... 7
1.4 The research approach and method .................................................................. 8
1.5 Structure of this report ...................................................................................... 10
PART A: HOUSING AFFORDABILTY OUTCOMES FOR LOWER INCOME
PRIVATE RENTERS IN 2011 .......................................................................... 12
2 HOUSING AFFORDABILITY OUTCOMES FOR LOWER INCOME
HOUSEHOLDS 2011 ....................................................................................... 13
2.1 Changes in the private rental market 2006–11 ................................................. 13
2.1.1 Affordable rent ranges for household income quintiles ............................ 13
2.1.2 The distribution of household incomes and rents .................................... 14
2.1.3 Very low income (Q1) households: supply and availability ...................... 15
2.1.4 Low-income (Q2) households: supply and availability ............................. 15
2.2 Housing affordability outcomes for lower income households .......................... 16
2.3 Who were lower income private renter households in 2011?............................ 17
2.3.1 Socio-demographic characteristics of lower income and other private
renter households ................................................................................... 17
2.4 Which lower income households were in unaffordable private rental housing in
2011? ............................................................................................................... 19
2.4.1 Overview of extent and severity of housing affordability problems facing
Q1 and Q2 households ........................................................................... 20
2.4.2 Lower income households in unaffordable private rental housing in 2011
20
2.5 Summary ......................................................................................................... 23
3 LOWER INCOME HOUSEHOLDS LIVING IN UNAFFORDABLE PRIVATE
RENTAL: WHERE ARE THE PROBLEMS? ................................................... 25
3.1 Metropolitan and non-metropolitan regions ...................................................... 25
3.2 Affordability outcomes in Australia’s capital cities, 2011 ................................... 26
3.3 Affordability outcomes in non-metropolitan regions, 2011 ................................ 28
3.4 Summary ......................................................................................................... 29
4 FOCUS CHAPTER: FAMILIES WITH CHILDREN, OLDER PEOPLE AND
RECENTLY ARRIVED MIGRANTS ................................................................. 31
4.1 Lower income families with children ................................................................. 31
4.2 Lower income older persons ............................................................................ 33
4.3 Lower income recently arrived migrants ........................................................... 35
4.4 Summary ......................................................................................................... 38
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PART B: LONGER TERM CHANGES IN THE PRIVATE RENTAL SECTOR 1996–
2011 ................................................................................................................. 40
5 LONGER TERM CHANGES IN THE AUSTRALIAN PRIVATE RENTAL
SECTOR, 1996–2011 ...................................................................................... 41
5.1 Size and structure of the private rental sector 1996–2011 ................................ 41
5.1.1 Size of the sector .................................................................................... 41
5.1.2 Structure of the private rental sector ....................................................... 41
5.2 Combining rents and household incomes ......................................................... 43
5.3 Shortages of affordable and available housing for lower income households ... 44
5.3.1 Occupation of rental dwellings by households on different income levels 44
5.3.2 Very low income (Q1) households .......................................................... 45
5.3.3 Q2 households ........................................................................................ 46
5.3.4 Aggregate shortages for lower income households (Q1+Q2) .................. 47
5.4 Spatial implications .......................................................................................... 49
5.4.1 Spatial distribution by household income quintile and corresponding
affordable rent segment .......................................................................... 49
5.4.2 Q1 households ........................................................................................ 50
5.4.3 Q2 households ........................................................................................ 53
5.5 Changes in the type of dwellings rented by lower income households 1996–
2011 ................................................................................................................. 55
5.6 Summary ......................................................................................................... 56
6 DISCUSSION AND IMPLICATIONS FOR POLICY ......................................... 57
6.1 What has driven increases in the supply of private rental dwellings, 1996–2011?
........................................................................................................................ 57
6.1.1 Deregulation of the financial system........................................................ 57
6.1.2 Fiscal policy changes .............................................................................. 57
6.1.3 Combined effects of deregulation and fiscal policy changes on the private
rental sector ............................................................................................ 58
6.1.4 Other factors ........................................................................................... 59
6.2 Why did the supply of affordable rentals for very low income households not
increase in line with general increases in supply? ............................................ 60
6.2.1 Demand-side assistance has been ineffective in stimulating an increase in
lower rent dwellings ................................................................................ 60
6.2.2 High urban land values undermine filtering down of housing into low rent
stock ....................................................................................................... 60
6.3 What has driven competition for private rental, reducing availability for lower
income households? ........................................................................................ 61
6.3.1 Higher income households: choice and constraint factors ....................... 61
6.3.2 Life cycle factors ..................................................................................... 62
6.3.3 Migration ................................................................................................. 63
6.3.4 Other factors ........................................................................................... 63
6.4 What are the implications for policy? ................................................................ 63
REFERENCES ......................................................................................................... 67
APPENDICES ........................................................................................................... 73
iv
Appendix 1: A note on measures of shortage employed over the four projects in the
series ............................................................................................................... 73
Appendix 2: Who were the lower income private renters in 2006? ............................ 82
Appendix 3: Spatial analysis of contribution to shortages for Q1 households ............ 83
Appendix 4: Affordability outcomes in Australia’s large regional centres ................... 84
Appendix 5: Further details on lower income households by rental affordability, type of
household and spatial unit ............................................................................... 85
Appendix 6: Detailed calculations of headline shortage figures for Q1 and Q2
households ...................................................................................................... 88
v
LIST OF TABLES
Table 1: Gross unequivalised household income quintiles and corresponding
affordable rent categories, Australia, 2011 ......................................................... 14
Table 2: Socio-demographic characteristics of private renter households (and all
households), Australia, 2011 .............................................................................. 18
Table 3: Rental affordability for Q1 and Q2 private renter households, Australia, 2006
and 2011 ............................................................................................................ 20
Table 4: Rental affordability by selected characteristics of lower income private renter
households, Australia, 2011 ............................................................................... 21
Table 5: Affordability outcomes for Q1 and Q2 households, metropolitan and non-
metropolitan regions, 2011 ................................................................................. 25
Table 6: Q1 households paying unaffordable rents due to shortages and availability,
Australia, metropolitan and non-metropolitan regions, 2011 ............................... 26
Table 7: Rental affordability of lower income private renter households by major
capital city sub-regions, Australia, 2011 ............................................................. 27
Table 8: Rental affordability of lower income private renter households by location,
Australia, 2011 ................................................................................................... 29
Table 9: Rental affordability of lower income private renter households with children
by location, Australia, 2011 ................................................................................ 32
Table 10: Rental affordability of older* lower income private renter households by
location, Australia, 2011 ..................................................................................... 34
Table 11: Characteristics of lower income private renter households by period of
arrival/Australian born, Australia, 2011 ............................................................... 37
Table 12: Rental affordability of recently arrived lower income private renter
households by location, Australia, 2011 ............................................................. 38
Table 13: Private rental dwellings and all occupied private rental dwellings, Australia,
1996, 2001, 2006 and 2011 ............................................................................... 41
Table 14: Income and rent distributions for households and stock in the private rental
market: 1996–2011 ............................................................................................ 43
Table 15: Three measures of shortage of affordable and available dwellings for Q1
private renters 1996–2011 ................................................................................. 45
Table 16: Three measures of shortages of affordable and available dwellings for Q2
private renter households ................................................................................... 46
Table 17: Summary of shortage estimates by measure employed: Australia, 1996,
2006 and 2011 ................................................................................................... 48
Table 18: Summary of spatial dimensions of shortages for Q1 households on three
measures, 1996, 2006 and 2011 ........................................................................ 52
Table 19: Summary of spatial dimensions of shortages for Q2 households on three
measures, 1996, 2006 and 2011 ........................................................................ 54

Table A1: Shortages of affordable rental housing by income quintiles: Australia, 1996–
2011 ................................................................................................................... 75
vi
Table A2: Allocation of rental stock by household income quintiles: Australia, 1996,
2006 and 2011 ................................................................................................... 76
Table A3: Comparison of alternative approaches, based on 2011 census outcomes 78
Table A4: Summary of shortage estimates by measure employed: Australia, 1996,
2006 and 2011 ................................................................................................... 79
Table A5: Gross household income quintiles: Australia 1996–2011 ($2011) ............. 80
Table A6: Socio-demographic characteristics of private renter households (and all
households), Australia, 2006 (Chapter 2) ........................................................... 82
Table A7: Q1 households paying unaffordable rents due to shortages and availability
by location, 2011 (Chapter 3) ............................................................................. 83
Table A8: Rental affordability of lower income private renter households by Australian
large regional centres, 2011 (Chapter 3) ............................................................ 84
Table A9: Rental affordability of lower income private renter households with children
by location, Australia, 2011 (Chapter 4) ............................................................. 85
Table A10: Rental affordability of older* lower income private renter households by
location, Australia, 2011 (Chapter 4) .................................................................. 86
Table A11: Rental affordability of recently arrived lower income private renter
households by location, Australia, 2011 (Chapter 4) .......................................... 87
Table A12: Shortage of affordable and available dwellings for Q1 renters 1996–2011
.......................................................................................................................... 88
Table A13: Shortages of affordable and available dwellings for Q2 private renter
households ........................................................................................................ 88

vii
LIST OF FIGURES
Figure 1: Number of private renter households by income group compared with the
number of dwellings affordable at 30 per cent benchmark, Australia 2006 and
2011 ................................................................................................................... 15
Figure 2: Proportion (%) of Q1 and Q2 households by rent segment paid, Australia,
2006 and 2011 ................................................................................................... 16
Figure 3: Rental affordability among Q1 private renter families with children, Australia,
2011 ................................................................................................................... 31
Figure 4: Rental affordability among Q2 private renter families with children, Australia,
2011 ................................................................................................................... 32
Figure 5: Rental affordability of lower income private renter households by period of
arrival, Australia, 2011 ....................................................................................... 35
Figure 6: Real incomes by gross income deciles, 1988–89 to 2009–10 ($2011–12) . 42
Figure 7: Shortages and/or surpluses of affordable private rental dwellings: Australia,
1996–2011 ......................................................................................................... 44
Figure 8: Occupation of private rental stock in different rent segments by household
income quintile, 1996, 2006 and 2011 ................................................................ 45
Figure 9: Contributors to the supply shortages for Q1 households, 1996, 2006, 2011
.......................................................................................................................... 46
Figure 10: Contributors to supply shortages for Q2 households 1996–2011 ............. 47
Figure 11: Private renter household income quintiles by type of location, 1996*, 2006
and 2011 ............................................................................................................ 49
Figure 12: Private rent segments by type of location 1996*, 2006 and 2011 ............. 50
Figure 13: Number of Q1 private renter households and R1 properties by metropolitan
and non-metropolitan regions, 1996, 2006, 2011 ............................................... 51
Figure 14: Number of Q2 private renter households and R1/R2 properties by
metropolitan and non-metropolitan regions, 1996, 2006, 2011 ........................... 53
Figure 15: Structure and size of Australian private rental dwelling stock by rent
segment, 1996 and 2011* .................................................................................. 55
Figure 16: Trends in lending for rental investment, 1985–2014, Australia ................. 58
Figure 17: Lending for new construction as a share of total finance commitments for
owner occupation and investment 1985–2014 ................................................... 59

Figure A1: Upper values for income quintiles: Australia 1996–2011 ($2011) ............. 81

viii
ACRONYMS
ABS Australian Bureau of Statistics
AHURI Australian Housing and Urban Research Institute Limited
ATO Australian Taxation Office
CPI Consumer Price Index
NHSC National Housing Supply Council
NRAS National Rental Affordability Scheme
NSW New South Wales
NT Northern Territory
QLD Queensland
RA Rent Assistance
SA South Australia
SMSF Self-Managed Superannuation Fund
TAS Tasmania
VIC Victoria
WA Western Australia

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