Housing affordability, central city economic productivity and the lower income labour market

188 Pages·2017·5.5 MB·English

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Faculty of Business - Papers (Archive) Faculty of Business and Law
1-1-2016
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Ryan Van Den Nouwelant
University of New South Wales
Laura Crommelin
University of New South Wales
Shanaka Herath
University of New South Wales, [email protected]
Bill Randolph
University of New South Wales
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Van Den Nouwelant, Ryan; Crommelin, Laura; Herath, Shanaka; and Randolph, Bill, "Housing affordability,
central city economic productivity and the lower income labour market" (2016). Faculty of Business -
Papers (Archive). 1127.
https://ro.uow.edu.au/buspapers/1127
Research Online is the open access institutional repository for the University of Wollongong. For further information
contact the UOW Library: [email protected]
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The objective of this research was to establish whether the diminishing supply of affordable housing
options for lower income (LI) workers near job-rich central city (CC) locations is having an impact on CC
businesses and on the overall productivity of CC economies. The findings of the specific research
questions are summarised here. The research comprised a review of census and other data as to the
housing market position of the LICC labour force in five of Australia's key metropolitan areas (metros)-
Perth, Darwin, Melbourne, Sydney and Brisbane-as well as a series of interviews with employers in
Sydney's CC and an analysis of the demand profile on recent infill development in the City of Sydney
council area
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Van Den Nouwelant, R., Crommelin, L., Herath, S. & Randolph, B. (2016). Housing affordability, central city
economic productivity and the lower income labour market. AHURI Final Report, 261 1-186.
This journal article is available at Research Online: https://ro.uow.edu.au/buspapers/1127
Housing affordability,

central city economic

productivity and the

lower income labour
market
authored by
Ryan van den Nouwelant, Laura Crommelin,
Shanaka Herath and Bill Randolph
for the
Australian Housing and Urban
Research Institute
at The University of New South Wales
April 2016

AHURI Final Report No. 261
ISSN: 1834-7223
ISBN: 978-1-925334-23-4
Authors van den Nouwelant, Ryan The University of New South Wales
Crommelin, Laura The University of New South Wales
Herath, Shanaka The University of New South Wales
Randolph, Bill The University of New South Wales
Title Housing affordability, central city economic productivity and the
lower income labour market
ISBN 978-1-925334-23-4
Format PDF
Key words Housing affordability, lower income labour markets, spatial
mismatch, central city economic productivity, urban form,
housing markets, economic growth.
Editor Anne Badenhorst AHURI National Office
Publisher Australian Housing and Urban Research Institute Limited
Melbourne, Australia
Series AHURI Final Report; no. 261
ISSN 1834-7223
Preferred citation van den Nouwelant, R., Crommelin, L., Herath, S. and
Randolph, B. (2016) Housing affordability, central city economic
productivity and the lower income labour market, AHURI Final
Report No.261, Australian Housing and Urban Research
Institute Limited, Melbourne, Available from:
<http://www.ahuri.edu.au/research/final-reports/261>.
[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 universities clustered into Research Centres across
Australia. Research Centre contributions, both financial and in-kind, have made the
completion of this report possible.
The City of Sydney co-funded the research as part of their ongoing support for
research on affordable housing options. The findings will inform the development of
affordable housing policies for the city.
The research team would also like to thank interview participants for their time and
valuable insights.

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.

PEER REVIEW STATEMENT
An objective assessment of all reports published in the AHURI Final Report Series by
carefully selected experts in the field ensures that material of the highest quality is
published. The AHURI Final Report Series employs a double-blind peer review of the
full Final Report where anonymity is strictly observed between authors and referees.
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CONTENTS
LIST OF TABLES ....................................................................................................... VI
LIST OF FIGURES ....................................................................................................VIII
ACRONYMS ............................................................................................................... XI
EXECUTIVE SUMMARY .............................................................................................. 1
1 INTRODUCTION ................................................................................................. 6
1.1 Research background .......................................................................................... 6
1.1.1 Objectives and purpose .............................................................................. 6
1.1.2 Research context ........................................................................................ 6
1.2 A brief summary of methods ................................................................................ 8
1.3 The analysed geographies ................................................................................. 10
1.4 Overview of structure of the rest of the report .................................................... 11
2 SPATIAL MISMATCH THEORIES AND POLICY CONSIDERATIONS ............. 13
2.1 Chapter overview ............................................................................................... 13
2.2 Spatial mismatch hypothesis .............................................................................. 13
2.2.1 Urban form and labour markets ................................................................. 13
2.2.2 Spatial mismatch of low-paid jobs and low-cost housing ........................... 15
2.3 Policy responses ................................................................................................ 17
2.3.1 Policy taxonomy ........................................................................................ 17
2.3.2 International comparisons ......................................................................... 19
2.3.3 Australian consideration ............................................................................ 21
2.4 Case-study context ............................................................................................ 23
2.4.1 Sydney ...................................................................................................... 23
2.4.2 Melbourne ................................................................................................. 25
2.4.3 Brisbane ................................................................................................... 27
2.4.4 Perth ......................................................................................................... 28
2.4.5 Darwin ...................................................................................................... 28
2.5 Chapter summary .............................................................................................. 28
3 EXPLORING THE EXTENT OF A SPATIAL MISMATCH ................................. 30
3.1 Chapter overview ............................................................................................... 30
3.2 Lower income central city workers live further from work than other lower
income workers .................................................................................................. 33
3.3 The mismatch is partly explained by transport and by differences with lower
income jobs outside the central city .................................................................... 53
3.3.1 Sheer volume of jobs in the CCs ............................................................... 53
3.3.2 Ease of travel to the CCs .......................................................................... 57
3.3.3 Different LI jobs in the central cities .......................................................... 60
3.4 Hospitality and retail are most affected, with other central city specific industries
also potentially affected ...................................................................................... 67
3.4.1 Number of LICC workers ........................................................................... 68
3.4.2 Proportion of CC workers in the LI range .................................................. 70
3.4.3 Competition for workers from outside the CC ............................................ 71

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3.5 Job-intensive areas around the central city could also be affected ..................... 75
3.6 Chapter summary .............................................................................................. 80
4 IDENTIFYING HOUSING CONSTRAINTS ON LOW-INCOME CENTRAL CITY
WORKERS ........................................................................................................ 81
4.1 Chapter overview ............................................................................................... 81
4.2 Most lower income workers do not live in lower income households .................. 82
4.3 There is little evidence of a greater degree of housing stress among lower
income central city workers ................................................................................ 88
4.4 Middle-income households compromise more on housing when connected to
the central city labour force ................................................................................ 95
4.4.1 Tenure compromise .................................................................................. 95
4.4.2 Dwelling structure compromise ................................................................. 96
4.4.3 Dwelling size compromise ......................................................................... 97
4.5 Housing distribution shows the need to live away from central cities to avoid
housing stress and compromise ......................................................................... 99
4.6 Chapter summary ............................................................................................ 110
5 IDENTIFYING HOW ANY SPATIAL MISMATCH AFFECTS EMPLOYERS .... 111
5.1 Chapter overview ............................................................................................. 111
5.2 Housing affordability is a concern for some employers, but not all ................... 114
5.3 The most concerned interviewees were predominantly from the service
industries ......................................................................................................... 116
5.4 Examples emerged of recruitment, reliability and retention all being affected by
housing affordability ......................................................................................... 117
5.4.1 Recruitment ............................................................................................ 117
5.4.2 Reliability ................................................................................................ 119
5.4.3 Retention ................................................................................................ 119
5.5 Most employers recognised housing issues exist, but indicated the direct costs
are mainly borne by employees ....................................................................... 120
5.6 The central city has other benefits that attract workers despite the high cost of
living nearby ..................................................................................................... 122
5.6.1 Salaries and opportunities are better in the CC ....................................... 122
5.6.2 The CC has amenities and ‘buzz’ ............................................................ 124
5.6.3 Even with growing commutes, the CC remains accessible ...................... 125
5.7 Other issues shaping the complex relationship between housing affordability
and central city productivity .............................................................................. 125
5.7.1 What is the productivity impact of a short-term/foreign workforce? .......... 126
5.7.2 What are the secondary effects of long commutes and housing shortages?128
5.7.3 How does Sydney compare with other places? ....................................... 128
5.7.4 For those concerned, what’s seen as the best solution? ......................... 130
5.7.5 Limitations, issues for further research .................................................... 131
5.8 Chapter summary ............................................................................................ 131
6 MARKET RESPONSES AND HOUSING THE SYDNEY LICC WORKFORCE 132
6.1 Chapter overview ............................................................................................. 132
6.2 Demand profile of residents living in newly developed areas............................ 134

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6.2.1 Household income and tenure ................................................................ 134
6.2.2 Weekly rental payments and monthly mortgage payments ..................... 136
6.2.3 Household composition ........................................................................... 138
6.2.4 Age of reference person.......................................................................... 140
6.2.5 Household location five years ago .......................................................... 141
6.2.6 Place of birth of reference person ........................................................... 142
6.2.7 Tertiary students as a proportion of all residents ..................................... 144
6.3 Dwelling prices and rents in the new high-density housing market 2006–14 .... 145
6.3.1 Rental activity by volume and entry rents 2006–14 ................................. 145
6.3.2 Incidence of affordable entry rentals in the newly developed areas and
Sydney LGA, 2006 and 2014 .................................................................. 149
6.3.3 Selling activity by volume and sales prices 2006–2014 ........................... 150
6.3.4 Incidence of affordable sales in the newly developed areas and Sydney
LGA, 2006 and 2014 ............................................................................... 154
6.4 Chapter summary ............................................................................................ 155
6.4.1 Demand profile of the new high-density market 2011 .............................. 155
6.4.2 Rental volume and median entry rents 2006–14 ..................................... 156
6.4.3 Sale volume and median sales price 2006–14 ........................................ 156
7 POLICY IMPLICATIONS ................................................................................. 158
7.1 Summary of the research findings .................................................................... 158
7.1.1 LICC workers bear a transport penalty, while CC employers pay a location
loading .................................................................................................... 158
7.1.2 The particularities of the CC job market make the commute worthwhile for
some LICC workers ................................................................................ 159
7.1.3 Some LICC workers are insulated from housing constraints; others
compromise to cope ................................................................................ 159
7.1.4 Increased CC housing supply has not greatly improved housing
affordability for LICC workers … ............................................................. 160
7.1.5 … but because LICC workers adapt, employers have borne only limited
costs ....................................................................................................... 160
7.2 Policy implications of these findings ................................................................. 161
7.2.1 Housing policy approaches to addressing the spatial mismatch .............. 161
7.2.2 Transport policy approaches to addressing the spatial mismatch ............ 162
7.2.3 Employment policy approaches to the spatial mismatch ......................... 163
7.3 Conclusion: a holistic policy approach remains the Holy Grail .......................... 164
REFERENCES ......................................................................................................... 165
APPENDICES ........................................................................................................... 172
Appendix 1: ANZSIC industry code short names ....................................................... 172
Appendix 2: Interview themes ................................................................................... 173

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LIST OF TABLES
Table 1: Key features of case study central city SA2s ............................................... 11
Table 2: Global ambitions of Australian cities ............................................................ 20
Table 3: Overview of populations analysed ............................................................... 31
Table 4: Metro workforce self-containment ................................................................ 32
Table 5: Proportion of all workers in defined income bands ....................................... 32
Table 6: Distance to work (km) by personal income, CC vs metro averages ............. 49
Table 7: Proportion of all metropolitan jobs that are in the CC ................................... 54
Table 8: Travel to work modal split between public, private & mixed mode of travel .. 60
Table 9: Indigenous representation in metro and CC workforces .............................. 67
Table 10: Industries with more than 5 per cent of the total LICC workforce ............... 68
Table 11:Major subsectors and occupations ............................................................. 69
Table 12: Proportion of CC workforce on LI, selected industries ............................... 70
Table 13: CC industries with above average LI worker footprint ................................ 71
Table 14: Ratio of CC:non-CC LI jobs, selected industries ........................................ 72
Table 15: Industries with above-average ratio of CC:non-CC LI jobs ........................ 73
Table 16: LI distance premium, selected industries ................................................... 74
Table 17: Industries with above-average LI distance premium .................................. 74
Table 18: Average distance (km) to work for LICC workforce, by occupation ............ 75
Table 19: CC extension SA2 ..................................................................................... 75
Table 20: Number and distribution of jobs in Sydney SA3 ......................................... 76
Table 21: Industry distribution of LI workers in Sydney SA3 ...................................... 78
Table 22: Average distance to work (km) in Sydney SA3 .......................................... 79
Table 23: Description of census counts analysed ...................................................... 82
Table 24: Proportion of all households in defined income bands ............................... 83
Table 25: Proportional split of LI workers by household income ................................ 83
Table 26: LI workers by relationship to reference person & household income ......... 85
Table 27: Proportion of LI workers in selected industries living in LI households ....... 86
Table 28: Employed reference persons (and all employed persons) by household
income ............................................................................................................... 87
Table 29: Employed reference persons (and all employed persons) by household type
.......................................................................................................................... 87
Table 30: Employed reference persons (and all employed persons) by industry
(selected) ........................................................................................................... 88
Table 31: Rates of housing stress by household income; with inferred rate for LI
workers .............................................................................................................. 89
Table 32: Housing tenure, by place of work and household income .......................... 96

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Table 33: Dwelling structure, by place of work and household income ...................... 97
Table 34: Number of bedrooms relative to number of residents, by place of work and
household income .............................................................................................. 98
Table 35: Industry sectors employing greatest number of LICC workers, 2011 ....... 112
Table 36: Industry, organisation type and role of interviewees ................................ 113
Table 37: The configuration of strata-titled units within SA1s in Sydney LGA, 2011 132
Table 38: Dwelling structure in the identified newly developed 89 SA1s, 2011 ........ 133
Table 39: Rental turnover 2006 and 2014 ............................................................... 146
Table 40: Proportion of bonds lodged in the newly developed areas and Sydney LGA,
2006 and 2014 ................................................................................................. 146
Table 41: Proportion of bonds lodged by dwelling type, 2006 and 2014 .................. 147
Table 42: Median entry rents by dwelling type, 2006 ............................................... 147
Table 43: Median entry rents by dwelling type, 2014 ............................................... 148
Table 44: Change in median entry rents by dwelling type, 2006 and 2014 .............. 149
Table 45: Percentage of metro-wide lowest quartile rentals in the newly developed
areas and Sydney LGA, 2006–14 .................................................................... 149
Table 46: Sales turnover 2006 and 2014 ................................................................. 151
Table 47: Proportion of sales in the newly developed area and Sydney LGA, 2006 and
2014 ................................................................................................................. 151
Table 48: Proportion of sales by dwelling type, 2006 and 2014 ............................... 152
Table 49: Median price by dwelling type, 2006 ........................................................ 152
Table 50: Median price by dwelling type, 2014 ........................................................ 153
Table 51: Change in median price by dwelling type, 2006 and 2014 ....................... 154
Table 52: Percentage of metro-wide lowest quartile sales in the newly developed
areas and Sydney LGA, 2006–14 .................................................................... 155

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