Housing affordability dynamics: new insights from the last decade
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EXECUTIVE SUMMARY This is the first report of a project that explores the duration of housing affordability stress (HAS) in Australia. It updates research findings previously reported by Wood and Ong (2009), which tracked the housing affordability trajectories of Australians over the period 2001–06. The present project offers more up-to-date estimates of duration in HAS and affordable housing by1 exploiting a longer 11-year timeframe that covers 2001–11. The dataset employed in this (and the previous) project is the nationally representative Household, Income and Labour Dynamics in Australia (HILDA) Survey. This project addresses three key research questions: 1. Were escapes from HAS permanent or temporary over the period 2001–11? To what extent did experiences of protracted and temporary spells in HAS vary by household characteristics? 2. To what degree are transitions in and out of HAS caused by changes in housing cost versus changes in income? Do Commonwealth Rent Assistance (CRA) arrangements serve as an effective buffer against sharp rises in rents or income shocks? 3. How often do households churn in and out of HAS? Why do some escape yet fall back into HAS at a later stage of their housing careers? The present project will offer important innovations and new insights. The longer timeframe of the HILDA Survey offers excellent opportunities to more rigorously distinguish between the characteristics of persons permanently or temporarily trapped in HAS, as well as take into account the disruption to Australian housing markets that followed the Global Financial Crisis (GFC). This project will also inform policy recommendations by firstly providing vital indicators as to whether housing affordability issues in contemporary times would be more effectively dealt with via housing or labour market instruments, or a combination of both, and secondly proposing CRA reforms that strengthen their effectiveness as a protective buffer against HAS. The key findings are as follows: ? In this project, we find that 73 per cent of Australians in housing affordability stress (HAS) will escape by Year 1. This rate of escape declines rather steeply, but only a small minority fail to climb out of spells of HAS by Year 10. Couples with children, and particularly those in the 35–54 age groups, find it relatively difficult to escape from spells of HAS. These findings confirm the trends presented in the previous project. ? For those in affordable housing, there is a high 79.5 per cent chance that housing remains affordable through to Year 10, again confirming the findings from the previous project. The young (under 35 years of age) and couples with children are particularly prone to slip out of affordable housing. On the other hand, the majority of outright owners retain affordable housing all the way through to the Year 10. ? A past experience of HAS seems to have a ‘scarring’ effect on future prospects of evading HAS. ? For those falling out of affordable housing, changes in housing cost ratios triggered by falls in income are more or less equal to those caused by rising housing costs. However, year-to-year escapes from unaffordable housing are disproportionately driven by changes in income.
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