Home Sweet Home on Struggle Street [Preliminary Draft]

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Introduction +





Home ownership is increasingly unaffordable - and even getting a place to rent to avoid homelessness seems to be getting beyond the ability of numbers of Australians on what would recently have seemed to be adequate incomes.

It will be suggested below that this could well escalate into a massive social problem which:

  • generates political instability - which puts Australia's economic performance at risk;
  • imposes large costs on governments; and
  • ultimately can only be solved by methods that are beyond the capacity of governments to arrange.

The Problem

A human perspective on the problem can be illustrated by the following:

An example: On recent visit to Sydney a friend mentioned a conversation with a homeless woman who lived on a nearby street. The woman had an income (from working at a supermarket) but this was insufficient to allow her to rent or buy a home. She had the option of living in a shelter - but chose not to do so because it was hard to get on with others who lived there. [Why this might be so is suggested by a second example].

Another Example:  A formerly-homeless contact in Brisbane was recently again confronting difficulties in finding affordable accommodation. She is a single mother with a teenage son who has learning difficulties. She has had limited ability to work because a car accident many years ago left crippling and permanently painful back injuries - and recently entitled her to a disability pension. However she has long faced difficulties finding affordable accommodation. Over many years she relied on shared rented accommodation - because renting alone with little more than a single parent's income was impossible.  However she believes that sharing has now become unsafe because it is no longer easy to find house mates who can be trusted. She and her son were once forced to live in a hostel to avoid homelessness. Like the Sydney homeless woman mentioned above she found this to be stressful (and an unacceptable environment for a teenage boy) because: many in the hostel were on drugs; and no one took the house rules seriously (eg women often had men overnight). Despite now having an apparently-reasonable income (somewhat less than that usually regarded as sufficient for a single person to enjoy a comfortable retirement) she recently feared that she again faced homelessness - as rental payments could only be 30% of income and there were now few such rental options unless she moved a long way out of the city (which could create psychological disturbances for her son). When (barely) affordable housing was found, she remained at ongoing risk of homelessness. Income and (tightly controlled) spending theoretically allowed some hundreds of dollars savings annually but income and spending were 'lumpy' (ie high some weeks, low others). With no cash reserves, there was a constant risk of being forced to the loan sharks by either unexpected expenses or a week of high outlays and low income. And if substantial emergency borrowing was required the 30% pa interest the loan sharks demanded for short term financing could tip the balance - leading to an inability to pay debts, a loss of the credit rating needed to rent and a spiral down to homelessness despite the fact that she was theoretically able to afford to provide a home for herself and her son.

Such cases are merely the tip of an iceberg as the extracts from recent articles below concerning housing affordability and homelessness illustrate.


Australia it is probably facing significant housing stress (ie difficulties for families in meeting the cost of housing) and homelessness brought on by:

  • low and declining ability by first home buyers (ie those who do not already have substantial family assets) to enter the property market;

  • escalating property values (as low interest rates apparently encourage investors to hope other investors will continue to pay 'bigger fool' prices);

  • the risk to financial institutions (much of whose collateral is based on real estate) if property prices were to fall significantly. This requires reserve banks to juggle between: (a) encouraging economic demand and sustaining property values with low interest rates; and (b) the potential asset 'bubbles' that low interest rates can generate;

  • a shortage of available accommodation due to growth in the number of potential households (eg partly as a result of rapid migration and family fragmentation) that exceeds the numbers of homes that can profitably be built (partly because of necessary environmental constraints on the release of land);

  • attempts to deal with areas of social need through provision of government assistance as this tends to reduce the perceived need for, and thus the availability of, family / community support - an effect which parallels the way in which simple 'welfare' can translate into 'welfare dependence'.

And the problem will probably escalate because of the difficulties Australia increasingly faces in transforming its economy into one which can provide sufficient high paid job opportunities - noting:

  • the declining percentage of required job opportunities the economy is now creating;

  • the recognition that the commodity export drivers of Australia's economic growth in recent years are unlikely to continue;

  • the competitive challenge that emerging economies with much lower wage rates have increasingly played since the 1960s in constraining incomes in many parts of the economies of more developed economies; and

  • the very real prospect of destabilizing international political economic difficulties.

Struggling to Cope

There are many programs by government and non-government agencies that are supposed to provide support to those who face such difficulties - but they don't seem to work. In Queensland the Department of Housing provides government housing - but there is such a waiting list that it is no longer a case of applicants being told that it will take ten years to gain accommodation. The waiting time is now indefinite.  And there seems to be a potentially-socially-disruptive perception by potential clients that priority is given to aborigines and refugees at the expense of ordinary Australians. One organisation which provides support to those having difficulty getting affordable accommodation was perceived to be only interested in helping those who were able to work.

There is nothing new about the problem. In 2003 a seminar was organised by a Queensland church group which focused on the increasing problem of both domestic violence and homelessness in SE Queensland (see Is the Smart State a Just State: A Commentary, 2003). However the organisers seemed only interested in highlighting what governments should do to deal with the problem even though in both areas deficiencies in individual behaviour (which it is beyond governments to do anything about) seemed to be major factors (as family fragmentation and and fear of others seems to be a factor contributing to Australia's housing affordability / homelessness difficulties).

For reasons suggested above there is likely to be a significant rise in the incidence of housing stress and homelessness. This is likely to create severe difficulties for the federal government as it is both seeking to:

  • solve these problems by funding 'affordable' accommodation; and

  • to reduce welfare costs to bring the budget into surplus so as to strengthen Australia's economic prospects.

Any reliance on welfare as the 'solution' seems likely to be overwhelmed by the probable future escalation of the problem. Amongst other things that escalation is likely to add to government budget difficulties as well as potentially generating alienation and political discontent. 

As for many social problems (eg see Gonski Review: An Example of the Limitations of Government Initiatives) the solution is ultimately likely to require strengthening the role that families play. For example, ff multiple generations live together the availability of housing relative to demand would increase - so housing costs should fall and affordability should increase. Likewise supportive families (if they are available) are most likely to be the best option for those facing risks of homelessness.  

About Housing Affordability and Homelessness  Housing affordability does not seem to be a problem in UK except in London where there are large numbers of people with high incomes. However affordability measures based on relationship between loan repayments (with historically very low interest rates) and incomes do not tell the full story - as interest rates must normalize Real estate: The great investment delusion, 7/4/14

Recent price growth in Sydney and Melbourne (up 15% and 12$ pa) seems unsustainable. Also median house price ($535,000) is said to be 4 times average family disposable income - implying the latter is $175,000 pa. on the basis of available data (eg that average equity on home purchase is 32%) current dwelling price to income ratio for each capital and proportion f average disposable income needed to pay average mortgages. This suggested that housing is affordable to those with big deposit given low interest rates. When rates rise, housing markets will contract (especially in Sydney and Melbourne) [1]

Average living standards fell in December quarter 2013 (as wages rose 0.1% and prices by 0.7%) - and household outlook is now weakest since 1980s. Ben Phillips (NATSEM) said living standards fell for 3 of last 5 quarters - and only rose when interest rates fell. Government is concerned for future living standard falls (eg due to cost of heavy debt burden) but the problem exists now. Prices for major exports won't support income growth, there was no potential for income tax cuts, little scope to reduce interest rates and jobs market is weak. Inflation is currently likely to be 3% pa - at top of RBA's desired range. Structural factors are driving up inflation - and this is why wage weakness is not reflected in inflation [1]

The number of households drawing on (rather than adding to) their savings is at the highest level in 20 years. The numbers adding to savings was down 4% while 15.6% were drawing on savings - according to St-George-Melbourne Institute Household Financial Condition Index. 80% were in a stable position. [1]

Over 3m households have taken out larger and cheaper mortgages since the GFC - mostly at variable rates - and are thus exposed to changes by RBA. NATSEM (Ben Phillips) says that interest rates could rise and be a shock to the system. Since 2008 620,00 owner-occupied home loans have been written in Queensland - and Brisbane home prices have risen 12%. Most households already find their finances stretched. NAB survey concluded that people are really feeling the pinch [1]

Sources to consult



















Australian Housing Price Index 1880-2012

About Economic Context Economists expect [1] that

between the slowdown in our rate of productivity improvement, the expected continuing fallback in mineral export prices and the reversal of the ''demographic dividend'' delivered by the baby boomers, ''we face a significant challenge in maintaining the rate of growth in living standards that Australians have come to expect''.

Specifically, Parkinson projected that, even if we assume labour productivity grows at its long-term average, the other two factors would cause real income per person to grow by just 0.7 per cent a year over the decade to 2023-24, rather than the 2.3 per cent ''to which Australians have become accustomed''.

So over 10 years our present annual real income of $63,600 per person would grow only to $69,000, rather than $82,000, leaving us only $5400 a year better off, rather than the $18,400 a year to which we've become accustomed.

To keep average incomes growing as fast as we've come to expect will require us to double our present rate of productivity improvement to 3 per cent a year.

Sorry, but I very much doubt we'll be willing to make the many controversial reforms needed to achieve such a transformation. More to the point, I'm not convinced we should [for social and environmental reasons].

There is concern that Australia could face a jobs' vacuum for a couple of years and that Australia may be unable to fill the growth vacuum left by the mining boom. Housing, retail and tourism have been hoped to fill the gap, but (though they have surged) they may be unsustainable in the long term. A 'tidal wave' of unemployment has been seen to be likely because of shrinking mining activity, cuts to car / airline / telecommunications industries as well as in manufacturing and government. The rising cost of living pressures in mortgages, food, energy, education and health will also have an effect [1]

Wallace R 'Women victims of hidden jobless crisis' A, 5-6/4/14 Hidden unemployment is afflicting two groups of women - with underemployment not seen since aftermath of GFC. John Black (Australian Development Strategies) identified crisis underemployment for women 234-325 and 55+. Federal government inherited economy providing just 238% of jobs population needed. As many now give up looking for work or settle for inadequate hours discretionary spending / retail and hospitality industries are suffering. The view that Australia dodged the GFC is a myth - as we are in it now> Women have particular problems because of need to care for children / parents or deal with family break-up. Technology overtakes them and they don't have time to acquire needed skills.

Black J 'Jobs cxrisis poses the biggest challenge', A, 5-6/4/14 - Rudd government inherited an economy that created enough jobs at end of 23007 for all 15+ entering workforce. In September 23007 economy was only generating enough for 238% of potential new entrants. Since then the situation has deteriorated further to 15-20%

The number of long-term ­unemployed young people has trebled since the GFC and has grown fastest over the past year, new analysis from Brotherhood of St Laurence shows. One key indicator — length of time spent without work — is heading for the “worst-case scenario”. The unemployment rate for people aged 15 to 24 is more than double the national ­average at 12.5 per cent — and the proportion of those who had spent a year or more out of work now accounts for almost one-fifth of all the unemployed youth. A worst-case scenario is already unfolding. Large numbers of long-term unemployed people at risk of never getting a foothold in work, of never being able to pursue their aspirations or build a life for themselves. (Morton R., Long-term youth unemployment triples since financial crisis, The Australian, 14/4/14)