Yesterday I was talking to a woman (Jen) and her son in the Newcastle suburb of Windale. She is a single mother struggling to raise a family on income support and some part time and casual employment. She is renting privately and absorbing over 50% of her income (from all sources)on housing. Jen has been on a public housing waiting list for several years.
One tragedy of her story is that just over 12 months ago she had the opportunity to buy a house. She had some savings, and had made some inspections of properties. They were all in keeping with her requirements. However, in the auction market she never had a chance. Each of the houses she wanted to buy were bought by investors - people with second, third and fourth properties (or more). She is now renting a house that she had a chance of buying.
There are two sides to a housing affordability crisis.
1. The crisis occurs when people are forced out of the ability to purchase a home by rapidly rising prices. Rapid housing increases are fuelled by two things - supply restrcitions and demand increases. Two often housing industry and governemnt commentators blame supply - we just have to make more land available they say. Rarely do they look at what has happened with demand for housing.
Demand increases have been fuelled by many things. Not the least is the rapid growth of the investor with surplus cash, finding housing an attractive investment. Tax laws (negative gearing) provide an incentive to such investors. Thus they bid for properties and force prices beyond which a large number of low income families can afford. The rich (even in these cases the modestly rich) get richer and the poor remain dependant on private rental or social housing.
2. The crisis occurs when private rentals are increased because of demand - rather than a competitive market driving rentals down, the market demand is driving rents up. So my freind is faced with rents that abosrb more than 50% of her income.
Jen wants to get out of the situation she is in. She wants to become a home owner. However, failures to address the housing affordability crisis are making things extremely difficult for her.
How can we overcome this major social and economic crisis in Australia? What can be done to ensure housing becomes affordable for all members of our society?