Housing affordability takes a global hit from COVID-19

Posted by Hal Pawson on March 25th, 2022 · Uncategorized

By Hal Pawson; CFRC

With newly released evidence of slowing house price inflation in early 2022, it may be that Australia’s latest property boom is subsiding. Especially with higher interest rates expected within months that seems highly likely. But any plateau or even gentle decline will be starting from property values dramatically higher than before the pandemic.

By late 2021 the typical Australian house was 30% more expensive than in early 2019. That will have markedly raised the barrier faced by aspiring first home buyers, especially in terms of mortgage down-payments. After all, wages increased by only 6% over this period.

Far from triggering a property market crash, as widely expected, the 2020 COVID-19 recession turns out to have activated an extraordinary residential price surge. And, as highlighted in our new international comparative research, Australia is far from alone in this. The equivalent COVID-19 house price increases in New Zealand the United States have been even greater.

Sources: OECD and UK Office for National Statistics

In fact, during the pandemic to date, nominal house prices rose in all eight case study countries covered in our research – Australia, Canada, Germany, Ireland, New Zealand, Spain, the UK and the US. In sharp contrast to the 2008 Global Financial Crisis, none of these countries saw any significant nominal price decline episodes in 2020 or 2021.

What ‘saved’ the market?

Avoiding a pandemic-triggered housing market slump can be largely credited to the remarkable government measures to maintain incomes and shield economies, widely implemented during the first two years of COVID-19 both in Australia and internationally.

Extraordinary actions that directly safeguarded housing systems and tried to protect at-risk populations also helped to confound initial fears of crashing property values and surging homelessness. Activities of this kind – as seen in most of the countries covered in our research – included mortgage payment deferrals, rental eviction bans and emergency housing for homeless people.

What powered prices?

While measures like this seem to have effectively placed a floor under the market in 2020, other factors combined to touch off the price booms widely seen in 2021. Crucial to this have been the rock-bottom interest rates and quantitative easing measures that have formed key elements of central bank responses to the crisis around the world. While deemed essential to protect economic activity, these have also pumped vast liquidity into housing demand.

In Australia and the UK an additional factor was direct government-funded housing market stimulus – generous home purchase grants and stamp duty concessions initiated in 2020. With hindsight these look to have been a misdirected form of official pandemic response, since they only compounded market overheating.

In some countries pent-up household savings will also have contributed to price booms. Many better-off households, working from home through the pandemic, with unusually low expenditure and with housing wealth to cash-in, have been motivated to spend big on improving their housing position. At the same time, many others have been priced out as a result.

Spiking rental markets

For lower income households pandemic-triggered housing cost pressures have been more importantly intensified through the equally marked spike in rent inflation seen in Australia and in many other countries in 2021. Whereas some of the nations in our research had restricted rent increases in the early ‘income shock’ phase of the pandemic, almost all had lifted these limits when rents began rising, on shifts in demand.

By year end 2021, with the possible exception of Canada, national annual rent increases were topping 8% in all of the Anglosphere countries – a rate of increase generally far exceeding past decade norms. Rent inflation in Australia, the UK and the US was, by this time, running at rates unseen since the 2008 Global Financial Crisis.

Sources: Multiple – see Figure 6.1 in published report for details.

Equally, there have been marked within-country variations in pandemic rental market impacts. In Australia, for example, Sydney and Melbourne rental demand in many inner areas was hard-hit by international border closure through most of 2020 and 2021, through the resulting absence of overseas students and foreign tourists. By year end 2021, capital city rents across Australia had barely recovered to their pre-pandemic values. Rental prices in non-metropolitan Australia, by contrast, were on average 18% higher than at the start of the crisis.

Higher rates of property price and rent inflation affecting non-metropolitan locations and houses (as opposed to apartments) have also been seen in other countries during the pandemic. These trends probably also reflect the residential ‘race for space’, a trend powered by the rapid rise of working from home. This has placed an increased premium on property size and also weakened spatial ties to city centre office locations, enabling many (generally more privileged) employees to contemplate out of town moves. As a result, pandemic-triggered damage to housing affordability is likely to be all the greater in the non-metropolitan settings attractive from this perspective.

Different stories in Germany and Spain

Importantly, much of the preceding account most directly describes pandemic-era experience in Australia and other Anglophone countries. The market impact has played out quite differently in some other high income nations. In Germany’s house sales market, for example, relatively robust pre-2020 price growth continued on a similar trajectory during the crisis to date. Spanish price growth, meanwhile, remained subdued.

Germany’s rental market likewise appears to have been relatively unaffected by the pandemic, with rent inflation generally continuing to moderate during 2020 and 2021. In Spain, meanwhile, rents continued to decline in nominal terms.

The German experience here probably reflects the country’s unusually stable and resilient economic and housing systems, a tradition of conservative mortgage lending, and a stronger social safety net. For Spain a key factor affecting the nation’s economy and housing market during COVID-19 will have been the heavy damage sustained by the dominant tourism industry.

Housing affordability impacts

Although in key respects contrary to predictions, the direct and indirect housing system impacts of COVID-19 have been profound. Not all of the novel housing market trends seen in 2020 and 2021 are likely to be sustained. But, as things stand two years after the pandemic was declared, consequently rising house prices and rents will have further intensified housing affordability stress in many nations. Specifically, in five of the six countries for which we have obtained national statistics, nominal rent increases exceeded wage increases in the two year period to late 2021.

Coinciding in many countries with energy price and tax rises, these developments will only compound the cost of living crises evoking calls for action to cushion these impacts – including through enhanced rental housing regulation and investment, and stepped-up social security payment rates.

Housing in the coming federal election

Posted by Hal Pawson on March 10th, 2022 · Government, Housing

By Prof Hal Pawson, City Futures Research Centre. Originally published at John Menadue’s Pearls and Irritations.

Very largely thanks to economic stimulus pumped into the economy to ward off COVID recession, Australia’s housing is now 30% more expensive than in 2019.

Add to that, the recent spike in rent inflation greater than at any time since 2008, and it’s obvious that the pandemic has exacerbated this country’s longstanding housing affordability challenge.

The scene is therefore surely set for housing affordability to feature as a significant flashpoint in the coming federal election – just as in three of the last five national contests.

The electoral saliency of housing

New polling evidence, released this week by the Everybody’s Home Campaign also emphasizes the saliency of housing as an issue that could sway significant numbers of votes in key seats. Focusing on the marginal electorates of Bass (Tas), Flinders (SA), Gilmore (NSW), and Longman (Qld), this showed that, for example, around three quarters of all voters in these seats consider it hard or very hard for low to middle income earners to afford to buy or rent in their area.

More pointedly, 61-72% believe that Federal Government action on housing affordability has been insufficient, while 68-76% think that social housing provision in their locality is inadequate.

Equally notable from this evidence is that concerns on housing affordability and inadequate social housing resonate strongly with the minor party, independent and undecided voters whose preferences may well swing election outcomes in the most contested seats.

All of this suggests that the major parties would be well-advised to give some prominence to housing policy proposals in their election platforms this year and we can assume that, from their own private polling, Coalition and ALP strategists will be already highly attuned to this.

Equally, with federal Labour having retreated from significant (albeit in fact modest) housing tax reforms pledged in 2016 and 2019, the terms of this election’s housing debate will be different from the last two contests.

ALP commitments

Even at this late stage in the runup to the coming poll, both parties are still keeping much of their powder dry in this area – as in many others. But, from a very early salvo in the current campaign, we do know that the ALP has pledged a national social housing investment program underpinned by an ‘off balance sheet’ $10 billion future fund, expected to generate some 6,000 social and affordable homes annually for five years.

Since this is 6,000 more than has been nationally funded in any year for a decade, it would come as a welcome development in a country where, pro rata to population, social housing supply has been halved since the 1990s. Equally, though, with more than 160,000 families and single people registered on social housing waiting lists, and with the national deficit of private rental homes affordable to low income tenants up from 187,000 to 212,000 in the most recent five-year period, it is also decidedly modest. A social housing investment ask better aligned with this scale of need has been recently pitched by a broad alliance of construction, welfare services and affordable housing industry peaks.

Alongside the ALP’s social housing future fund, although as yet less prominent in Party messaging, is shadow Housing Minister Jason Clare’s pledge to develop a national housing and homelessness plan in the first term of a Labor government. Quite what this could involve, though, remains to be defined.

Grattan’s housing policy menu

The ALP has indicated plans to unveil further components of its election housing offer over coming weeks and we can assume that the Coalition will be planning likewise. Seeking to influence these agendas, the recently published Grattan Institute Orange Book lays out a wide array of closely argued and well-defined housing proposals intended as appealing to party strategists.

Many of these are familiar Grattan favourites, typically informed by the wholly justified concern that Australia’s housing system is a major driver of mounting inequality, but also by a worldview that abhors tax, social security and regulatory settings considered as distorting consumption and investment choices or otherwise unduly constraining market forces.

Consistent with both of these themes, for example, is backing for a range of property tax and welfare reforms to dampen excessive demand for housing. Among these is Grattan’s previously argued advocacy for the complete removal of negative gearing tax concessions for private landlords, and the straightforward halving of the Capital Gains Tax discount on the sale of rental property. The unqualified terms of this pitch only go to highlight the modesty of the related ALP 2016 and 2019 election proposals that were limited according to whether homes were newly built or purchased.

On the housing supply side, once again warming to a familiar Grattan theme, the Orange Book more controversially argues that Australia experiences a ‘historical shortage of housing’ and that this is ‘largely a failure of housing policy, rather than housing markets’. Arguably, though, we should be focusing on housing distribution as much as (or more than) quantity.

And although many would support the Grattan case for enabling higher density development in favoured urban locations, the report’s implication that feasible land-use planning de-regulation would enable Australia’s private development industry to build the country out of housing unaffordability (even if only very gradually) is, at the very least, contentious.

Echoing the ALP’s existing proposal (see above), a notable new component in Grattan’s broad ranging housing reform agenda is a social housing development program underpinnned by an off-balance sheet $20 billion future fund. Counter-intuitively, despite involving a larger initial stake, the scheme would fund a significantly smaller annual program of new social and affordable housing investment than the ALP model. This reflects the fact that – unlike Labor’s scheme which would effectively exhaust its capacity after five years – the Grattan variant would be set up to provide an income stream to fund an annual flow of capital grant funding ongoing in perpetuity.

Proposed in the highly persuasive and economically justified Grattan style, it might be imagined that this could even appeal to a Coalition Government perhaps sensing the electoral imperative to be seen to act in this space. But, since Housing Minister Sukkar has continued to assert that social housing is purely a state/territory responsibility, and of little concern to the Federal Government, that seems doubtful.

At the same time, stand by for the pre-election Coalition message that by extending the Treasury guarantee underpinning private debt shouldered by community housing organisations, the Federal Government is ‘supporting social housing investment’. Yes, such support is meaningful, but it does not – repeat not – equate to the government subsidy that is essential in enabling social and affordable housing development.

A new Grattan housing proposal perhaps more likely to win favour across the political divide is the Orange Book’s advocacy for a national shared equity scheme to assist aspiring first home buyers. This seeks to emulate similar models operated on a very large scale in some comparator countries (such as the UK’s ‘Help to Buy’ program), and also on a small scale in some Australian states (e.g. the Victorian Government’s recently announced scheme).

The Grattan model here would involve an aspiring homebuyer being assisted to purchase their home on a co-payment basis where government takes an equity stake in the property (proposed as up to 30% of the total value), thereby reducing the required size of buyer downpayment and mortgage. Over the medium to long-term the government stake is repaid along with a pro rata share of any capital gain, with the proceeds being potentially recycled into a new shared equity property acquisition on a revolving fund basis.

Adopting a shared equity scheme for first homebuyers would go with the grain of recent Federal Government housing policy, in complementing the First Home Loan Deposit Guarantee scheme – enabling access to low deposit mortgages – as announced during the 2019 election campaign.

From a socio-economic equity perspective, though, it has to be kept in mind that despite being seen as a meritorious group, an aspiring first home buyer with the potential to support even a 70% mortgage is, by definition, a relatively advantaged household. Arguably therefore it would be hard to justify a national shared equity scheme outlay (e.g. $12 billion over eight years, as proposed by Grattan) unless as part of a package also including significant (and arguably much larger) outlays on social housing (or other similarly targeted initiatives) to benefit low income Australians in genuine need.

A strategic perspective

Recommendable though they may be, specific programs such as expanded social housing output or (especially) shared equity home ownership don’t really go to the heart of the issue. Considering the complexity of our housing system, Australia’s affordability challenge can be fundamentally addressed only through an evidence-based and broadly-scoped national housing strategy with a long-term remit. A hard ask, yes, but the cost of continuing to muddle through will be high – both for many individual housing consumers, and for the economy as a whole.

States’ social housing boom no substitute for Federal funding commitment

Posted by Hal Pawson on December 6th, 2021 · Uncategorized

By Hal Pawson. This story first appeared in the Fifth Estate – read the original story here.

As tens of thousands prepare to take a financial hit with the end of COVID-related disaster payments, our new research shows that renters on low and modest incomes are already in the grip of a housing pincer, especially in regional Australia. Inflamed by surging private rents, this also reflects an intensifying shortage of social housing after a decade of Commonwealth neglect since 2011.

Despite widely-supported calls for the inclusion of social housing investment in Australia’s national economic revival program, this was firmly rejected by the Commonwealth Government in 2020. But, as revealed in our new research, four state Governments (Victoria, Queensland, Tasmania and Western Australia) have announced significant self-funded public housing construction programs as a component of post-pandemic stimulus, pledging nearly $10 billion to this cause.

As our work reveals, these programs will add over 23,000 badly needed new homes to the stock of public and community housing over the next four years. But although this is more than welcome, there are 155,000 households registered on social housing waiting lists across the country and more than 400,000 households in need of low-cost rental tenancies.

Recently pledged new social housing construction will be also extremely patchy across the country. For example, also factoring in the numbers of existing public housing properties that governments plan to demolish or sell over just the next three years, we estimate the prospective net gain in social housing dwellings over this period will be only 400 in New South Wales, compared with 8,300 in Victoria and 4,400 in Queensland.

And even the states that have recently stepped up their commitment, the scale of action remains fairly modest. In Victoria, the increase in social housing commencements in prospect through the state’s Big Housing Build program, equates to only around 5% of all housebuilding – compared to public housing construction in the period 1945-70 when the comparable Australia-wide figure was 16%.

Moreover, housing stress due to both affordability and availability pressures is rising significantly thanks to a tightening rental squeeze. While rents declined sharply in some inner cities early in the pandemic, from mid-2020 they increased. By August 2021 rents were accelerating at more than 8%, Australia-wide – the fastest pace since 2008, and far ahead of wage growth of under 2%.

And rapid rent acceleration isn’t by any means confined to the cities. Regional rent rises are now outpacing metropolitan areas, particularly in NSW, Victoria and Queensland, up by more than 12% in the year to August 2021, and raising the prospect of growing homelessness in these overheated markets.

For regional Victoria, the proportion of tenancies affordable to low-income tenants declined from 41% to 33% during 2020-21. This percentage looks set to deteriorate further with the end of affordable rents for homes developed under the Commonwealth Government’s “National Rental Affordability Scheme” (NRAS).

NRAS funded 38,000 newly built rental homes for key workers and other low wage earners to be let at 75-80% of market rates. Government figures show that over the next three years the subsidies and rent restrictions attached to some 22,000 of these affordable homes will expire.

State governments are also shouldering the responsibility for keeping rough sleepers, moved into emergency accommodation (EA) at the beginning of the COVID-19 pandemic, off the streets. Once again without Commonwealth financial support, key states have committed hundreds of millions of dollars in new spending on move-on housing programs to provide longer term solutions for the most disadvantaged homeless populations.

As documented by our research, in New South Wales and Victoria alone, these initiatives will have facilitated safe, secure and supported accommodation pathways for around 3,500 former rough sleepers with complex needs by 2022. This will, at least partially, relieve the growing backlog of chronic rough sleepers built up in Sydney, Melbourne and other cities over previous years.

Arguably, though, these COVID-response homelessness actions should have been more extensive, considering the scale of the problem. For example, the limited scale of the New South Wales EA move-on housing scheme meant that places had to be strictly rationed, so only around a third of former rough sleepers in EA were assessed for possible inclusion. In a state where social housing is dwindling towards only 4% of all housing, this reflects the extreme shortage of suitable move-on accommodation, as well as emergency program funding limits. It is also yet another example of the very real need for stepped-up Commonwealth support.

Crucially, even in the states that have initiated post-pandemic social housing programs, build rates at expected levels are only a little above those needed simply to keep pace with growing population (and housing need). They will make only a very modest short-term contribution to redressing the huge shortfall in rental housing affordable to low income Australians that has accumulated since the effective end of a routine national social housing construction program in 1996.

Through its tax, borrowing and currency-issuing powers, it is the Commonwealth Government, not the states, that holds the real financial firepower in Australia. Shifting prime responsibility for funding social housing growth to the states is untenable. A sustained national construction revival is only possible if the Federal Government resumes its historic role as the main source of investment for additional affordable homes.

Hal Pawson is Professor of Housing Research and Policy at UNSW City Futures Research Centre

Why Housing Emergency Must Shift Australian Politics

Posted by Hal Pawson on November 24th, 2021 · Uncategorized

By Professor Duncan Maclennan, Honorary Professor, City Futures Research Centre. First published on Pearls and Irritations. Read the original article here

In June 2021 OECD Secretary General Mathias Cormann, former Australian Finance Minister, launched a landmark report outlining how unbalanced housing markets now impede inclusive growth. As our own research reveals, Australia is emerging as a key case in point.

Back in 2018 we highlighted how Australian governments’ goals for housing have been unfulfilled for decades. Homelessness has risen, rental housing shortages and payment burdens have increased. The poorest Australians have suffered most from housing system change.

Housing policy has been at best fragmented and inadequate, and at worst inactive or counterproductive. Our new evidence demonstrates the economic damage that arises from the consequent housing outcomes by raising inequalities of wealth and income, hampering productivity and exacerbating potential economic and financial instabilities.

In twenty-first century Australia the social housing sector has been starved of resources that provide for the homeless and most disadvantaged, despite the obvious merits of investment cases made. However, it is not the argument for social justice that will change the political economy of Australian housing policy. A change is going to come because for three decades Australian politics has failed to understand and govern market systems in which nineteen out of twenty Australians find, own and rent their homes.

Housing system failures are accumulating

Housing system failures are accumulating and manifesting in numerous ways. Most obviously, and despite substantially rising incomes, since 1990 home ownership rates have almost halved for under 35s, are now falling in every age cohort under 65 and the overall rate fallen by 5 percentage points to 67%. These shifts are not sudden and they are not small.

Beneath these headline ownership rates lie a growing number of individual household battles to progress. First-owners have faced steadily rising entry level prices and, though assuaged by a decade of lower mortgage rates, mortgage burdens have increased. Challenges in securing a deposit to purchase have become critical for many, especially those with no access to wider family wealth. Social mobility is halted for many in the housing market.

For existing homeowners the growing ‘flexibility’ of employment and household relationships has generated a stock of more precarious owners. There is, for many, no longer one-way lifetime progress through home-ownership. Mid-life tenure churn has grown and, increasingly, post-retirement homeowners are still paying off mortgages. Older owners, increasingly remain in peak family homes matching their bequest aims rather than consumption needs. This is not the Australian way. For governments expressly committed to expanding home-ownership it is both a massive policy failure and is a stark departure from the implicit promise of Australia’s ’social contract’.

For almost a century, until the 1980s, home-ownership provided stability and prosperity for Australians who worked hard and saved for retirement by paying mortgages. Home ownership was a ‘savings’ system with minimal ‘speculative’ gains as house prices rose slowly and steadily. And, until this millennium, rising home ownership rates reduced wealth inequality in Australia.

Policy settings increasingly problematic

That home ownership system no longer exists. The residential sector has been reshaped by changing macro-policy settings into an active ‘speculation’ system, with easy wealth accumulation motives increasingly dominating consumption requirements in housing choices. The same processes have heightened the gap between renting and owning. Since 2011 monetary policy has been most generous to the already wealthy, so that housing wealth inequality is rising, even within the class of home-owners. Most of the evidence submitted to the Falinski Inquiry recognises, explicitly and implicitly, sector difficulties that chime with our own experts survey in finding Australian housing market policy no longer fit for purpose.

With progressively fewer gainers and more losers from housing outcomes it could have been expected that re-balancing policy changes would have emerged. Instead, short-term ‘patch and repair’ policies make matters worse. Typically, first home buyer grants accelerate demand and boost house prices; then tighter monetary policies and/or stricter prudential lending tests choke off the price boom. But this leaves the next wave of younger Australians to, eventually, climb over the ownership entry price hurdles with the next policy surge in first-owner grants.

Meanwhile in the rental sector, prudential regulatory measures contrarily discourage the investor demand stimulated by landlord tax breaks. National, state and local policy changes often rapidly increase housing demand. Housing construction is invariably a complex and slow process. Yet local supply chains and their required connections to infrastructure and service provision are rarely aligned to wider demand side shifts. Policy lacks foresight and coordination at all levels of government.

Housing policy governance must be modernised

Australian governments need a new understanding of what ‘housing policy’ means. The Commonwealth Government and its agencies control most of the housing demand-side levers through fiscal, monetary and macro-prudential policies. These levers drive most ‘housing affordability’ policy in the form of first home buyer assistance, but much more importantly in the extra attraction of home ownership as a highly tax-advantaged asset. All other policies are relegated to a small corner of social welfare policy with a diminished housing ‘ministerial’ portfolio and budget, and to state/territory governments.

This disconnect is toxic. It leads the Treasurer, the Minister for Infrastructure, the Governor of the Reserve Bank and the Chairman of APRA to deny any responsibility for broader housing market outcomes, including house price inflation, and to downplay the resulting economic under-performance. This is an ineffectual approach to governing one of the major systems in the economy. Disparate Commonwealth activity is then magnified by the often yawning gaps between Commonwealth, State and Municipal actions that pull the housing system in different, costly and price-raising directions. There are too many ‘missing links’ in forming and delivering good housing outcomes for Australians.

Reforming Australian housing policy governance is an overriding priority. However, the dawning recognition in federal Australia that all is not well in the housing market has not energised a search for solutions but, instead a ‘hunt’ for ‘who is to blame’. Ministers and the RBA point the finger at state and local council planning departments. Mr Falinski appears to have prejudged evidence for his Parliamentary Inquiry by taking the same line.

The evidence in our review stresses that excess demand for housing drives prices. But excess demand arises from demand enhancing influences, including policies, as well as supply inhibitions. These can arise from planning allocations and processes, but the complex supply chain may be made inelastic by infrastructure, skilled labour, materials and other shortages. Government quickly needs to join up the dots – not just in policy governance but in its conceptual thinking about how housing markets work.

The politics of housing policy must change

Burgeoning housing needs, tons of expert reports and multiple opinion surveys may fail to influence policy change where governments have a short term, narrow or ideologically-driven policy vision and narrative. Other countries consider the balance of policy action with a broader, longer lens. These differences were well illustrated and reported at the COP26 conference in Glasgow. The Australian Government’s stance has, admittedly, shifted here – but only from denial to blame-shifting. A depressingly similar scenario to what we see in the housing space.

Why should the politics of housing policy change now? The proportion of home-owner voters in some form of difficulty has now risen so significantly, arguably to close to half of owners, that it will impact voter choices and electoral participation. Our concluding evidence report highlights how the current geography of mortgage and renter stress, particularly in the outer metropolitan suburbs, represents a large terrain for significant, imminent changes in political choices.

The Prime Minister and Leader of the Opposition may already be competing for votes around the stability of mortgage payments and robustness of housing prices. There is an emerging electoral ‘housing emergency’ for Australian governments and it will not be addressed by short term tinkering nor inter-governmental blame games. As Treasurer, Mr Morrison famously said that when it comes to addressing national housing challenges ‘business as usual across federal, state and local governments is not an option’. Too right mate, and that applies to the business of politics and government, and opposition, too.

This article synthesises a program of work at UNSW led by Duncan Maclennan and also involving Bill Randolph, Hal Pawson and Chris Leishman from the University of South Australia.

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Introductory Remarks to Parliamentary Inquiry hearing: Housing affordability and Supply in Australia, 17 November 2021

Posted by Hal Pawson on November 17th, 2021 · Affordability, Government, Housing, Housing supply

By Prof Bill Randolph and Prof Hal Pawson.

We’d like to thank the Committee for inviting us to address you this morning. The issue of housing supply and its relationship to housing affordability is central to the pursuit of essential reforms to national housing policy.

The City Futures Research Centre is one of the leading University research teams focusing on urban issues in Australia. Research on land use planning, housing markets and housing policy are among our key concerns, together with gathering data on the housing system. Much of our work is funded by the Australian Research Council and AHURI. More recently, we are working with NHFIC, the AIHW, the ABS and others on developing the Australian Housing Data Analytics Platform, funded by our partners and the Federal government.

As we argued in our submission, adequate housing supply is a key component of a healthy housing market. But we would argue that the causes of housing unaffordability are complex and call for consideration of both housing supply and housing demand and the underlying drivers on both sides of the market.

Boosting home ownership is a key objective that we fully support. But, as argued in our recent report, ‘Housing – Taming the Elephant in the Economy’, Australia’s home ownership system has transformed from its historic function of spreading wealth into a modern day system that concentrates wealth and drives growing inequality. Over-preferencing existing home owners and investors has increasingly excluded young adults from access.

Housing supply is important for housing affordability. But it’s not simply a matter of growing the total stock of housing. We need to encourage the right kind of supply in the right places. Australia needs a more diverse housing market that provides more consumer choice, is more inclusive, less volatile and more resilient to economic shocks. That means promoting a wider range of housing to fill the missing middle – not just high-rise apartments for investors in town centres and project homes on the fringe. For example, we need well located medium density homes and build-to-rent housing at both market and affordable prices.

The Australian Government could play an important role in supporting such diversity. Not only by reforming key tax settings, but also through influencing urban development. Although it can’t do that directly, there is plenty of scope to do so indirectly. With the National Housing and Homelessness Agreement between the Commonwealth and States up for re-setting next year, it could use the terms of that Agreement for that purpose.

Beyond that, the Turnbull Government’s City Deals policy could be revived and ramped-up as a vehicle for joint working with key local governments to promote affordable and market housing supply. The Australian Government could look to the example of the Canadian Liberal Party which has just pledged a $4 billion fund to reward local governments that streamline and expand housing development.

But although maximising housing supply is important, it does not follow that you can simply build your way out of housing unaffordability, any more than you can build your way out of urban congestion. As our submission concluded, and as correctly stated by Luci Ellis in an earlier session, there is little international evidence of significantly reduced house prices resulting from expanded supply, rather than from a severe economic shocks.

As we have seen recently in some of our inner-city apartment markets, if supply does exceed demand, prices plateau or begin to fall, and the development industry responds in a perfectly rational way by rationing output. Development approvals for apartments fell away in 2019 and 2020, not because the planning system refused them, but because developers were not submitting applications when faced with declining investor demand.

Local resistance to housing development can be an important constraint, especially where medium or higher density is proposed. The only constructive way to address this issue is by ensuring that there is sufficient local infrastructure investment to support the greater local population. That comes back to the issue of development contributions – it will be possible to reduce reliance on these only if urban financing is reformed so that infrastructure costs are borne by the whole community over time, as they used to be. Again, the Australian Government could play a key role in supporting this.

We presented a range of new data in our submission with a view to providing some additional information on the outcomes of the development process of relevance to the Inquiry’s objectives. We would be happy to take questions on these data and any other related matters.

Challenging the notion of housing reform as ‘political suicide’: household financial stress analysis of Australian political constituencies

Posted by William Thackway on October 28th, 2021 · Affordability, Government, Housing

By William Thackway & Bill Randolph, City Futures Research Centre. Originally published by the Fifth Estate.

In Australia, where more than 60% of voters own their own home, the notion of housing reform policies that may negatively impact housing prices is widely viewed as “political suicide” (Raabus, 2021). The term has been used to describe moves to reinstate both inheritance taxes (largely relating to property inheritance) and attempts to abolish negative gearing (Buckley, 2021; Caldwell, 2019). When Bill Shorten vowed to grandfather negative gearing and halve capital gains tax concessions in the 2019 election, the policy was weaponised by the coalition government who claimed that it would stop “everyday families” from aspiring to buy investment properties (Remeikis, 2021). That housing reform was one of the first policies on the chopping block when Anthony Albanese assumed the Labor party leadership in 2019 spoke to its perceived unpopularity.

However, the COVID-19 pandemic has exacerbated several existing housing financial stresses and reinvigorated calls for a national housing plan (Pawson, et al, 2020). On the one hand, the impacts of COVID-19 have been disproportionately felt by low-income renters, who tend to be low-skilled workers at the greatest risk of losing employment (Maclennan et al., 2021). In the first six months of 2021 alone, the proportion of renters spending more than two-fifths of their income jumped by 8 percentage points to 68% (Sweeney, 2021). On the other, low interest rates have stimulated surging house prices and driven first-home buyers to take on increasingly aggressive mortgages (Switzer, 2021).

As Figure 1 shows, financial stress rates had risen steeply after 2017 for both renters and mortgagors but plateaued until the outbreak of the pandemic in early 2020 when it ticked up sharply, initially for mortgagors and then for renters, to the point where both tenure groups were facing comparable rates. By August 2021 the stress rates had reached 42% for mortgagors and 38% for renters (Thackway & Randolph, 2021). For mortgagors this figure is almost four times the level recorded in 2000 and has risen in the context of a parallel increase in overall household debt to income ratios over this time, with only the aftermath of the GFC providing a temporary respite. But for renters, the current stress figure is six times the level recorded in 2000.

Figure 1: Mortgagor and renter financial stress rates Q1 2000 – Q2 2021

While financial stress among renters and mortgagors was significant prior to the onset of COVID-19, the pandemic has only served to underline the existential threat they pose to Australia’s housing market. The question beckons: is there a tipping point of housing-related financial stress for which housing reform becomes a politically viable strategy? If the number of people in housing-related financial stress starts to outnumber those with personal interest in the continued prosperity of the housing market, will the political outlook of housing reform change?

To investigate the state of housing-related financial stress in Australia, we analysed household financial survey data compiled monthly by Martin North from DFA. The data is sourced from a monthly survey of 4,300 households which creates a rolling pool of 52,000 households annually. The survey asks specific questions on household income and expenditure to calculate a ‘mini’ cashflow analysis for each respondent: money in vs. money out. Households with a ‘residual’ income after normal expenditure (including housing costs) of less than +5% or have negative residual incomes are classified as stressed. Additional questions record the household’s housing tenure position.

For this analysis, the data, originally aggregated at the Postcode level, were reaggregated into Commonwealth Electoral Divisions (CED) to investigate the political landscape of housing-related household financial stress (Guiliano, 2021). Using the DFA survey data, two measures of housing-related financial stress were calculated at the CED level:

The first calculates the proportion of mortgagor households in financial stress. The second calculates the proportion of all households that are renters or mortgagors in financial stress.

A measure of political alignment for each CED was then constructed using the Australian Electoral Commission divisional classifications data from the 2019 federal election (AEC, 2019). The data contains information on the geographical demographic, successful party, and seat status (‘safe’, ‘fairly safe’, ‘marginal’) for each CED from the 2019 election. Based on the successful party and seat status, a party alignment measure was constructed for each CED, whereby marginal seats were classified as ‘marginal [successful party]’, safe or fairly safe seats were classified as ‘safe [successful party]’. Using the financial stress and party alignment data, we examined where the most financially burdened constituencies in Australia are, how this related to housing tenure (buying or renting), and what the political base of these constituencies comprise.

Most Financially Stressed Constituencies

Table 1 examines the top 20 ‘mortgagor-stressed’ constituencies in Australia sorted by party alignment. Financial stress rates among this cohort range from 59% (McEwen) to 76% (Macarthur), representing well over a majority of mortgagors. While NSW and Victoria make up a majority (16) of the top 20, all States other than South Australia feature in the list. Furthermore, there is a mix of both metropolitan (11) and regional (9) areas. Finally, all the major parties feature strongly in the list. Marginal seats make up over a third (7) of the constituencies with highest proportions of financially stressed mortgagors (four Labor, two Liberal and one Independent), while overall, Labor (12) has a larger share than the Coalition (7). Ultimately, the top 20 mortgagor-stressed constituencies demonstrate both the breadth and depth of financially stressed mortgagors across Australia.

Table 1: Top 20 CEDs by financially stressed mortgagors

Table 2 lists the 12 CED’s where a majority of all households are in overall financial stress – that is, the number of both mortgagors and renters in difficulty as a proportion of all households. NSW (7) and Victoria (4) again feature strongly, and there is a strong trend towards outer metropolitan regions being most affected. While the share of Labor seats (6 Safe, 3 Marginal) outnumbers Coalition seats (2 Safe, 1 Marginal), both sides of politics have significantly burdened constituencies. For these seats, irrespective of the proportion of mortgagors or renters, a majority of voters face financial stress. Intuitively, this would mean that the voter bases of these constituencies could have a potential financial self-interest in government policy that helps them to reduce the pressure of ever escalating housing costs, especially over the longer term – either through reduced rental prices, an increase in government-supported housing, or moderating house price inflation. Conceivably, these constituencies may represent the emerging locations where a tipping point of housing-related financial stress has been reached, after which the political viability of housing reform shifts from the inconceivable to the possible.

Table 2: CEDs with a majority of households in financial stress

Analysis of Household Financial Stress by Political Alignment

The following maps visualise the Federal political alignment of a city’s constituencies (2019 election), overlayed with a dot representing the level of household financial stress in each CED. Larger dots represent higher levels of household stress (i.e. financially stressed mortgagors and renters as a % of all households), and vice versa for smaller dots. Seats with a majority of households in financial stress are labelled. Sydney, Melbourne, and Perth were selected as the three major cities with the highest level of financial housing stress.

In Sydney, no constituencies recorded household financial stress levels of below 30% (Figure 2). There is seemingly a clear relationship between household financial stress and party alignment. The coalition seats in the city’s north and south have comparatively low levels of stress. By contrast, Labor seats close to the centre, west and south-west all have households stress levels above 40%. However, the six marginal seats, hailing from both sides of politics, also all have household stress levels above 40%. Other than the seat of Sydney in the city centre, the other five constituencies with a majority of households in financial stress are located to the city’s far west and south-west. This reflects a general trend of higher housing stress levels towards the city’s outer areas.

Figure 2: Sydney Household Financial Stress by Political Alignment

Melbourne shares several distinct housing financial stress trends with Sydney (Figure 3). Constituencies with the highest levels of household stress are again largely located towards the periphery of the city, including the three seats where a majority of households are in financial stress. As in Sydney, Coalition seats tend to have lower levels of household stress than Labor seats, with the exceptions of La Trobe and Aston in east Melbourne. Finally, housing stress across the city is generally high, with only three constituencies recording household stress levels of below 30%.

Figure 3: Melbourne Household Financial Stress by Political Alignment

In Perth, six of the 13 constituencies recorded politically marginal results in the 2019 election. All of these recorded moderately high levels of housing financial stress (Figure 4). Household stress levels are nevertheless generally lower for Coalition seats, with the exception of the Pearce constituency towards the northern fringe of Perth (> 50%). On the other hand, both the safe Labor seats south of the city centre have household stress levels of over 40%. In keeping with both Melbourne and Sydney, household financial stress is more common in outer-metropolitan areas.

Figure 4: Perth Household Financial Stress by Political Alignment

Key Takeaways

Analysing the financial survey data provided by DFA illuminates both the breadth and depth of housing-related financial stress in Australia. In twelve constituencies a clear majority of households are burdened by significant financial stress, while many key suburban seats display substantial levels of stress. Although Labor seats tend to be more affected than Coalition seats, financial stress is clearly a bi-partisan issue, including in several key marginals. And it’s also evident that no part of Australia is immune from these pressures, with constituencies from the inner city to rural and regional districts suffering high levels of financial stress.

With a general election looming and housing stresses exacerbated for both the rental and mortgage sector by the COVID-19 pandemic, it’s reasonable to ask: where is the discussion of housing reform? However, at the Federal level both major parties are clearly avoiding housing as an issue for fear of upsetting either John Howard’s suburban ‘Battler’ vote or the army of ‘Boomer’ property owning retirees. In this context it’s difficult to see how a coherent housing reform policy package can be put back onto the agenda.

It is to be hoped that the current Parliamentary Inquiry into housing supply and affordability (Parliament of Australia, 2021) will lift its gaze away from the easy target of blaming the planning system for all our housing woes and conclude that integrated reform is needed across all three levels of government if we are to turn away from the speculatively fuelled ‘boom and bust’ property cycles and the mounting unaffordability crisis that current policy settings have created.

The data presented here should give the members of the Parliamentary Inquiry pause for thought. In the past, politicians have faced the seemingly impossible task of convincing the majority home-owning voter base to support policies that may restrain house price growth or threaten the almost unending ‘money pot’ of housing investment, let alone make better provision for renters. But the extent of household financial stress among both home buyers and renters – many of whom the Boomers’ children who aspire to buy but see the prospect receding by the day – related to ever escalating housing costs, may prompt a greater degree of voter support for systematic policy reform. The question is, have we reached the tipping point, and if not now, when?

Shade: bringing planners and health professionals together to provide critical infrastructure

Posted by Chris Martin on October 5th, 2021 · Cities, Wellbeing

By Prof Susan Thompson, Liz King, Jan Fallding and Nicola Groskops. Originally published in New Planner, the journal of the Planning Institute of Australia (NSW Division).

Increasingly communities are rightly demanding a built environment that makes it easy for everyone to be healthy and well as they go about their daily activities. This is related to growing understandings about the critical health supportive role of the places where we live, work, play, and how we travel from one to the other. COVID-19 has sharpened our collective focus on this issue, particularly the importance of local neighbourhood public spaces, walking paths, cycleways and green parkland for good health and wellbeing.

Being outdoors for recreational pursuits is germane to the Australian culture. Physical activity is very much a part of this, as is the infrastructure to facilitate different recreational pursuits. The research evidence is strong on the benefits of regular physical activity for good health, particularly in reducing the major risk factors for chronic physical and mental conditions. Being active with others importantly connects us socially, which underpins wellbeing, and has been a challenge during the Pandemic.

And while the outdoors is an ideal place for all Australians to engage in vital health supportive behaviours, it is somewhat ironic that it can be deadly! Time spent in the open air potentially puts us at risk of skin cancer, the most common cancer across the nation.

Skin Cancer

We know that overexposure to the sun’s ultra-violet radiation (UVR), which is a carcinogen, causes skin cancers, including both melanoma and non-melanoma skin cancer types. Australians have the highest rate of melanoma in the world – the most dangerous form of skin cancer. Two in every three Australians are expected to develop skin cancer before the age of 70. Between 2013 and 2017, 80 of 128 local government areas (LGAs) in NSW had an age-standardised incidence rate of melanoma above the NSW average (52.3 per 100,000 population). The Cancer Institute NSW has a comprehensive statistics web portal where you can find melanoma age-standardised incidence rates by LGA. Across NSW, UVR levels of three and above are high enough to damage unprotected skin for at least 10 months of the year. Unlike temperature, UVR cannot be seen or felt and alarmingly, damage to unprotected skin can still occur on cool and/or overcast days.

Shade

The good news is that skin cancer is highly preventable. Personal protective behaviours are essential. These include wearing appropriate clothing, wide brimmed hats and sunglasses, and applying sunscreen. In addition, it’s important to seek out shade when UVR levels are high. There is evidence that well-designed and correctly positioned shade, from both natural vegetation and built structures, can reduce exposure to UVR by up to 75 per cent. The provision of good quality shade is particularly important in spaces such as playgrounds, frequented by children and adolescents. It is in these younger years that vulnerability to UVR is especially high and over exposure to the sun at this time of life can result in deadly skin cancers in later years. When shade is provided, people use facilities that are protected. The provision of shade will ensure that communities can safely use outdoor facilities in summer to keep fit and avoid skin cancer. So, the outdoor gym, no matter how well equipped, will be abandoned in hot weather if it is not adequately shaded (see below). It’s also important to note equity issues here as Cancer Council NSW research has found that those living in lower socio-economic areas have less access to playgrounds with adequate shade.

Getting critical infrastructure in place – the co-benefits of shade

The health evidence is unequivocal – shade is critical infrastructure in providing a health supportive environment for the entire community across the life course. But it’s not just about UV protection – there are many other benefits of shade which strengthen the case for its installation. Environmental benefits include lowering urban heat, as well as reducing air pollution, water evaporation, soil erosion and storm water run-off. The maintenance of animal habitat and biodiversity is also enhanced and energy usage and associated costs can go down. Social and economic benefits encompass reducing neighbourhood crime as more people are out and about connecting with each other and activating the streets, commercial areas and public places. All-in-all this results in places that people want to frequent, which is a positive outcome for the entire community. For a very accessible summary of the multiple benefits of shade which can be used with lay and professional audiences alike, download ‘Shade; A planning and design priority that helps prevent skin cancer’.

Getting critical infrastructure in place – guidelines to assist

Planners have multiple roles to play in ensuring that the communities’ demands and needs for a healthy built environment are met. Shade is a critical piece of infrastructure supporting healthy behaviours in the hot and sunny Australian outdoors. Planners can find a wealth of resources to actively advocate for the provision of shade for public and private developments.

At the local level, the Cancer Council NSW’s ‘Guidelines to Shade’ is a practical and informative tool for planners and developers. Local Strategic Planning Statements (LSPSs) can also incorporate specific text strategising appropriate shade installation. Example LSPS provisions are available and a recent report for the Cancer Institute NSW documents how councils actually incorporated the consideration of shade in their LSPSs. This research can assist councils when revising their Statements and preparing future planning policy.

At the state level we are seeing a strong focus on integrated design policy for the built environment under the Government Architect’s ‘Better Placed’ integrated design framework. This includes the use of green infrastructure as a core element, as well as putting health and wellbeing at the centre of good placemaking. While the importance of tree canopy for shade to protect against overexposure to sunlight is acknowledged in ‘Greener Places’, shading for UV protection requires greater emphasis and direct referencing to better promote its uptake. The soon to be produced Design and Place SEPP by DPIE provides a great opportunity to do this. All five principles of the intended SEPP would benefit from the inclusion of either natural or built shade as key strategies to achieve their objectives.

Conclusion

Quality natural and built shade for UV protection is an essential part of health supportive infrastructure for all members of the community. Shade has multiple benefits in public and private settings and needs to be embedded in planning policies and strategies at all levels of governance.

About the authors

We are all members of the NSW Shade Working Group (SWG) collaborating together across health and the built environment. The SWG is auspiced by the NSW Skin Cancer Prevention Strategy led by Cancer Institute NSW.

Susan Thompson, FPIA and Sydney Luker Medalist, is Professor of Planning and Head, City Wellbeing Program, City Futures Research Centre at UNSW. She is a passionate advocate for healthy built environments and the role that planners can play in supporting health and wellbeing for all.

Liz King is Manager, Skin Cancer Prevention Unit, Cancer Council NSW. She has a strong background in public health planning and service delivery, and is a passionate advocate for the integration of UV protection policies into planning design and practice.

Jan Fallding RPIA (Fellow) is a self-employed strategic and social impact planner based in the Hunter Valley.

Nicola Groskops is a public health professional working to prevent cancer with the Cancer Institute NSW (NSW Health) and is passionate about improving the conditions in which people live, work and play.

Exiting prison with complex support needs: the role of housing assistance

Posted by Chris Martin on August 23rd, 2021 · Housing

By Dr Chris Martin, Dr Rebecca Reeve, Assoc Prof Ruth McCausland and Prof Eileen Baldry (UNSW), Pat Burton and Prof Rob White (UTas), and Prof Stuart Thomas (RMIT).

One of the classic metaphors for exiting prison is ‘going home’. However, more than half of people exiting Australian prisons either expect to be homeless or don’t know where they will be staying when they are released.

The connection between imprisonment and homelessness presents special risks for people with complex support needs: that is, those leaving prison who have a mental health condition and/or a cognitive disability. People with complex support needs are often excluded from community-based support and services because they are deemed ‘too difficult’, and so end up entangled in the criminal justice system.

Post-release housing assistance is a potentially powerful lever in arresting the imprisonment–homelessness cycle, and breaking down the disabling web of punishment and containment in which people with complex support needs are often caught.

In research published today by AHURI, we investigated the post-release pathways of people with complex support needs, and the difference made by housing assistance – in particular, public housing. We found:

Imprisonment in Australia is growing and ex-prisoner housing need is growing; but at the same time, housing assistance capacity is declining.
Without real options and resources, prisoner pre-release planning for accommodation is often last-minute. Insecure temporary accommodation is stressful, and diverts ex-prisoners and agencies from addressing other needs, undermining desistance from offending.
Ex-prisoners with complex support needs who receive public housing have better criminal justice outcomes than comparable ex-prisoners who receive private rental assistance only: police incidents (down 8.9% per year), time in custody (down 11.2% per year), justice system costs per person (down $4,996 initially, then a further $2,040 per year), and other measures.
In dollar terms, housing an ex-prisoner in a public housing tenancy generates, after five years, a net benefit of between $5,200 and $35,000, relative to the cost of providing them with assistance in private rental and/or through homelessness services.

Our findings about the effect of public housing on criminal justice outcomes and costs are the result of our analysis of linked administrative data from NSW government agencies about ex-prisoners with complex support needs. We compared two groups of ex-prisoners: one group of 623 ex-prisoners who received a public housing tenancy some time after their release from prison, and another group of 612 ex-prisoners who were eligible for public housing but received private rental assistance only. The charts below show average predicted police incidents per year for each group. For the ‘private rental assistance only’ group (figure 1), police incidents rose gradually over the period for which we have data. For the public housing group (figure 2), average predicted police incidents also rose until they received public housing (year 0 in the chart). Then police incidents turned down remarkably, and kept going down. Public housing flattens the curve.

The evidence strongly supports the need for much greater provision of social housing to people exiting prison, particularly for those with complex support needs.

Read the full report, the executive summary, and a policy evidence brief here, and the ABC’s report of the research here. This research is part of AHURI’s Inquiry into enhancing the coordination of housing supports for individuals leaving institutional settings.

Does the 5km radius make sense? Analysing the NSW government COVID-19 response

Posted by Chris Martin on August 18th, 2021 · Data, Government, Pandemic, Sydney, Transport

By Nemanja Nikolic, Research Assistant and MPhil Candidate, City Futures Research Centre.

In an attempt to control the spread of the virus, state governments have gradually introduced various spatial measures and limitations in local hot-spot areas across the country. The goal of such restrictions is targeted at reducing people’s mobility and avoiding potential spill-overs to neighbouring areas. So far, these have included ‘stay at home orders’ for certain postcodes, suburbs or LGAs, combined with restrictions on travel of more than 10km – now 5km – beyond a person’s home LGA. But how effective have these measures been? Do they make sense from a scientific and governance perspective?

The use of spatial analysis/planning in epidemiology and medical geography has been well documented throughout history. Techniques such as cluster analysis or spatial autocorrelation are regularly employed to examine the spread of viruses (for instance cholera in the 19^th century, by John Snow). One of the first pioneers of Town Planning, Sir Patrick Geddes, used medical analogies in establishing relationships between humans and their environment. Spatial analysis is not only used to understand spatial phenomena, but also to construct optimal planning solutions. For instance, how to place medical centres or fire stations in a way to achieve maximum population coverage, while minimising travel time?

In this context, the article focuses on the following questions:

Do administrative boundaries reflect the way people actually live?
Do the 5/10km limits present optimal travel distances as a COVID-19 prevention measure?

All travel distances have been computed using road network calculations, but are expressed in ‘as the crow flies’ straight lines distances – to make comparison with government guidelines easier.

Along imaginary lines

The initial response of state governments to the local spread of COVID-19 was to introduce hard borders and limit people’s mobility within specific jurisdictions. Even though these areas represent legal entities and make things easier from a governance perspective, in too many instances, they do not correspond to the way people live and work, nor do they reflect settlements and communities.

Figure 1: Strathfield Town Centre and train station – Split between three LGAs

This issue doesn’t stop with state boundaries (which are often, just arbitrary straight lines) but goes all the way down to city blocks, where streets separate suburbs in most impractical ways.

Figure 2: Suburb boundary between Mosman and Cremorne, along Spofforth Street

The example in Figure 2, shows how residents on the left-hand side of the street – officially part of the suburb of Mosman, in a hypothetical scenario of ‘hard borders’ wouldn’t be able to access the local supermarket, post office or medical centre just across the road – officially part of the suburb of Cremorne. The next closest substitute facilities are approximately 1.3km away. Over a period of six weeks, this represents a total of 110km of additional travel (if residents were to commute daily). Similar scenarios, although at a much larger magnitude, are seen at the QLD-NSW-VIC borders where workers require exemptions to access their usual place of work.

Functional Regions – a long term solution

So how can these issues be resolved? From a long-term perspective, the concept of Functional Regions (used by the OECD and EU amongst others – see OECD, 2013) provides a viable and practical solution. In essence, Functional Regions are self-contained areas that reflect the actual connections, interactions and flows that exist in space, based on specific human activities such as labour (Travel-to-work Area; see Mitchell and Stimson, 2010 for example in Australian context) or population movements (Daily Urban Systems). In most cases, there is a node/centre to which people gravitate toward and that provides certain services. This can be an employment centre or health and education cluster for instance (Brown and Holmes, 1971; Klapka et al., 2013). In the example above, the fact that residents’ shop and complete other daily activities in the local shopping centre (node) across the street, would be recognised and reflected in the boundaries.

Do LGAs in NSW reflect functional ties and movement? Well, only to a degree. As part of the colonial legacy – reflected in arbitrary straight-line boundaries, but also political factors – unwillingness of decision makers to follow through on change (when faced with potential voters’ backlash), LGAs remain limited in many ways. The most recent attempt at ‘optimisation’ was seen in 2015-16, when the NSW governments tried to reduce the number of LGAs from 152 to 112 via amalgamation. The process faced considerable controversy and local resistance (see ABC, 2015; 2016a; 2016b).

In a hypothetical scenario, the degree of optimal resident allocation (based on functional ties) was tested using a network analysis and compared to the actual allocation (established by the existing LGA boundaries). This was achieved, by calculating the shortest travel-time between each SA1 (smallest statistical unit) and its nearest major shopping centre, under free-flow traffic conditions. The number of potential destinations/shopping centres, was limited to 33 – matching the current number of LGAs in Metropolitan Sydney.

Figure 3: Optimal SA1 allocation, based on nearest major shopping centre

As seen on the map (in red), there is a significant number of areas that have sub-optimal allocation – i.e. the closest major shopping centre is outside of their designated LGA. This is especially pronounced along the edges of LGAs (see Cumberland and Canterbury-Bankstown, but also Inner-City areas such as Inner West and Canada Bay). In total, approximately 1,187,000 residents (or 25% of Metropolitan Sydney’s population) would need to travel more than usual, if LGA hard borders were implemented, to reach their largest shopping centre. An interesting example is also seen in Bayside, which is effectively ‘split in two’ by the Sydney Airport – acting as a barrier between the former Rockdale (West) and Botany Bay (East) LGAs. This is not to say that amalgamations are necessarily bad, but rather that border corrections need to be an outcome of careful analysis and support internal cohesion/accessibility.

10km and 5km zones – a short term solution?

To temporarily overcome the shortcomings imposed by existing administrative boundaries, state governments have introduced additional travel guidelines. These include buffer zones along state borders or more flexible arrangements currently seen in NSW, which allow local residents to travel up to 5km (previously 10km) outside of their LGA for a reasonable excuse (including shopping). Although these measures make life easier, at the same time they provide a ‘bridge’ for the virus to effectively spread across the metropolitan area, if the conditions are right.

Figure 4: 10km buffer zones across Metropolitan Sydney

As seen in Figure 4, it would only take four people to spread COVID-19 from Camden to Northern Beaches (or the other way around). The darker shaded blue areas, between the buffers, represent overlap locations where transmission could potentially occur. Although this represents a highly unlikely scenario, the possibility of transmission increases substantially at micro-local scales and along borders, where the level of interaction is higher. In this context, each additional kilometre added, can dramatically change the chances for such an occurrence.

To better understand if the 5/10km radius is optimal in providing the necessary means for people to satisfy their basic needs, while minimising the chance of spread, an additional local network analysis was completed. Similarly, to the previous example, this was achieved by calculating the shortest travel-distance between each SA1 (smallest statistical unit) and its nearest local supermarket (compared to major shopping centre in previous example). The number of potential destinations/supermarkets (limited to Coles or Woolworths, because of data availability) was 263, with no limitations to number of destinations per LGA. The modelling was also used to locate residents that were likely to step-over LGA boundaries to reach their nearest supermarket (within the 5km radius) and hence identify potential areas of concern.

Figure 5: SA1 allocation to closest supermarket – Canterbury-Bankstown LGA

As seen in the example of Canterbury-Bankstown above and Figure 6, the Median Travel Distance (under the assumption that each resident used their closest supermarket and optimal travel route) was 1.2km, with 95% of residents reaching their destination within 3km. This represents a noticeably smaller distance to the current 5km limit enforced in hot-spot locations. Areas in the far South-East and East section of the LGA, along the border with Bayside, Georges River and Inner West represent potential areas of spread, as a significant proportion of Canterbury-Bankstown residents have their closest supermarket outside of the LGA boundary.

Figure 6 also points to two other important findings. Firstly, that most modelled trips (to the nearest supermarket) are well under the current 5km restrictions, providing room for further adjustments if the epidemiological situation were to worsen. Secondly, depending on the LGA location and urban form, the modelled travel distance varied substantially, requiring different approaches depending on the context – i.e. densely populated (Inner-City) LGAs have much smaller distances compared to outer metropolitan LGAs. Allowing for additional leeway in these dense areas, could lead to easier spread.

Figure 6: Summary statistics of modelled travel distances to nearest supermarket by LGA

Note: The cells in orange have larger modelled travel distances to current restrictions

Conclusions

Functional Regions and an informed approach to travel restrictions, provide a platform to achieve better community outcomes while minimising the chances of COVID-19 spill-overs. This requires a combination of long and short-term planning, that accounts for the whole spectrum of interactions and flows between people and the environment (including local idiosyncrasies) and is ideally reflected in LGA/administrative boundaries. Further research is also needed into the hierarchy of human needs – i.e. establishing an objective ranking to which activities take priority, and the travel distances needed to achieve them. This would allow for a set of measures, that could be applied depending on the spatial context and virus circulation – i.e. 2.5km for essential activities (high virus circulation), 5km for discretionary shopping (medium virus circulation) in inner-urban LGAs etc. Governments could also ‘designate’ each household a unique local supermarket (informed by network modelling) and notify them by mail, effectively reducing the number of potential exposure sites and making contact tracing easier. Lastly a better understanding of which category of places lead to the virus spread – the findings of Praharaj and Han (2020), suggest this is grocery and retail – could further complement the findings and inform the adequate response.

Note: The NSW Health Department and the Office of Brad Hazzard were asked to provide insight on the 4^th of August 2020, to the process that informed the current 5km radius measures. No response was received, till date. It is the belief of the author that greater transparency is needed.

References

ABC. (2015). NSW councils to merge under State Government plan for forced amalgamations; 2016 elections delayed. https://www.abc.net.au/news/2015-12-18/sydney-councils-to-be-forced-to-merge-by-nsw-government/7039326

ABC. (2016a). Local council amalgamations: Decision imminent as NSW Cabinet considers issue. https://www.abc.net.au/news/2016-05-12/nsw-local-council-merger-announcement-imminent/7406790

ABC. (2016b). NSW council amalgamations: 19 new local bodies created under forced mergers. https://www.abc.net.au/news/2016-05-12/new-councils-created-under-forced-mergers-across-nsw/7408152

Brown, L. A. and Holmes, J. (1971). The Delimitation of Functional Regions, Nodal Regions, and Hierarchies by Functional Distance Approaches. Ekistics, pp. 387-391.

Klapka, P., Halas, M., Tonev, P. and Bednar, M. (2013). Functional Regions of the Czech Republic: Comparison of Simpler and More Advanced Methods of Regional Taxonomy. Acta Universitatis Palackianae Olomucensis–Geographica, 44 (1), 45-57.

Mitchell, W. F. and Stimson, R. (2010). Creating a new geography of functional economic regions to analyse aspects of labour market performance in Australia. Callagan, Australia: Centre of Full Employment and Equity, University of Newcastle.

OECD. (2013). Definition of Functional Urban Areas (FUA) for the OECD Metropolitan Database. Organization for Economic Cooperation and Development website.

Praharaj, S., & Han, H. (2020). A longitudinal study of the impact of human mobility on the incidence of COVID-19 in India. medRxiv.

Boasting about budget expenditure numbers does not make for a housing policy

Posted by Chris Martin on August 16th, 2021 · Government, Housing

By Vivienne Milligan, Honorary Professor, City Futures Research Centre. Originally published at Pearls and Irritations, John Menadue’s Public Policy Journal.

The Federal Minister for Housing and Homelessness, Michael Sukkar, is fond of quoting large numbers when quizzed on what his government is doing to address Australia’s enduring housing crisis. So, we hear for instance that annual Federal spending on housing and homelessness programs has reached over $8b and that his government is exceeding Labor’s spend on social housing and homelessness support.

Such numbers and claims deserve closer scrutiny. What comprises the $8b and how far does it go in addressing the need? What have been the differences between recent Coalition and Labor Government policies in this area?

The two largest and long-standing components of Federal housing expenditures are:

Rent Assistance paid to private renters receiving social security when their rent exceeds a specified level. This reached $5.5b in 2020-21.
Payments to state/territory governments for social housing and homelessness services under the National Housing and Homelessness Agreement. These currently total $1.6b. per annum.

Last year and this, the HomeBuilder program has been bloating Federal expenditure. Expected to total over $2b in payments, this program is effectively a government gift to middle income home buyers/owners.

Rent Assistance expenditure has been increasing steadily over a long period and more so during the pandemic as 400,000 additional renters received this support. This payment provides much needed immediate relief from rental stress for those eligible. But what of its longer-term costs and benefits?

From the early 1990s successive Australian Governments have placed increasing reliance on Rent Assistance (RA) as the primary form of help for lower income renters to be housed more affordably. Paradoxically, though, rental stress has remained stubbornly high with over 40% of recipients from 2016 to 2019 still paying more than 30% of their income in rent after receiving RA . Subsequent COVID-19-related income support measures and rent moratoriums have temporarily alleviated this situation somewhat.

Rental stress is entrenched largely because, without other actions, RA does not redress the underlying shortage of affordable private rental housing, which was estimated to have reached over 300,000 dwellings in 2016, up from 138,000 in 2006. Instead, it props up rising rents at the same time as becoming an increasing drag on the national budget.

And what of the effectiveness of the other main component of the Government’s housing assistance package – provision of social housing and supporting the homeless? To their credit, post-2013 Coalition Governments have maintained funding for homelessness services at the enhanced levels established under the outgoing Rudd Government. These services provide temporary housing and personal support to the homeless, but they do not address their likely ongoing need for secure affordable housing in either the private or social rental sectors.

Given the demonstrable failure of the private rental market to supply affordable housing, access to social housing is critical to government ambitions to reduce homelessness and housing stress. The Howard Government severely cut payments to the states for social housing and pre-1996 base funding levels have never been restored. And while the Rudd and Gillard Governments significantly increased funding for social and affordable housing, including a big component for remote Indigenous housing, their fixed-term initiatives have either expired or have been dropped by the Coalition since 2013.

A key indicator of the adequacy of the current level of funding for social housing is revealed by measuring its share of the whole market. Tellingly, this share fell from 6.3% to 4.2% of all dwellings between the 1991 and 2016 census periods. So, if the objective is to maintain access to social housing for homeless people and other vulnerable renters (and perhaps also to reduce the cost of RA) plainly we need to be spending more to keep up the supply of social housing.

In this regard the Turnbull Government’s 2018 creation of the National Housing Finance and investment Corporation (NHFIC) has been widely embraced as a worthy supply-side initiative. NHFIC’s role here is to deliver low-cost loans (by using long term bond finance raised under a government mandate) to not-for-profit (NFP) developers of affordable housing. NHFIC’s potential, however, has been severely curtailed from the start by a lack of complementary policies to enable these NFPs to initiate more development, such as by allocating them public land or enabling them (through planning policies and a funding boost) to acquire privately owned sites. The necessity for such support is laid out in black and white in the Federal Government’s own advisory report by Treasury officials.

As acknowledged last month in the report of a Government-initiated Inquiry into Homelessness in Australia, a key missing element that could inform judgements about the adequacy of housing expenditures is an official measure of housing need. Adopting a needs-based approach to funding housing and homelessness, as recommended in the report, would help governments better design and cost the mix of policy actions to be used. And, unlike throwaway references to expenditure levels, it would tell us just how far the Government’s housing endeavours go towards addressing established need.

City Futures Blog

News and research in housing and urban policy, from Australia’s leading urban policy research centre.