Jan 22, 2013

A tiny shack for $300 a week? The real crisis in housing

There's a crisis in the housing market -- and it's not about mortgage rates and property prices. Renters are increasingly squeezed into tiny places with unaffordable rates, writes market analyst Catherine Cashmore.

Australia has a growing generation of residents who not only can’t afford to buy, they can’t afford to rent either.

They’re the oft-forgotten “rental sector” lost amid an abundance of market commentary devoted to the “good news” on falling interest rates for mortgage holders, endless “forecasts” of growth for potential property investors and renovation mania that is set to hit the country again as we enter the year’s annual ratings war full of obsessive real estate reality shows.

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32 thoughts on “A tiny shack for $300 a week? The real crisis in housing

  1. Altakoi

    I’m a bit suspicious of these ‘poor renters’ analysis because it tends to come around to arguments to subsidise the building of new accomodation in the seemingly never realised hope that this will be affordable. At the moment there are over 2000 vacant rental properties in Canberra, which is as high as I have seen it in 15 years are a renter. While many of these are pricey, the flip side of high rentals is that owner-investors usually can’t afford to have a property vacant either. Since the consequence of unaffordable rent is vacany, rents tend to come down. Some restraint on negative gearing claims forcing people to sell unrealistic assets might help. More sprawl will just fuel mortgage stress, which is hardly better than rental stress.

  2. Rhys Bevilaqua

    Since rent effectively winds up as a percentage yield on the property price due to the fact that it generally ends up priced at the pain point just below a mortgage then the only way to adress this issue is to torpedo prices.

    Removing negative gearing and taxing the family home rather than charging stamp duty would go a long way to relieving the upward pressure on home prices, but both of these items would be political suicide.

  3. Apollo

    I hope they will build more affordable housings in the next budget.

    For now they should raise the the rate for the unemployed from $246/W to $260 per week starting from March. And remove the fuel rebates for the large miners, they can leave it for the smaller miners so they can compete. The welfare should be directed at the poor not the rich miners.

  4. joanjett

    I agree with Apollo regarding raising the dole, it is scandalously low. Reduce the bloody baby bonus and also the private health rebate to pay for it if necessary. I am very lucky as my mother helped me purchase a home, figuring that she would prefer to see her inheritance put to good measure before she shuffles off this mortal coil. If I fall under the spell of a Svengali type and sell the place, she gets her money back. She did the same for my sister. Funny thing is, I actually can’t live there as it is too small for my family, only really will be once most of the kids leave home. I have to rent it out, and rent a larger place for my family. I have a lovely landlady who doesn’t automatically lift the rental rate every year, like the last one did. This is the only toe in the home owing door for me and I wish I could have achieved it by myself, but that would have been impossible without a 150 year life span. Can we give incentives for newly arrived migrants to move to other places rather than the capital cities? In Italy you can just up and live in say, Rome. You need a job, accommodation before you can apply for your residency with the city. Can people access their super instead of seeing it eroded by financial planners and the next stock market crash? It does seem that we need to think outside the box on this one….

  5. joanjett

    um re: Rome, you can’t just up and live there, sorry

  6. Dogs breakfast

    A supremely complex problem, and a million touts and lobbyists muddying the water making good policy so hard to assess.

    Personally, tax incentives for investors would be the first thing I would look at, getting rid of negative gearing. Although there are those who suggest that ‘investors’ improve the lot of renters, there is ample argument to the contrary, and certainly house prices are falsely bid up by the tax incentives available for those wealthy enough to ‘invest’.

    And no, rent increases are not a corollary of the abolition of negative gearing, nor do investors add to the housing stock in any significant way, with over 95% of housing investment going to established homes.

    Hugely expensive real estate is a great burden on this society, not a great boon. It is at the heart of a substantial inter-generational inequality and will either burst precipitously, which will endanger many, or remain as a boulder tied around our necks.

    Hugely complex. I look forward to simplistic solutions, which will be elegant, clever, and wrong. šŸ™‚

  7. mattsui

    My wife is Japanese and the major factor guiding our decision to live there, rather than home in Perth was rental cost. Apartment living is very much the status-quo for much of the Japanese population (though a large home is an aspiration still) and where we live there is an abundance of vacancy. In Perth, I would be paying at least half my weekly income for a modest house with a garden which I would be obliged to maintain (one of the greatest thorns in the tennants side is looking after someone elses garden). In Japan – albeit outside the major population centres of Honshyu – we are able to rent a very comfortable apartment for the equivalent of $600 per month.
    I know, apples v. oranges in many respects but the Australian obsession with large houses is causing irreparable damage to the property market (and the landscape). Inner suburb apartment developments are only for the rich. Meanwhile, the working poor who serve your coffee are forced to commute from the fringes.

  8. fractious

    @ DogsBreakfast
    “I look forward to simplistic solutions, which will be elegant, clever, and wrong.”

    They won’t be wrong so much as completely unpalatable to the real estate bandwagon. The simpler and more effective the solution, the less likely those with their snouts in the property trough will let it happen.

    @ Altakoi – the high vacant rentals in CBR may be partly because uni hasn’t started yet (or has it?) and partly because of the significant number of jobs gone or going as the Fed budget cuts kick in.

  9. michael r james


    ” In Italy you can’t just up and live in say, Rome. You need a job, accommodation before you can apply for your residency with the city.”

    Do you mean for Italian citizens, or is this just the usual visa requirements for foreigners?

    France has gone to great lengths to encourage people to live elsewhere other than Paris–as I have written in Crikey, including the TGV network, and overall devolution (of government jobs, universities etc). This was because growth rates in the 50s and 60s truly spooked them that Paris would become 20 million–it didn’t though it still became the biggest conurbation in Europe (about 12m).

    But there is no actual legal prescription against choosing to live in Paris. As usual the rental and housing market etc. act to encourage many to choose elsewhere.

  10. fractious

    Thanks for the article Catherine. Renters are almost third-class citizens these days and – except for when 7, 9 or 10 decide to run (yet another) ‘bad tenants boo!’ “exclusive” – barely rate a mention in the MSM.

    I’ve wanted to be able to buy a place to live for some years but it’s always been just out of reach, and I simply will not go into debt way way over my head just to do so. Unfortunately that puts me at the mercy of ever-increasing rent, greedy landowners and estate agents who can quite readily find you when you’re a day late with a bill but who miraculously vanish when urgent repairs are needed.

    Yes I know not all landowners and estate agents are like that, but neither are all tenants lazy, filthy, defaulting wreckers. Most of us pay our bills and look after the place where we live – all we ask for in return is to be heard when we have a legitimate problem, and be treated by landowners and real estate agents with the same degree of respect that is afforded to property owners.

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