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Rental supply and housing affordability

Rental supply and housing affordability

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Rental supply and housing affordability

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  1. Rental supply and housing affordability Judy Yates University of Sydney Residential Tenancy Conference Renting in Tasmania 2010-2020: The Next Decade 2 Nov 2010

  2. Overview • Structural trends and outcomes for housing market as a whole at an Australia wide level • Tasmania specifics • Issues arising • Policy responses

  3. Australia wide context Pressure on house prices and housing affordability is structural not cyclical Contributed to decline in home ownership amongst younger FHBs In past decade, supply has not responded adequately to meet increased demand Combined effect puts pressure on rental market with resultant high incidence of rental stress

  4. House prices have risen faster than incomes… Source: Treasury, ABS

  5. Falling interest rates Inflationary era; two income households CGT: investor concession CGT: O-O exemption Financial deregulation, High and steady growth Deposit gap has increased dramatically…. Source: ABS, RBA

  6. Pressures exacerbated by inadequate supply… 1990 2000 2010 Source: NHSC Figure 4.1, based on unpublished ANZ data

  7. Has resulted in supply shortage… Source: National Housing Supply Council 2010, Table 4.4

  8. Few houses built or sold in 2007-08 were affordable for households with incomes at 3rd decile….. Source: NAHA Indicators, 2010, Table 2.1

  9. HO rates for young have declined…. Source: Yates et al (2008)

  10. HO declines most severe in capitals…. Source: from ABS census data collected by Yates et al (2008)

  11. Impact on private rental market…. Increased demand from households who previously moved into HO as FHBs Increased pressure from higher capacity to pay by potential FHBs

  12. Rental affordability has declined…. AFTS Report v2, p 414

  13. Proportion of private renter households in rental stress, 2007-08 Source: ABS SIH 2007-08

  14. Private renter stress projected to worsen Source: Yates et al (2008)

  15. Private rental trends 1996, 2001, 2006 Census data, CPI adjusted

  16. Rental housing: absolute shortage, Australia Source: NHSC, 2008, Figure 5.9

  17. Shortage rental dwellings Note: a + indicates a surplus; a - indicates a shortage Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

  18. Shortage rental dwellings Note: a + indicates a surplus; a - indicates a shortage Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

  19. Shortage rental dwellings Note: a + indicates a surplus; a - indicates a shortage Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

  20. Shortage rental dwellings Note: a + indicates a surplus; a - indicates a shortage Source: National Housing Supply Council, 2008 Report, Table 5.1; 2010 Report, Table 5.3, 5.4

  21. 90,000 dwellings Social housing supply has also declined… Social rental dwellings needed to keep pace with household growth Social rental stock Source: National Housing Supply Council (2010, Figure 4.7)

  22. What are the key housing challenges for Australia? Declining access to home ownership for middle income households Inadequate supply of affordable and accessible housing for lower income and vulnerable households

  23. How does Tasmania compare??? • Dwelling price pressures not so severe • Demographic pressures not so severe • Economic pressures not so severe • Housing shortages not so severe • Supply has been more responsive • But pressures might mount…..

  24. Economic pressures less severe…. Source: ABS Australian National Accounts 5220.001

  25. Demographic pressures lower in Tasmania…. Source: ABS Australian Demographic Statistics 3101.02

  26. Less driven by overseas migration…. Source: ABS Australian Demographic Statistics 3101.01

  27. Dwelling completions appear more responsive…. Source: ABS Building Activity 8752.0; Australian Demographic Statistics 3101.02

  28. Dwelling completions appear more responsive…. Source: ABS Building Activity 8752.0; Australian Demographic Statistics 3101.01

  29. Supply shortages less severe in Tasmania…. Source: National Housing Supply Council, 2010 Report, Table A4.2

  30. Real house prices have increased faster in Hobart than other capitals since mid 2000s….. Source: ABS House price indexes 6416.0, CPI adjusted

  31. But are considerably lower than elsewhere…. Source: HIA Housing Reports and ABS House price indexes 6416.0, CPI adjusted

  32. But still few houses in 2007-08 were affordable for households with incomes at 3rd decile….. Source: NAHA Indicators, 2010, Table 2.1

  33. HO declines less in Tasmania…. Source: from ABS census data collected by Yates et al (2008)

  34. But change from 1981 to 2001 still significant …. Source: from ABS census data collected by Yates et al (2008)

  35. Rental housing: absolute shortage,Tas 2006 Source: customised tables from ABS generated for in Wulff et al (2009) AHURI positioning paper

  36. 2006 shortage rental dwellings in Tasmania…. Note: a + indicates a surplus; a - indicates a shortage Source: derived from ABS census data used in Wulff et al (2009)

  37. Had worsened by 2007-08…. Note: a + indicates a surplus; a - indicates a shortage Source: ABS SIH 2007-08

  38. Proportion of private renter households in rental stress, 2007-08 Source: ABS SIH 2007-08

  39. What happens when there is a shortfall?... • Prices and rents increase • Housing stress increases • Household formation slows • Household size increases • Households find insecure or temporary accommodation • Households become homeless…

  40. Outcomes in next decade?

  41. Shortfall in dwelling construction projected to increase in Tasmania (as elsewhere) ….. NHSC 2010, Table A4.2

  42. Shortfall in dwelling construction projected to increase in Tasmania (as elsewhere) ….. NHSC 2010, Table A4.2

  43. Policy issues arising???? • How can low income households better access affordable rental housing? • What is the appropriate balance between supply side and demand side policies? • What is the appropriate balance between support for home ownership vis a vis rental housing (private or social)?

  44. Overview of current housing policies… Demand side policies for owners dominate Poorly targeted Perverse effects Demand side policies for private renters alleviate but do not eliminate affordability problems Generally well targeted Unlikely to have perverse effects Tax system for investors Negative gearing adds to demand; offset by land taxes Not designed to provide incentives to supply low rent dwellings NRAS Increasing supply of affordable rental dwellings

  45. Any questions?