Economics and modelling

Housing makes a significant contribution to the Australian economy. It both influences and is impacted by other economic activities such as consumer spending, taxation reform and income assistance. Over the past decade, AHURI researchers have built up a sizeable body of evidence around:

  • the relative costs and benefits of housing assistance for disadvantaged people
  • the effects of policy change and taxation reform on housing affordability
  • the effects of increased housing wealth on consumer spending
  • a range of other economic aspects of housing in Australia and abroad.

AHURI researchers have also conducted a substantial body of work around demographic trends in housing, as well as modelling the effects of these on future housing supply and demand.

  • What are the costs and benefits of providing housing assistance to disadvantaged Australians?

    • Homelessness programs can provide positive housing outcomes for clients at relatively low cost. They can also lead to reduced spending in other areas such as health, justice and police interventions — Project 80306.
    • Financial housing assistance is found to reduce labour market participation. This is largely due to the extended reach of effective marginal tax rates as tenants' salaries increase. AHURI research to date provides no evidence that housing allowances stimulate an increased supply of affordable rental housing. In fact, the opposite occurs—the supply of affordable housing has decreased in recent years — Project 70073.
    • Unemployment benefit recipients tend to move to areas with better employment opportunities.  Those in high-cost housing areas are most likely to move, as are young singles and those with some other form of non-benefit income — Project 70065.
    • The First Home Owner Grant is found to sharply reduce borrowing constraints but tends to attract private tenants who would have eventually purchased a home without assistance. Researchers also found high effective marginal tax rates on investors in the private rental market, which acts as a disincentive to invest — Project 80088.

  • How does taxation reform affect the provision of special types of affordable housing for those on low incomes?

    • Changes in taxation laws can mean additional tax burdens for providers of alternative accommodation such as boarding houses and caravan parks. Given that most of their tenants are on very low incomes, landlords in these contexts will struggle to pass on increased costs to tenants. They may therefore be forced to exit such businesses. This can lead to a reduction of supply, particularly in areas with sluggish growth in property values — Project 80023.

  • Is it possible to make social housing pay for itself, or does it require ongoing external financial support?

    • Changes to the Commonwealth–State Housing Agreement in 1996 meant that six out of nine state/territory housing authorities had to operate in deficit. Research demonstrated that Commonwealth funding of the gap between public tenant rental charges and the market value of those units would allow all but one of these authorities to run in surplus — Project 30154.
    • AHURI researchers have found that most community housing associations in 2005-06 were small-scale organisations, with high levels of volunteer labour, ageing stock and insufficient resources for professional stock management. Whilst operating costs were generally lower for community housing than for public housing, associations tend to severely understate their real operating costs. Most organisations had a major backlog of maintenance — Project 30355.

  • How have patterns of home ownership changed over the past few decades?

    • Significant demographic, social and economic change in Australia over the past few decades has resulted in polarisation of household income, as well as increasing social and spatial inequalities. Changes in housing and home ownership outcomes are indicators of these broader transformations — Project 20257.
    • Income declines have become more polarised in metropolitan areas. There have been some declines in home ownership, although these were moderated by increases in outright ownership. The income gap between renters and home owners has widened considerably from 1986 to 1996 in all areas — Project 20257.
    • One group of researchers re-examined Australian housing careers and found that it is no longer possible to talk in terms of the traditional linear career path, due to major demographic and socio-economic change. Changes of particular impact are young people leaving home later, reduced ability to maintain home ownership due to increased divorce rates, and the increase of house prices to the point where few renters have sufficient savings for a deposit — Project 80151.

  • How does housing wealth interact with consumer spending?

    • Higher housing wealth tends to increase consumer spending in Australia. For every $100 000 of additional housing wealth, there is a net increase in spending of $1000 to $1500. This is consistent with international studies. This finding demonstrates how housing price booms can add to economic growth through increased spending — Project 60360.

  • What does demographic modelling tell us about housing patterns in Australia?

    • A number of demographic and economic models have now been developed by AHURI researchers. These allow policymakers to plan for future housing needs. They include:
      • The Australian Housing Market Microsimulation Model (AHURI 3M): this allows policy analysts to assess the effects of economic and policy changes on housing outcomes. One group of researchers modelled the impact of the National Rental Affordability Scheme (NRAS) and Commonwealth Rent Assistance on the supply of affordable housing. They found that neither program would make a significant difference in isolation. However, as a combined assistance program, they would lift 45 per cent of stressed low-income earners out of unaffordable housing — Project 30399.
      • HOUSEMOD: a regional microsimulation model which allows policy analysts to project future demand for particular types of housing assistance. Researchers found that demand for housing assistance will vary widely from state to state, with demand being higher in the major cities in some stats, and higher in regional centres in others — Project 30205 & Project 30387.

Forthcoming research

Useful websites

Icon: Printer  Printer friendly version        Icon: Envelopes  Email to a friend        Icon: Small book  Send feedback        Icon: RSS  Research theme RSS