Current housing affordability measures don’t reflect real housing costs

Most of the trade-offs lower-income households make to afford their housing costs are not accounted for in the housing affordability measurements used by policy makers, according to new AHURI research. As a result housing can appear affordable even though it is of such poor quality it affects people’s health or it is located far from employment opportunities so that householders have very high commuting costs. 

The research, ‘Measuring housing affordability: Scoping the real cost of housing’, undertaken for AHURI by researchers from Curtin University examines the relationship between housing, energy and transport, with a focus on housing quality (performance and comfort) and location in relation to housing affordability. It aims to establish a framework for a more comprehensive and nuanced measurement of housing affordability in consideration of the multiple and complex trade-offs households make in their housing decisions.

Affordable housing is more than housing costs vs household income 

‘Generally governments understand housing affordability as a relationship between housing costs and household income. What is not considered is whether that housing is of an adequate standard that doesn’t negatively affect household health, wellbeing and other essential costs,’ says lead researcher Dr Adam Crowe of Curtin University. ‘Accurately measuring housing affordability is particularly challenging given the many interrelated financial variables, such as rents or mortgages, heating and cooling costs, and transport costs, which all affect households in many different ways.’

‘What we do know is that lower-income households routinely make trade-offs to meet their housing costs. This can include things like rationing of food, heating and cooling, and can have implications for health and wellbeing and for maintaining social connections. We see that as the proportion of income dedicated to housing increases, the challenges associated with poor affordability typically become more pronounced and severe.’

Energy hardship is not currently measured in housing costs

Energy hardship—when a household experiences payment difficulty or difficulty maintaining indoor thermal comfort—has increased as energy prices have risen well beyond inflation, wages and income support payments. Until the time when households can’t actually pay their energy bills, experiences of energy hardship can often ‘fly under the radar’ of policy makers and are not picked up in housing affordability measurements and policy measures.

Australia needs better housing affordability measurement methods and policy responses

The research investigated 11 Australian case studies to better understand the quality, energy, and locational and transportation dimensions of housing affordability. The findings point to the need for a universally applied definition of safe and healthy housing standards across Australia and the need for policy makers to measure households’ required energy expenditure, rather than their actual energy expenditure.

The case studies also reveal the relationship between housing affordability and locational advantage or disadvantage, that is being close to, or far from, employment, education, health facilities and cultural amenities. Areas with lower housing costs but with higher transportation costs were more likely to experience social exclusion and spatial disadvantage. This highlights the need to expand interventions to increase social and affordable housing supply in well-located, job-rich areas.

Better integration of government policies can deliver better housing outcomes for low income households

‘Our research stresses that integrating housing, planning, transport and employment policies is critical to reducing the risks of housing stress and locational disadvantage for lower income householders, while offering increased access to key resources and services,’ says Dr Crowe. 

‘The private sector can be encouraged to develop affordable housing through policies that address planning certainty and costs such as taxes and developer contributions to infrastructure, as well as strategies exploring alternative construction technologies proven to cut costs and build times.’ 

There is also a need for programs to encourage private landlords to provide well-located, good quality affordable rental housing. Furthermore, for low-to-moderate-income householders living in locationaly disadvantaged areas, expanding transport assistance schemes can help to reduce transport costs and improve residents’ connections to job-rich areas.