Homelessness – Affordable Housing

The key drivers of homelessness are domestic violence, unemployment, addiction, rising house prices, government taxation and broken marriages.  Many of these common drivers are the subject of discussion elsewhere in this YSH website, being common drivers to many other of our social problems.  Homelessness is mostly circumstantial, not necessarily brought about directly by the people and families involved.   People can suddenly find themselves subjected to the previously mentioned driver situations through no fault of their own.   These are personal situations which push them onto the bottom rung of the social ladder.   There is no lower social state for an otherwise healthy person than to find yourself (and/or potentially your family) homeless – exposed to the elements, insecurity, violence, robbery and molestation. 

Being homeless becomes both a physical situation and a state of mind.  Being homeless can arise from a life of poverty or be the result of having made some poor decisions in life which, for one reason or another, have not worked out as anticipated.  Based upon my experiences, very few homeless choose to remain homeless.  Even those very rare examples where a homeless person has chosen to remain so, their decision usually ties back to some life situation which resulted in them eventually becoming homeless.  Being forced to adopt and adapt to homelessness. It becomes a relatively stable and repetitive daily cycle of survival   Some addicts (drug/alcohol) who feel they need every cent to support their addiction habit, will trade-off being homeless for being able to afford and continue their habit.

But in the main, most of the homeless I have dealt with over the years fit a broad spectrum of situations called – living on the street, couch surfing, rough sleeping, being evicted (for non-payment of rent), lacking in the necessary funds to afford  regular accommodation, etc.  There are examples in NSW where an eligible homeless male can be on the waiting list for public housing for over 15 years before a permanent home is made available.   Bare waiting 15 years, the only exit strategy for the homeless is the will and persistence to be housed and to gain access to sufficient funds to be able to afford some form of permanent rental accommodation, albeit welfare funding.  It is far more difficult for a homeless person to find employment than someone already housed, hence the reason why many are in the long term unemployment queues.

The lack of affordable housing to rent is the primary reason for most people being homeless in Australia.   But what does the term “affordable housing” mean.  For economists “affordability” is a measure that combines house prices, mortgage costs and household income.   At the low-end of the affordable market is rental accommodation.   At the upper end is property/home ownership for low income earners.  People at the upper end have the choice of either renting or mortgaging.  Both choices are predicated by some requirement to sustain monthly/weekly payments, which often turn out to be very similar in monetary terms.  It’s all determined by who has the income capacity to save for a deposit – a low income earner.  Given the dramatic falls in mortgage rates, the current (Australian) level of affordability, or lack of it, is no worse than in previous house price surges as is occurring now.  But the rate of homelessness is worsening.

For those who have no/little savings, the only viable option is rental accommodation.   For those with some savings and a desire to purchase their own home, most are forced to seek accommodation in a location within their financial capacity and away from their traditional comfort zones.   For example outback Australia towns, with decreasing populations which lack employment opportunities, are advertising liveable homes for $100.   The two categories of home “affordability” in our major cities can be described thus:-

  • Affordability with a capital “A” – is social or key worker accommodation for those who cannot “A”fford market rents or market prices. This sector is by far the largest seeking Affordable housing, who struggle to have the holding bond moneys and the regular weekly rental payments.
  • “a”ffordable housing with a small “a” is for the low-moderate income earners looking to purchase or rent accommodation in a particular location that is a well-designed small apartment, townhouse or terrace house on a small lot typically provided by some housing developers.  They typically cannot afford either the deposit or the mortgage repayments in a rising price market with excess demand (despite interest rates being at an all-time low).

What is deemed to be Affordable housing in the cities (where the bulk of the homeless reside) are homes at 20% lower than average market prices for our social or key workers seeking rental accommodation at such affordable prices.   The first “no-brainer” is that there needs to be an increased supply of affordable housing as demand far outstrips viable supply.  The resultant trend is away from larger homes and blocks to smaller homes close to amenities (such as shops, parks, transport, schools and grandparents, etc).    Good home design is clearly another determining factor for getting the best “banks for available bucks”, irrespective of a rental or purchase decision.  To make the most of the space (home and land) flexibility of the occupants, innovation to cut costs (like solar panels), an open plan design with on-site parking (not necessarily a garage) is sought.    As mentioned earlier, what’s required is a product design priced well below the going rates in the area, a smaller home supported by viable financial models for rental and purchase (even for investors seeking to rent at affordable prices) such as:-

  1. Lowest cost trailer home with solar electricity and tap water on site – to accommodate a single or couple in one bedroom ($65,000 purchase or under $100 rental/week)
  2. Lowest cost home and land – to accommodate a single or couple in one bedroom ($375,000 purchase or $370 rental/week)
  3. Two bedroom home for a couple and 2 children ($475,000 purchase or $475 rental/week)
  4. Three bedroom home for a couple with 3+ children ($575,000 purchase or $575 rental/week)

To provide this style of affordable housing, a shift away from the traditional developer-pays approach is required.  New home buyers in NSW currently pay 42% ($250,00) of the cost to the government in the form of taxes, levies and charges.  The average time to save their minimum deposit is 5 years on an average $600,000 home.   This continuance is non-viable, if we are to ever solve our housing affordability issue. The new housing sector bears a large, inefficient and inequitable tax burden, which inevitably fall on the home buyers.  Its the second largest contributor after the GST. Reducing this burden in part or totally could be achieved by removing stamp duty, compliance, costs, ad hoc taxes, fees, charges and the supply-side barriers.  The housing sector contributes towards $40bn in tax revenue each year. Recent data shows that the removal of taxes will slash the cost of new housing in Sydney from $639,533 to $371,617, a whopping 58% reduction.   Clearly, Government has a major role to play in making homes in Australia more affordable. It is impossible to make 10% of homes affordable (as suggested in the above list) by requiring the developer to carry this reduction; for these reductions will merely be passed on to the remaining 90% of conventional homes purchasers.  Making conventional house prices more expensive only ever leads to putting additional pressure on the (once) affordable sector.  Expecting developer to cover the affordability gap is never going to work because the gaps is eventually passed onto the 200,000, in the current boom, who are waiting to buy new homes.

Social affordable housing has to be a vital part of our current housing solution.  Low-income individuals and families need quality accommodation but the government and the local community need to work together effectively to achieve this.  The coming available Manly Hospital site is an excellent opportunity for government, developers and our local community to work together in developing appropriate housing designs, financial models and private/public arrangements to facilitate this style of social housing (for purchase and/or rental).

The extra demand for accommodation across all major cities has been identified as the reason the homeless rates around Australia are increased.  In Melbourne the rate of increase in rough sleepers is up 75% in the past 2 years.   Family violence is a major contributor, especially where domestic violence campaigns lead to the removal of women and children from their home situation without a matching increase in available housing and support.  Despite the Victorian government construction of 180 new units of crisis accommodation and the availability of 130 new women’s refuges, there remains 250 rough sleepers in Melbourne CBD, up from 142 in 2014.  Figures in Sydney are just as bad – 28,000 people are homeless, 60,000 families are sitting on public housing waiting lists and it’s getting worse.  The home affordability issue needs to be urgently addressed as refuge and crisis centres are only ever short-term measures.  Unless appropriate housing is found for these people, they inevitably join the “rough sleeper” category without any permanent accommodation and the unemployment queues.  The streets are filling with more homeless than ever before.   There are more women on the street than ever before.  Many women (for obvious reasons) choose to live in their car if they are fortunate enough to own one.  But where they choose to park becomes an issue.  Being homeless also adds to the burden placed upon our hospital system as the homeless become exposed to illness, violence, molestation and the extremes in weather conditions and the more likely they are to have related health problems.  The transition pathways from places such as hospitals, mental health units, prisons and rehabilitation units into the general public are simply not there and inevitably many simply leave hospital to return  to their homeless situation.  A common survival fall-back for the homeless is to travel on trains every day as part of their cycle of survival.   Again putting a strain on our public transport system.   Where the homeless leave their meagre possessions and necessarily portable belongings also become an issue as it all accumulates across the public domain.  Many store their possessions in shopping baskets or large plastic carry bags.

Governments around Australia are fighting a losing battle, for no matter what initiatives are put in place, demand continue to exceed the ability to create new housing options.  Government needs to take the lead in working with the development industry and the community in improving affordable housing supply, especially for those on lower incomes –  both tenants and potential owners.   Possibly governments could act as mortgage insurers for lower income groups and affordable home developers by assisting in their purchases of specifically designated and approved affordable housing in an attempt to drive down low end accommodation rates and to free up even more affordable existing rental accommodation.    

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