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ADELAIDE CITY RENTAL HOUSING PROGRAM PREPARED FOR ADELAIDE CITY

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					PARRAMATTA CITY COUNCIL
Parramatta Affordable Housing Strategy: Options And Issues Report

Jon Hall and Associates and JBA Planning Ltd

Final Report August 2003

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CONTENTS
1. Introduction
1.1 Aims And Objectives 1.2 Structure Of This Report

1
1 1

2.

What is Housing Affordability
2.1 2.2 2.3 2.4 2.5 Housing Affordability Variables Affecting Housing Affordability Housing Affordability and Affordable Housing The Affordability of Housing in Parramatta LGA Our Approach

2
3 3 3 3 5

3.

A Framework For Analysis
3.1 3.2 3.3 3.4 3.5 A Framework for Analysis The Components Of Affordable Housing Delivery Mechanisms And Government Support Financial Options And Delivery Mechanisms Targeting And Management

6
6 6 7 8 8

4.

Parramatta: Affordability Analysis
4.1 4.2 4.3 4.4 4.5 4.6 4.7 Issues in Data Analysis The North East The North West The Central (REP) Area The Southern Area Analysis Of Housing Stress In Parramatta LGA The Distribution Of Affordability Problems

10
10 11 15 18 22 25 25

5.

Options And Issues
5.1 Delivery Options 5.2 Financing Issues and Options 5.3 Targeting And Management Issues

26
26 31 34

References

40

TABLES
1. Parramatta: Median Dwelling Prices and Weekly Rents 2. North Eastern Area: Dwelling Type By Stressed Family Type: Percentage Of Total Dwellings Occupied By Stressed Family Type 3. Preliminary Affordable Housing Target Groups: Renters In The North East 4. North West: Dwelling Type By Stressed Family Type: Percentage Of Total Dwellings Occupied By Stressed Family Type 5. Preliminary Affordable Housing Target Groups: Renters In The North West 6. Central REP Area: Dwelling Type By Stressed Family Type: Percentage Of Total Dwellings Occupied By Stressed Family Type 3 14 15 17 18 21

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TABLES (continued)
7. Preliminary Affordable Housing Target Groups: Renters In The REP Area 8. Southern Area: Dwelling Type By Stressed Family Type: Percentage Of Total Dwellings Occupied By Stressed Family Type 9. Preliminary Affordable Housing Target Groups: Renters In The Southern Area 10. Affect of Shared Equity on Affordability 11. Affordable Housing Options Matrix 21 24 24 31 36

GRAPHS
1. Minimum Annual Household Income Required to Rent or Buy Median Priced Housing in the Parramatta LGA 2. Minimum Annual Household Income Required to Rent or Buy Median Priced Housing in the Parramatta LGA: Changes in Key Variables 3. Minimum Annual Household Income Required to Rent or Buy Median Priced Housing in the North Eastern Area 4. North Eastern Residential Area: Recent Movers: Proportion Of Private Renters Experiencing Housing Stress: 1996-2001 5. North Eastern Residential Area: Recent Movers: Proportion Of Stressed Renters Occupied By Each Household Type: 1996-2001 6. Minimum Annual Household Income Required To Rent Or Buy Median Priced Housing In The North Western Area 7. North Western Area: Recent Movers: Proportion Of Private Renters Experiencing Housing Stress: 1996-2001 8. North Western Area: Recent Movers: Proportion Of Stressed Renters Occupied By Each Household Type: 1996-2001 9. Minimum Annual Household Income Required To Rent Or Buy Median Priced Housing In The Central REP Area: (as at December 2002) 10. Central REP Area: Recent Movers: Proportion Of Private Renters Experiencing Housing Stress: 1996-2001 11. Central REP Area: Recent Movers: Proportion Of Stressed Renters Occupied By Each Household Type: 1996-2001 12. Minimum Annual Household Income Required To Rent Or Buy Median Priced Housing In The Southern Area: (as at December 2002) 13. Southern Area: Recent Movers: Proportion Of Private Renters Experiencing Housing Stress: 1996-2001 14. Southern Area: Recent Movers: Proportion Of Stressed Renters Occupied By Each Household Type: 1996-2001 15. Stressed Households From Each Area As A Proportion Of All Stressed Households And All Private Renter Households Moving To Parramatta LGA: 1996-2001 4 4 12 13 13 15 16 16 18 19 20 22 22 23 25

MAPS AND DIAGRAMS
Map 1: Four Areas Of Analysis Diagram 1: Adelaide City Council: Social Housing Structure 11 28

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ATTACHMENTS
Attachment 1: Affordable Housing Options Attachment 2: Local Government Financing Options Attachment 3: Detailed Parramatta Affordability Analysis 42 51 52

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EXECUTIVE SUMMARY
One of the key issues identified in the Outcomes for Parramatta City is the fostering of inclusive communities. The Affordable Housing Strategy is a key element in providing people with an appropriate range of housing options for the diversity of people in the Parramatta LGA. The primary purpose of the Affordable Housing Strategy is to ensure continued provision of affordable and appropriate housing within Parramatta Local Government Area. The approach in this report is to identify the households in the four areas of Parramatta who are in housing stress by type of household and income levels. The next step is to define housing options which will deliver appropriate housing with affordable payments for those households experiencing housing stress. Section 1 of the report introduces the key elements of affordable housing and presents the framework. Section 2 describes the key components of affordable housing and the various ways in which these components may be manifested. Section 3 of the report provides an analysis of the household types, the levels of income and the median cost of rent and mortgage for different types of dwellings in the four areas of Parramatta. The analysis:
 



clarifies the housing affordability applying in each area; identifies the tenure, dwelling type, and affordability characteristics of the new demand for housing in Parramatta and the likely trends in demand in the immediate future; consistent with our earlier discussion of defining for whom housing is not affordable, define the appropriate preliminary demographic and socio economic groups to which affordable housing should be targeted.

Section 4 presents the options and issues for Parramatta City Council Section 5 presents a summary of the range of Local Government and private sector options for providing affordable housing in the Affordable Housing Matrix. The more detailed explanation of the Commonwealth/State supporting and local government financing options are contained in Attachments 1 and 2. The most common use of housing affordability is the ratio of the housing payment (mortgage or rent) to household income. Housing is deemed to be affordable if the housing payment does not exceed 30% of household income, and unaffordable, (or the household in ‗housing stress‟), if housing payments exceed 30% of household income. Housing affordability is therefore a ‗moveable feast‟ and depends upon the relationship between the household, its income, and the households housing payment. Both household income and housing payments change as a function of changes to the key variables affecting either housing payments or household income. If we take the 30% of household income as the threshold the Graph sets out the minimum commencing household income required if housing is to be ‗affordable‘ i.e. costing 30% or less in housing payments.

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Note: these incomes are different to those identified for the four areas because they are median for all Parramatta

What this graph is saying that there is no private market housing of an average standard which is affordable for any households living in Parramatta and earning less than $42,100 income per annum. There is therefore no dwelling solution or type which produces ‗affordable housing‟ . Rather the approach in this strategy is on defining for whom private market provided housing is not affordable. The next step is to identify priority households by type and income, and design housing options for these groups which will deliver appropriate housing with affordable payments.

Appropriate Housing
Not only is it important that the housing is affordable it must also be appropriate for the any particular household. The concept of appropriate housing consists of two main elements, the quality of the housing, and the type of housing. Affordable housing should not be provided at the expense of a loss of quality, that is the standard of the housing should not be appreciably different to the average standard applying to housing generally. Furthermore a one bedroom unit is clearly not appropriate for household consisting of two adults and three children, so the type and size of the housing should reflect the household characteristics of the particular clients concerned. The Affordable Housing National Research Consortium developed a framework which ‗unpacked‘ the various components of Affordable Housing. In essence they defined four components of Affordable Housing:

i.

The delivery mechanism,
i.e. how affordable housing is to be provided, either dwellings, (public housing), cash payments for rent supplements (rent assistance) etc.;

ii.

How government will provide support,
i.e. outlays, i.e. cash payments, revenue foregone, i.e. tax concessions, credit support etc,

iii.

How affordable housing will be financed,
i.e. where the funds will come from; and

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iv.

How and who will manage it.

The table below sets out the primary suggested target groups who cannot afford any market based housing in Parramatta for the four areas, the North East, The North West, REP, and Southern, as discussed in more detail in Chapter 3 and Attachment 3. PRIVATE RENTERS IN THE NORTH EAST Income Category Or Family Type Dwelling Preference Range
Two Parent Families and Group Households, Single Parent Families and Lone Person H’sh’lds Two and Single Parent Families and Lone Person H’sh’lds Two Parent Families Single Parent Families and group households Lone person households Group households and couples without offspring Lone person households Incomes less than $31,148 Smaller flats, larger townhouses, larger detached dwellings Smaller and larger townhouses, larger detached dwellings Larger detached dwellings and townhouses Smaller flats Smaller flats Larger and smaller detached dwellings and smaller flats Larger and smaller detached dwellings and smaller flats

Priority
1

PRIVATE RENTERS IN THE NORTH WEST
1 1 Incomes less than $31,148 Incomes less than $31,148

PRIVATE RENTERS IN THE REP AREA
1 1 Incomes less than $31,148 Incomes less than $31,148

PRIVATE RENTERS IN THE SOUTHERN AREA
1 Incomes less than $31,148

1

Incomes less than $31,148

These income levels and households types have been chosen because housing stress is concentrated in these household types with incomes between $15,000 p.a. and $31,000 p.a. across all areas of Parramatta. It should be noted that public housing income eligibility cutoffs for large families are considerably higher than the thresholds in the table above and rent assistance from the Commonwealth Government can be received by any household in receipt of a pension or benefit and earning up to approximately $60,000 p.a. In conclusion there are four main components of Affordable Housing;


the method by which the housing assistance is delivered to the recipient, and the options available to do this; what form any government, (including local government), recurrent or ongoing support might be required and provided; and who will pay for that support the way in which the provision of the assistance will be financed, i.e the source of the funds provided for the provision of affordable housing; and the options available to do this, and; who or which agency or entity may be responsible for the management of the affordable housing.







Each of these components can be considered independently of any other component.

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The eleven affordable housing options that might be used by Council and discussed in the last section are listed below; i. Council Capital Provision, Recurrent Subsidy and Management By DOH or Community Housing Council Capital Provision, Recurrent Subsidy, and Management By DOH or Community Housing Council Capital Provision, Recurrent Subsidy, Stock and Tenancy Management. Debt Funded Social Housing Affordable Housing On Department Of Housing Or Council Land (Joint Venture) Additional Public Housing In Parramatta (the do nothing option) Rent Assistance: Government Funded Rent Assistance: Council Funded And Government Managed Council Recurrent Subsidy, Stock and Tenancy Management. Tax Credits And Capital Gains Reform From Federal Government Wizard Shared Equity Home Loan Program: Joint Council/NSW Government Support For Mortgage Defaults

ii.

iii. iv. v. vi. vii. viii. ix. x. xi.

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1.

INTRODUCTION

One of the key issues identified in the Outcomes for Parramatta City is the fostering of inclusive communities. The Affordable Housing Strategy is a key element in providing people with an appropriate range of housing options for the diversity of people in the Parramatta LGA.

1.1

Aims and Objectives

The primary purpose of the Affordable Housing Strategy is to ensure continued provision of affordable housing within Parramatta Local Government Area. Related Objectives of the Strategy as set out in the brief are:  To produce the Parramatta City Council Affordable Housing Strategy with the appropriate planning and policy documentation to amend the Parramatta LEP and DCP 2001, that achieves the outcomes for Affordable Housing;  To develop policies, systems and procedures for implementation and management of the strategy within Council, and for external (i.e. developer) information;  To establish monitoring measures and targets for affordable housing within designated areas and across the LGA; and  To develop planning mechanisms that contribute actively to the range of choice of housing sizes and types, particularly for people on low incomes and those with special needs.

1.2

Structure Of This Report

The approach in this report is to identify the households in the four areas of Parramatta who are in housing stress by type of household and income levels. The next step is to define housing options which will deliver appropriate housing with affordable payments for those households experiencing housing stress. Section 1 of the report introduces the key elements of affordable housing and presents the framework. Section 2 describes the key components of affordable housing and the various ways in which these components may be manifested. Section 3 of the report provides an analysis of the household types, the levels of income and the median cost of rent and mortgage for different types of dwellings in the four areas of Parramatta. The analysis:


clarifies the housing affordability applying in each area; identifies the tenure, dwelling type, and affordability characteristics of the new demand for housing in Parramatta and the likely trends in demand in the immediate future;  consistent with our earlier discussion of defining for whom housing is not affordable, define the appropriate preliminary demographic and socio economic groups to which affordable housing should be targeted.  Section 4 presents the options and issues for Parramatta City Council Section 5 presents a summary of the range of Local Government and private sector options for providing affordable housing in the Affordable Housing Matrix. The more detailed explanation of the Commonwealth/State supporting and local government financing options are contained in Attachments 1 and 2.
Jon Hall & Associates and JBA Urban Planning 1

July 2003

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2.
2.1

WHAT IS HOUSING AFFORDABILITY?
Housing Affordability

The National Housing Strategy (NHS) defined affordable housing as a situation that:
.…conveys the notion of reasonable housing costs in relation to income: that is, housing costs that leave households with sufficient income to meet other basic needs such as food, clothing , transport, medical care and education

The NHS distinguishes between ‗accessibility‘, viz
‗…i.e. the cost of becoming a home purchaser or entering a rental arrangement‘

and affordability
‗…i.e. the ongoing cost of housing in relation to gross income‘.1

The NHS suggests the most commonly used affordability measure in housing research is the ratio of housing costs to income. Leaving aside the costs of access, housing costs vary according to the type of tenure considered; in the case of home ownership the main costs will be the cost of mortgage payments, plus the cost of maintenance and rates, whereas in rental tenure the costs are normally limited to the payment of the rent. The National Housing Strategy was particularly concerned to point out that those income units in the lowest 40 per cent of gross income distribution could not be expected to pay more than 25 per cent of their income in rent if they were to be left with sufficient funds to meet their other 2 needs adequately. The Strategy also indicated that, if required, a more conservative (but less 'adequate') benchmark would be 30% of income in housing payments (rent or mortgage) for income units in the lowest 40% of gross income distributions. This also coincides with the maximum acceptable mortgage repayment limits set by institutional mortgage providers. The Senate Committee Report on Housing Assistance said:
The NHS approach has been criticised in some quarters as being too rigid and unrelated to what different households, especially those in crisis, need to spend on essential non-housing costs. In its more recent work in the area of housing affordability, the Australian Institute of Health and Welfare (AIHW) has developed a more sophisticated model taking into account differences in the size of the household, its composition and location in determining the proportion of income that household can afford to spend on housing. While the AIHW model has much to recommend it because of its sensitivity to differences in the financial situations of low income households, the Committee recognises that the adoption of such 3 a model would pose major problems of administration for a government department.'

Therefore the most common use of housing affordability is the ratio of the housing payment (mortgage or rent) to household income. Housing is deemed to be affordable if the housing payment does not exceed 30% of household income, and unaffordable, (or the household in ‗housing stress‟), if housing payments exceed 30% of household income.

1 2

NATIONAL HOUSING STRATEGY, 1991, ‘The Affordability Of Australian Housing’ Issues Paper No 2, (p ix) KARMEL, ROSEMARY, 1997,`Some Issues in Estimating Housing Needs in the Private Rental Sector', Australia's Private Rental Market: Processes and Policies, Australian Housing and Urban Research Institute, Working Paper No.9, , p.108. 3 REPORT OF THE PARLIAMENTARY SENATE COMMUNITY AFFAIRS REFERENCE COMMITTEE, December 1997, Housing Assistance In Australia (pp 1 -2) Jon Hall & Associates and JBA Urban Planning 2 July 2003

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2.2

Variables Affecting Housing Affordability

Housing affordability is therefore a ‗moveable feast‟ and depends upon the relationship between the household, its income, and the households housing payment. Both household income and housing payments change as a function of changes to the key variables affecting either housing payments or household income. Housing payments are a function of housing prices and interest rates for home purchasers and housing prices and rents for renters. If prices increase then the entry cost i.e. the initial housing payment required also increases. For the household to maintain housing affordability initial household income must increase. To summarize the main variables affecting housing affordability are: For the household income component;    income or wages growth; the number of individual incomes supporting household income; and unemployment.

For the housing payment component;    dwelling prices; mortgage interest rates; and weekly rents.

2.3

Housing Affordability and Affordable Housing

Consequently housing may be „affordable‟ and appropriate for one household with one household income profile, and unaffordable for another, with a different and lower income profile. Hence the key question is Affordable Housing For Whom?

2.4

The Affordability of Housing In Parramatta LGA

Set out in Table 1 below are the median dwelling prices and private market weekly rents for detached and multi-unit dwellings in Parramatta LGA, as at the end of the December quarter 2002. TABLE 1: PARRAMATTA: MEDIAN DWELLING PRICES AND WEEKLY RENTS, DECEMBER 2002 Dwelling Type Units Houses
Source: Residex P/L Special Unit Data For Parramatta

Weekly Rents: $
243 264

Dwelling Prices: $000’S
275.6 373.6

If we take the 30% of household income as the threshold Graph 1 sets out the minimum commencing household income required if housing is to be ‗affordable‘ i.e. costing 30% or less in housing payments, (for home purchase based upon a loan for 95% of the purchase price, to be repaid over twenty five years, at an effective annual interest rate of 6.5%).

Jon

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GRAPH 1

Source: Derived from Residex P/L Special Unit Data For Parramatta

What this graph is saying that there is no private market housing of an average standard which is affordable for any households living in Parramatta and earning less than $42,100 income per annum. There are, of course, locational differences within Parramatta as the later discussion on the four areas will demonstrate. To illustrate our earlier discussion of how affordability is a ‗moveable feast‟ Graph 2 sets out how the minimum household incomes required to obtain affordable housing change in response to change in each of the three variables of dwelling prices, weekly rental payments, and mortgage interest rates. Each variable has been increased by 5% and all others held constant. In this example, the increases are:      unit dwelling prices from $275,600 to $289,300; detached dwelling prices from $373,600 to $392,300; unit weekly rents from $243 to $255; detached dwelling weekly rents from $264 to $277.2; and mortgage interest rates from 6.5% to 6.83%. GRAPH 2

Source: Derived from Residex P/L Special Unit Data For Parramatta Jon Hall & Associates and JBA Urban Planning 4

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A 5% increase in each of the key variables produces an equivalent reduction in affordability and a commensurate increase in the minimum household incomes required.

2.5

Our Approach

There is therefore no dwelling solution or type which produces ‗affordable housing‟ . Rather the approach in this strategy is on defining for whom private market provided housing is not affordable. The next step is to identify priority households by type and income, and design housing options for these groups which will deliver appropriate housing with affordable payments. As a note to the recent publicity about shared-equity finance type solutions, changes in Australia‘s financial sector during the last 15 years have resulted in large and increasing flows of savings into financing home ownership. The rapid recent growth in the secondary market for residential mortgages underscores the relative neglect of the private rental sector, especially by large corporate investors. Capital constraints on both public borrowing for public housing and investment in private rental housing is contributing to the worsening affordability problems being experienced in the private rental sector. Consequently, the need for innovative interventions is likely to be most needed in this sector.

Jon

Hall

&

Associates

and

JBA Urban

Planning

5

July 2003

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3

A FRAMEWORK FOR ANALYSIS

In 2002 the Affordable Housing National Research Consortium4 (a groups of peak housing organisations), produced a report5 which analysed in detail the affordable housing options available to Commonwealth and State Governments‘. A summary of the key elements of that paper emerging is set out below. The options which emerged from that analysis

3.1

A Framework for Analysis

The framework developed by Hall and Berry distinguishes the ways in which different forms of government support can be delivered and combined with the alternative forms of private financing to expand affordable housing supply in Australia. An exhaustive matrix of the various combinations of delivery mechanism, government support and financing option was derived. This represents the universe of possible ‗policy packages‘ -- combinations of delivery mechanism, government support measure and financing option -- from which is derived a smaller sub-set of options.

3.2

The Components Of Affordable Housing

The framework developed comprises four components:


The delivery mechanisms: the method by which the housing assistance is delivered to the recipient, and the options available to do this. Four main mechanisms are distinguished: the capital provision of dwellings; subsidised home loan mortgage schemes; subsidised shared equity schemes, and; direct assistance in the form of rent assistance or housing allowances (e.g. ‗vouchers‘). Government support options: what form any government, (including local government), recurrent or ongoing support might be required and provided; and who will pay for that support.  Five options are distinguished:  Outlays: cash payments made by Commonwealth or State Governments (or both) to either purchase stock or pay subsidies.  Revenue foregone: taxation concessions (again, in theory, by either level of government but most importantly by the Commonwealth) delivered to private investors to reduce the cost of financing – i.e. to reduce the required rate of return.  Credit support: the provision of capital and/or income guarantees to investors, reducing risk and therefore the cost of finance.  Development levies (or inclusionary zoning): placing a requirement on developers of new housing to provide a specified proportion of dwellings at affordable prices, or payment of a levy in lieu.  Financial Regulation: in this context, a government requirement for specified classes of investors to invest a minimum proportion of their funds in the provision of affordable housing (i.e. imposition of a prescribed assets ratio). Financing options: the way in which the provision of the assistance will be financed, i.e the source of the funds provided for the provision of affordable housing; and the options available to do this.





4

Comprising the National Community Housing Forum, Housing Industry Association, Master Builders Australia Incorporated, Property Council Of Australia, Real Estate Institute Of Australia, Urban Development Institute Of Australia, AHURI, ACTU, CFMEU, AMWU, ACOSS and DUAP New South Wales. 5 HALL J, & BERRY M, (2002), Policy Options For Stimulating Private Sector Investment In Affordable Housing Across Australia: Stage 2: Identifying And Evaluating The Policy Options, for the Affordable Housing National Research Consortium. Jon Hall & Associates and JBA Urban Planning 6 July 2003

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These options are debt, equity and combinations of debt and equity. and;


who or which agency or entity may be responsible for the management of the affordable housing; i.e. Commonwealth, State, Local Government, the non-profit community housing sector or the private market (private mortgage providers or residential rental investors).

Every government approach to expanding affordable housing implies a particular way of delivering a particular type of government support, financed in a particular way. Each possible combination of delivery mechanism, support option, financing option and management option represents a potential ‗policy package‘ or option for the encouragement of the provision of affordable housing. The most efficient way of delivering affordable housing will not remain the same when external economic and environmental conditions change. Assuming that the minimisation of subsidy costs to government as a whole is a major consideration, the guiding rules that might apply to the choice of delivery mechanism are that in times of:     low to moderate interest rates and moderate to higher levels of gross private rental yields and capital growth; public housing options will prove to be most cost-effective; as interest rates rise, and capital growth declines shared equity will likely outperform public housing as the most efficient delivery mechanism; in periods of low housing interest rates, high gross rental yields and little capital growth subsidies on home loans will come to the fore; when rental yields are low dwelling prices are stagnant and mortgage rates are high, headleasing supported by rent assistance will be most cost effective.

3.3

Delivery Mechanisms and Government Support

Because of the risk profile associated with particular delivery mechanisms some forms of government support are best linked to particular types of delivery mechanism, if subsidies are to be provided in the most cost effective manner.   Outlays can be applied to all of the delivery mechanisms, because they can be allocated, for example, as a cash subsidy or a capital injection or both. Support options other than outlays are really not applicable to a direct (rent) assistance program where the management of the dwellings is in the hands of individual landlords. By contrast, revenue foregone options (e.g. tax concessions) can be applied to a ‗packaged‘ headleasing program where groups of dwellings are provided and the tenancy management and maintenance arrangements remain in the hands of the public or community sector, with ownership in the private sector. This is because revenue foregone options imply private sector ownership and investment but organisation and management by the public sector. In essence, they separate ownership from dwelling management. Provision of tax exempt status on income earnings generated by a bond, i.e. interest earnings, would enable cheaper funds application to both capital provision programs (direct private investment via regulation, public housing, community housing) and home loan and shared equity programs.



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

Credit Support in the form of government guarantees mostly relate to income (usually to cover such matters as losses on mortgage defaults in home loan schemes or to top up net rents to fixed returns in the case of privately owned packaged head leasing schemes), however they may apply to capital, i.e. a guarantee that the dwelling value at sale will not be less that the cost price indexed to the CPI. Capital guarantees and capital insurance are really only appropriate for programs where the funds are applied to capital provision by dwelling acquisition (direct investment, public and community housing) or support dwelling yields (e.g. ‗packaged headleasing‘ – as in the PEP 1 and 2 schemes involving the N.S.W. Department of Housing and AMP). In the past in almost all of these cases the credit support has been provided by State Governments as Commonwealth Governments have insisted that their role is to provide a fiscal allocation and the State‘s role is to accept any risk. Regulatory Mechanisms that involve the application of something such as a prescribed asset ratio requiring Superannuation Funds to invest in affordable housing raises a number of questions before issues such as the delivery mechanism can be resolved. For example, Superannuation Funds may argue that unless the price at which they will provide the funds is specified they are precluded under their trust deeds from investing at anything other than the market rate.





3.4

Financial Options and Delivery Mechanisms

The cost of finance – and, therefore, the final price of housing to residents – will depend on the risks involved and their division between government and private investors. In general, the more risk taken on by government, the lower the cost of finance and the more affordable the resulting housing. In the case of Parramatta there are four possible methods of obtaining funds to support affordable housing:
 

State Government Funding, i.e. dwellings, a subsidy fund etc; Council Assets or Income; i.e. provision of land, or cash; Inclusionary Zoning or Section 94 form a financing option that (in the current institutional environment) can only be imposed with the support of State Government; and Negotiated Agreements With Developers; i.e. payments for affordable housing in return say for development bonuses.




3.5

Targeting and Management

Whilst funds may be directed to private investors (rent assistance) or to publicly managed but superannuation owned housing assets (capital provision) or delivered via home loan or shared equity schemes, government is likely to be concerned about the targeting of the assistance, that is:   are households eligible for mainstream housing program assistance obtaining access? are they obtaining access on the same terms and conditions as they would have received in government programs?

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JBA Urban

Planning

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 

who is doing the credentialing? and is there capacity for fraud?

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4
4.1

PARRAMATTA: AFFORDABILITY ANALYSIS
Issues In Data Analysis

Housing payments are often a function of when households obtained a residence in a particular area, and relate to the price of housing at the time the household moved into an area, not current housing prices. Consequently where households have lived in an area for some considerable time, (non-movers), whilst their incomes will probably have increased since the time they arrived, if they are buying a home, their housing payments will not have changed, (because of straight line payment credit foncier mortgages). Similarly for private renters who have been living in an area for a long time, when compared to new arrivals, rent payments will tend to be discounted because of the good payment history may produce rent discounts. In addition, some of the leases may be of considerable duration, so that for non-movers rent rates will not necessarily reflect market rents. In these circumstances the distributions and averages for household type, dwelling consumption, household income, tenure, etc of non-movers, will not reflect the impact of housing prices and rents, and are likely to be very different to those applying to recent movers to the LGA, whose characteristics will more clearly reflect the impact of housing affordability. Even more importantly, data on housing payments relative to housing prices indicate that a much lower proportion of non-movers than movers are experiencing problems with their payments and hence housing stress. It is clear that the proportions for recent movers much more accurately reflects the current affordability pressures, than those that arise from movers and non-movers in total. Similarly the demographic and socio-economic characteristics of recent movers to Parramatta are also more likely to reflect the ‗price push‘ impacts of house and rent prices currently applying to other locations. That is the characteristics of movers will reflect households who are moving to Parramatta because other areas have become unaffordable for them, and therefore are more likely to mirror the demographic and socio-economic characteristics of future immigrants to the Parramatta LGA. For all of these reasons only the recent mover (i.e. households who have moved into Parramatta in the last 5 years) of the 2001 Census have been used in the analysis. Finally households incomes have tended to only increase by just slightly more (0.5%), than the Consumer Price Index, whilst housing prices and, to a lesser extent rents, grow at much higher annual rates. So whilst household incomes will have only increased marginally since the 2001 Census dwelling prices and rents have grown dramatically and it is for this reason that as current as possible dwelling prices and rents (December 2002), have been used to assess affordability and housing access. In this section of the report we summarize:    the housing affordability applying in each area; identify the tenure, dwelling type, and affordability characteristics of the new demand for housing in Parramatta and the likely trends in demand in the immediate future. consistent with our earlier discussion of defining for whom housing is not affordable, define the appropriate preliminary demographic and socio economic groups to which affordable housing should be targeted.
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A more detailed affordability analysis for each area is contained in Attachment 3.

4.2

The North East

Map 1 sets out the the location of all four areas in the analysis including the North East MAP 1

PRICE AND AFFORDABILITY IN THE NORTH EAST Presuming a 5% deposit, interest rates of 6.5%, and a 25 year loan term graph 3 below sets out the minimum annual household income required to rent or buy houses or units, assuming a maximum payment of 30% of household income in mortgage or rent payments.

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GRAPH 3

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

Overall then at a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $48,000 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about one third of all mover households from obtaining affordable housing. Graph 4 below sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. It should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress. Overall 36.3% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented almost 600 households and slightly more than the average of 35.1% for the Parramatta LGA as a whole.

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GRAPH 4

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Exactly 60% of all stressed renters are made up of the two groups of two parent families and lone person households. When combined with single parent families they represent over 80% of all stressed renters. GRAPH 5

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

The dwelling choices of stressed single parent families, (22.1% of stressed households), are concentrated in the small flats and larger townhouses categories with 80% of dwellings chosen falling into these two dwelling types. For stressed couples without offspring, (8.0% of stressed households), dwelling choices are concentrated in the small flats, (33%), larger townhouses, (24.4%), and larger detached dwellings segments with these three types accounting for nearly 80% of dwellings chosen by this group.

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The dwelling choices of stressed two parent families, (33.8% of stressed households), are concentrated in the larger detached dwellings and townhouses categories with nearly 70% of dwellings chosen falling into these two dwelling types. For stressed group households, (8.9% of stressed households), dwelling choices are concentrated equally in the small flats, and larger detached dwellings segments, (29.2% each), followed by smaller detached dwellings, (16.7%), with these three types accounting for nearly 75% of dwellings chosen by this group. The dwelling choices of stressed lone person households, (27.2% of stressed households), are concentrated in the smaller flats, (39%), and larger detached dwellings categories, (22.7%) followed by smaller detached dwellings, (14.2%), with 75% of dwellings chosen falling into the former two dwelling types. TABLE 2: NORTH EASTERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Family Type

Detached Dwellings
9.3 6.7 2.1 16.7 14.2 0.0 22.2 38.2 29.2 22.7 9.3 28.9 40.3 45.8 36.9

Total
60.0 46.7 24.1 52.1 63.8 40.0 53.3 75.9 47.9 36.2

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

6.7 6.7 7.9 6.3 10.6 36.0 24.4 31.4 12.5 10.6
Total

44.0 33.3 14.1 29.2 39.0 4.0 6.7 6.3 6.3 2.8 48.0 40.0 20.4 35.4 41.8

Greater Than Two Bedrooms

42.7 31.1 39.3 18.8 21.3

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Given the above analysis Table 3 contains some possible family type, income category and dwelling preference options for targeting affordable housing in the North East.

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Hall

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Associates

and

JBA Urban

Planning

14

July 2003

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AFFORDABLE ISSUES AND

HOUSING

STRATEGY:

OPTIONS

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TABLE 3. PRELIMINARY AFFORDABLE HOUSING TARGET GROUPS: RENTERS IN THE NORTH EAST Priority
1

Family Type
Single Parent Families and Lone Person H’sh’lds Two Parent Families and Group Households Single Parent Families and Lone Person H’sh’lds Two Parent Families and Group Households

Income Category Or Range
Incomes less than $31,148

Dwelling Preference
Smaller flats, larger townhouses, larger detached dwellings Larger detached dwellings and townhouses and small flats Smaller flats, larger townhouses, larger detached dwellings Larger detached dwellings and townhouses and small flats

1

Incomes less than $31,148 Incomes between $31,149 and $41,548 Incomes between $31,149 and $41,548

2

2

4.3

The North West

Presuming assumptions as outlined earlier, graph 6 below sets out the minimum annual household income required to rent or buy houses or units in the North-West. GRAPH 6

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

Overall, at a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $39,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 28.5% of mover households from obtaining affordable housing. Graph 7 below sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. As with the North East, it should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress.
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GRAPH 7

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 30.9% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented some 293 households and considerably less proportionately, than the average of 35.1% for the Parramatta LGA as a whole. Almost 60% of all stressed renters are made up of the two groups of lone person households and single parent families. When combined with two parent families they represent over 83% of all stressed renters. GRAPH 8

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

Table 4 below sets out by smaller and larger, and types of dwellings the proportion of total dwellings occupied by each stressed family type. The dwelling choices of stressed single parent families, (28.4% of stressed households), are concentrated in the smaller and larger townhouses categories with 71% of dwellings chosen falling into these two dwelling types.

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For stressed couples without offspring, (11.5% of stressed households), dwelling choices are concentrated in the larger detached dwellings (45.2%), and larger townhouses, (19.45%), segments with these two types accounting for nearly 65% of dwellings chosen by this group. Smaller detached dwellings and flats account for a further 26% of all dwellings occupied. The dwelling choices of stressed two parent families, (23.4% of stressed households), are concentrated in the larger detached dwellings and townhouses categories with 80% of dwellings chosen falling into these two dwelling types. For stressed group households, (5.4% of stressed households), dwelling choices are concentrated first in the larger detached dwellings, (47.1%) and then equally in the small detached dwellings and flats, and larger townhouses segments, (17.6% each). The dwelling choices of stressed lone person households, (31.3% of stressed households), are concentrated in the larger detached dwellings, (46.6%), and smaller townhouses categories, (22.1%) followed by larger townhouses, (15.6%), with 84% of dwellings chosen falling into these two dwelling types. TABLE 4: NORTH WESTERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Family Type

Detached Dwellings
17.9 12.9 6.2 17.6 11.7 0.0 45.2 49.2 47.1 46.6 17.9 58.1 55.4 64.7 58.4

Total
57.1 35.5 20.0 35.3 37.7 42.9 64.5 80.0 64.7 62.3

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

28.6 9.7 9.2 0.0 22.1 42.9 19.4 30.8 17.6 15.6
Total

10.7 12.9 4.6 17.6 3.9 0.0 0.0 0.0 0.0 0.0 10.7 12.9 4.6 17.6 3.9

Greater Than Two Bedrooms

71.4 29.0 40.0 17.6 37.7

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Given the above analysis Table 5 contains some possible family type, income category and dwelling preference options for targeting affordable housing in the North West.

Jon

Hall

&

Associates

and

JBA Urban

Planning

17

July 2003

PARRAMATTA

AFFORDABLE ISSUES AND

HOUSING

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OPTIONS

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TABLE 5: PRELIMINARY AFFORDABLE HOUSING TARGET GROUPS: RENTERS IN THE NORTH WEST Priority
1 1 2

Family Type
Single Parent Families and Lone Person H’sh’lds Two Parent Families Single Parent Families and Lone Person H’sh’lds Two Parent Families and Group Households

Income Category Or Range
Incomes less than $31,148 Incomes less than $31,148 Incomes between $31,149 and $41,548 Incomes between $31,149 and $41,548

Dwelling Preference
Smaller and larger townhouses, larger detached dwellings Larger detached dwellings and townhouses Smaller and larger townhouses, larger detached dwellings Larger detached dwellings and townhouses and small flats

2

4.4

The REP (Central Area)

Turning now to our affordability analysis as at the December quarter 2002, the REP area is the most expensive place in Parramatta to buy a house and the second most expensive place to buy a multi-unit with the median price of houses and units being $445,800 and 281,500 respectively, and median weekly rents were $281 and $265 respectively. Presuming assumptions as outlined earlier, Graph 9 below sets out the minimum annual household income required to rent or buy houses or units. GRAPH 9

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

At a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $45,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 50% of mover households from obtaining affordable housing.
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Graph 10 below sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001 GRAPH 10

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 34% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented some 1,295 households and slightly less than the average of 35.1% for the Parramatta LGA as a whole. 60% of all stressed renters are made up of the two groups of lone person households and group households. When combined with single parent families they represent over 75% of all stressed renters. GRAPH 11

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.
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Table 6 below sets out by smaller and larger, and types of dwellings, the proportion of total dwellings occupied by each stressed family type. The dwelling choices of stressed single parent families, (14.1% of stressed households), are concentrated in the smaller flats category with 83% of dwellings chosen falling into this dwelling type. For stressed couples without offspring, (15% of stressed households), dwelling choices are also concentrated in the smaller flats category with this type accounting for 86% of dwellings chosen. The dwelling choices of stressed two parent families, (9.3% of stressed households), are concentrated in the smaller and larger flats categories with 82% of dwellings chosen falling into these two dwelling types. For stressed group households, (35.3% of stressed households), dwelling choices are also concentrated in the smaller and larger flats categories with 84% of dwellings chosen falling into these two dwelling types. The dwelling choices of stressed lone person households, (25.2% of stressed households), are concentrated in the smaller flats category with 81.7% of dwellings chosen falling into this dwelling type. TABLE 6: REP AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Family Type Detached Dwellings
2.4 1.6 1.9 3.4 2.3 0.0 1.6 7.1 2.5 4.0 2.4 3.2 9.0 5.9 6.3

Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Total
89.1 93.0 75.5 72.0 87.6 10.9 7.0 24.5 28.0 12.4

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

3.6 5.3 4.2 2.5 3.5 1.8 2.7 4.5 6.8 1.9
Total

83.0 86.1 69.4 66.1 81.7 9.1 2.7 12.9 18.6 6.6 92.1 88.8 82.3 84.7 88.3

Greater Than Two Bedrooms

5.5 8.0 8.7 9.3 5.4

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Given the above analysis Table 7 contains some possible family type, income category and dwelling preference options for targeting affordable housing in the REP.

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Hall

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JBA Urban

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TABLE 7: PRELIMINARY AFFORDABLE HOUSING TARGET GROUPS: RENTERS IN THE REP AREA Priority
1 1 2 2

Family Type
Single Parent Families and group households Lone person households Single Parent Families and group households Lone person households

Income Category Or Range
Incomes less than $31,148 Incomes less than $31,148 Incomes between $31,149 and $41,548 Incomes between $31,149 and $41,548

Dwelling Preference
Smaller flats Smaller flats Smaller flats Smaller flats

4.5

The Southern Area

Graph 12 below sets out the minimum annual household income required to rent or buy houses or units. GRAPH 12

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

At a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $30,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 38% of mover households from obtaining affordable housing. Graph 13 below sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001.

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GRAPH 13

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census: Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 42.5% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented some 358 households and is the highest of all areas and much higher than the average of 35.1% for the Parramatta LGA as a whole. 64% of all stressed renters are made up of the two groups of lone person households and couples without offspring. When combined with group households they represent over 82% of all stressed renters. GRAPH 14

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

The table below sets out by smaller and larger, and types of dwellings the proportion of total occupied by each stressed family type. The dwelling choices of stressed single parent families, (10.5% of stressed households), are concentrated in the smaller detached dwellings and smaller flats categories with almost 80% of dwellings chosen falling into this dwelling type.
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For stressed couples without offspring, (26.9% of stressed households), dwelling choices are also concentrated in these two categories, (smaller detached dwellings and smaller flats), with these types accounting for 76% of dwellings chosen. The dwelling choices of stressed two parent families, (6.7% of stressed households), are concentrated in the larger detached dwelling category, (55.5% of stressed households), and equally in the smaller detached dwellings and flats with 19.5% each falling into these two dwelling types. For stressed group households, (18.1% of stressed households), dwelling choices are concentrated in the larger detached dwellings and smaller flats categories with 57% of dwellings chosen falling into these two dwelling types. The remaining dwellings chosen fall equally between all other types. The dwelling choices of stressed lone person households, (37.7% of stressed households), are concentrated in the larger detached dwellings, (33.3%), small flats, (28.3%), and small detached dwellings categories, (23.3%), with 85% of dwellings chosen falling into these dwelling types. TABLE 8: THE SOUTHERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Family Type Detached Dwellings
46.9 43.3 19.5 10.7 23.3 0.0 23.3 55.5 32.1 33.3 46.9 66.7 75.0 42.9 56.7

Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Total
85.7 76.7 41.4 46.4 56.7 14.3 23.3 58.6 53.6 43.3

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

6.1 0.0 2.3 10.7 5.0 8.2 0.0 3.1 10.7 10.1
Total

32.7 33.3 19.5 25.0 28.3 6.1 0.0 0.0 10.7 0.0 38.8 33.3 19.5 35.7 28.3

Greater Than Two Bedrooms

14.3 0.0 5.5 21.4 15.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Given the above analysis Table 9 contains some possible family type, income category and dwelling preference options for targeting affordable housing in the Southern Area.

Jon

Hall

&

Associates

and

JBA Urban

Planning

23

July 2003

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TABLE 9: PRELIMINARY AFFORDABLE HOUSING TARGET GROUPS: RENTERS IN THE SOUTHERN AREA Priority
1

Family Type
Group households and couples without offspring Lone person households Single parent families and two parent families

Income Category Or Range
Incomes less than $31,148

Dwelling Preference
Larger and smaller detached dwellings and smaller flats Larger and smaller detached dwellings and smaller flats Larger and smaller detached dwellings and larger and smaller flats

1

Incomes less than $31,148

2

Incomes less than $31,148

4.6

Analysis of Housing Stress In Parramatta LGA

Using the 2001 census data for the whole of Parramatta LGA, the Urban Frontiers Program was able to calculate the total numbers of households paying more than 30 % of income on rent or mortgage to be 4,811 in research for WSROC. The research for this report, separated out those residents who had moved into the LGA in the five years between 1996 and 2001. This group called recent movers, purchased or rented dwellings during the period when the market price for housing has significantly increased. The result is 2,530 of the recent movers were calculated to be experiencing housing stress in December 2002, which is about 53% of the total or 4,811 for the LGA. The numbers in housing stress would be growing with the numbers moving into the LGA.

4.7

The Distribution Of Affordability Problems

Graph 15 sets the proportion of total stressed mover households in the Parramatta LGA according to the area of residence. GRAPH 15

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated
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The large majority of the affordability problems are concentrated in the Central area and the North East and this where any affordable housing initiative might be effectively targeted.

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5

OPTIONS AND ISSUES

In conclusion there are four main components of Affordable Housing;


the method by which the housing assistance is delivered to the recipient, and the options available to do this; what form any government, (including local government), recurrent or ongoing support might be required and provided; and who will pay for that support the way in which the provision of the assistance will be financed, i.e the source of the funds provided for the provision of affordable housing; and the options available to do this, and; who or which agency or entity may be responsible for the management of the affordable housing.







Each of these components can be considered independently of any other component and the issues which apply to component consideration are set out below. The first section summarizes:
  

the delivery options which might be available, who might pay for the ongoing support, and who would manage it, the second discusses the financing options, and the third the management issues arising from affordable housing.

5.1

Delivery Options

There are three main types of delivery options available to Council.    dwelling stock for affordable rental housing; rent assistance cash support by way recurrent subsidy funding for affordable rental housing; and special financial support for shared equity home purchase options for the designated target groups.

DWELLING STOCK FOR AFFORDABLE RENTAL HOUSING Within this group there are five main options: i. Council Capital Provision, Recurrent Subsidy and Management By DOH or Community Housing

Under this option Council would provide the necessary capital to cover the actual capital cost of providing the land and dwellings and would procure the stock. Council would provide details to DOH of the amount of capital funding and dwelling stock provision anticipated to be available for the next say ten years. This program would include documentation of how the funds would be raised. Council would undertake to provide the dwellings under management to either DOH or Community Housing subject to these entities entering into a Deed Of Agreement with Council that would ensure the dwellings were only available to private rental households living in Parramatta and experiencing housing stress. The State would agree to:  adhere to the tenancy selection process sought by Council;
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 

provide any recurrent subsidy required, and carry out all of the functions of a dwelling and tenancy manager outlined in section 5.3

The capital required for the stock would be financed by way of either:   provision of land or capital from Council‘s retained earnings; inclusionary zoning including amendment to SEPP 70 and inclusion of Parramatta Council in the designated LGA‘s and amendments to the relevant planning schemes, (subject to the Deed of Agreement with DOH) and development of a levy, and establishment of an affordable housing capital fund; provision of appropriate floor space bonuses and development of negotiated agreements for the payment of affordable housing contributions and the establishment of an affordable housing capital fund. ii. Council Capital Provision, Recurrent Subsidy, and Management By DOH or Community Housing



Option 2 is the same as Option 1 except that the Council would establish two funds one for stock procurement or dedication, and a sinking fund for the payment of recurrent subsidies. A portion of the capital provided from retained earnings, planning levy, or negotiated agreement contribution would be paid into the recurrent sinking fund based on analysis of tenants incomes, stock in program and likely weekly rental shortfalls. iii. Council Capital Provision, Recurrent Subsidy, Stock and Tenancy Management.

This is the same as Option 2 except under this option because no funding or management would be sought from the State, Council would establish its own (State Independent), eligibility criteria, rent payment policy, and waiting list processes. Council would conduct a tender for the appointment of an independent dwelling and tenancy manager. iv. Debt Funded Social Housing

This option is identical to one adopted by Adelaide City Council, and supported by debt funds from the South Australian Treasury and with management by the South Australian Housing Trust.     An initial residential development is sponsored by Adelaide City Council. The City Council contributes land or direct equity valued at $1million and capable of supporting up to a total of 90 social housing and private dwelling units. The social housing is owned by the Adelaide City Council and managed on its behalf by an appropriate social housing agency. The private dwellings are sold directly into the market. The social housing is targeted at households with commencing average household incomes of $25,000 with maximum eligible household incomes being determined in accordance with South Australian Housing Trust eligibility procedures. Commencing rental payments are limited to prescribed affordability conventions of 25% of income or $120 per week. However, it is assumed that 10% of the tenants are couples who paying 15% of their income in rent or a combined rent of $144 per week.
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Therefore the average rent across the program is $122 per week which equates to an average rent of 26% per apartment.  A safety net provision will be provided such that if household income falls because of unanticipated income loss rental payments will be adjusted to the new level of 25% of income. As social housing tenants voluntarily vacate the dwellings will either be let to private tenants or sold in the market. The South Australian Treasury has agreed to provide the loan funds to Council in a mix of floating rate, fixed and CPI Indexed instruments with variable maturities designed to match the likely rate of dwelling sales. The program is designed to terminate at the end of the 20th year whereby any residual social housing tenants will be relocated to accommodation of an appropriate social housing agency and the residual dwellings will either sold in the private market or to the State Government. It is proposed that other levels of government or other funds contribute $2m which will by matched 1:2 by the contribution of Adelaide City Councils land or equity. It is anticipated that these supporting arrangements will pay all necessary subsidy for the term of the transaction. The overall subsidy/contribution of $3 m supports a loan of $15.69 m to produce 90 apartments. If the total level of subsidy were reduced to $2m it would support a loan of $10.46m to produce 60 apartments. A total subsidy of $1 m hence would support a loan of $5.23 m and produce 30 apartments. So that the number of apartments produced is directly proportional to the amount of subsidy provided.

 





The Model is essentially identical to that proposed by the Affordable Housing National Research Consortium in its Stage 2 Report. A copy of the structure for the transaction is set out below.
DIAGRAM 1
ADELAIDE CITY COUNCIL: SOCIAL HOUSING STRUCTURE
Discharge Debt

STATE TREASURY STATE TREASURY

Pay Shortfall Amounts

ADELAIDE ADELAIDE CITY CITY COUNCIL COUNCIL

COMMONW EALTH COMMONW EALTH

Loan Funds

Land

Pay Net Rents Net Sale Proceeds (if required)

PROJECT PROJECT CONSTRUCT. CONSTRUCT.

Provide Land

Pay Shortfall Amounts Provide $2M 2M

MANAGER AND MANAGER AND AGENT AGENT
Pay Rents

Advise Shortfall/Surplus Amounts

Receive M anagement and Property Disposal Instructions

AFFORDABLE AFFORDABLE HOUSING HOUSING SINKING FUND SINKING FUND

Receive M aintenance

TENANTS TENANTS
Source: HALL J, Dec 2002, Adelaide Rental Housing Program, Consultants’s Report For Adelaide City Council Jon Hall & Associates and JBA Urban Planning 28

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v.

Additional Public Housing In Parramatta (the do nothing option)

Under this option Council would simply seek to increase the supply of public housing dwellings in areas designated by Council and to the types of households identified as primary target groups. This would be achieved by simply making formal submissions to the Minister for Housing. RENT ASSISTANCE CASH SUPPORT VIA RECURRENT PROVISION FOR AFFORDABLE RENTAL HOUSING Within this group there are four main options: vi. Rent Assistance: Government Funded

Under this option Council would simply seek a greater commitment from the Commonwealth or State Government to provide more rent subsidies for private tenants experiencing housing stress and consistent with the target groups outlined earlier. The rent subsidy would be paid to tenants deemed eligible according to Commonwealth Rent Assistance criteria and would be an additional cash payment in addition to that provided by rent assistance up to a maximum being the difference between 25% of the households income (including Commonwealth Rent Assistance) and the market rent up to a maximum of the median rent for either a two bedroom unit, or in the case of families with more than one child, a three bedroom dwelling (multi-unit or detached). Either the Commonwealth or the State would determine eligibility, maintain waiting lists and allocate assistance. vii. Rent Assistance: Council Funded And Government Managed

Under this option Council would agree to provide any recurrent shortfalls on the difference between net rents and operating costs for new DOH public stock allocated to Parramatta residents. This undertaking would be subject to these entities entering into a Deed Of Agreement with Council that would ensure the dwellings were only available to private rental households living in Parramatta and experiencing housing stress. The State would agree to:    adhere to the tenancy selection process sought by Council; provide any recurrent subsidy required, and carry out all of the functions of a dwelling and tenancy manager outlined in section 5.3

The recurrent subsidy required for the stock would be funded by way of either:   provision of land or capital from Council‘s retained earnings; inclusionary zoning, amendment to SEPP 70 and inclusion of Parramatta Council in the designated LGA‘s and amendments to the relevant planning schemes, (subject to the Deed of Agreement with DOH) and development of a levy, and establishment of an affordable housing capital fund; provision of appropriate floor space bonuses and development of negotiated agreements for the payment of affordable housing contributions and the establishment of an affordable housing capital fund.



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viii.

Council Recurrent Subsidy, Stock and Tenancy Management.

This is the same as Option 7 except Council would conduct a tender for the appointment of an independent dwelling and tenancy manager. ix. Tax Credits And Capital Gains Reform From Federal Government

Under this option Council would simply prepare a submission to Federal and State Government for the introduction A US-style tax credit paid to investors of dwellings renting below a threshold level (assumed in Wood‘s base case to be $100 per week in 1996 prices). The tax credit is delivered as a reduction in the investor‘s annual total tax liability. Wood (following the US example) calculates the annual credit at the rate of 4 per cent of the dwelling‘s building value. Wood‘s microsimulation analysis concludes that this would increase the annual after-tax return to low-income investors by almost 1 per cent of the total capital value of the dwelling. The gain, on average, to high income investors is only 0.1 per cent, suggesting that this measure would be effective in targeting the tax subsidy to the low rent segment of the market. In addition an annual threshold on capital gains taxation (CGT); i.e. tax is not payable on the first, say, $10,000 of capital gain. Wood‘s analysis shows that if the current British capital gains tax regime (which has a GST threshold) replaced the Australian regime, landlords of low rent dwellings would gain an average of 0.3 per cent of dwelling value each year. This compares to an increase in CGT liability of about 0.1 per cent of dwelling value for landlords in the high rent segment. Wood would argue that if such measures were introduced they would increase the supply of low cost private rental accommodation throughout Australia (including in Parramatta) and hence the rents on lower cost private rental housing would fall making rental housing more affordable (including in Parramatta). HOME PURCHASE OPTIONS Within this group there is only one Option x. Wizard Shared Equity Home Loan Program: Joint Council/NSW Government Support For Mortgage Defaults

Instead of committing a large part of household income to servicing a large mortgage debt, a household could buy its house in partnership with another investor. Equity would be shared and the household would only have to borrow to finance its share. Under this shared equity arrangement, the household is the managing partner and the investor the sleeping partner. The former decides when to sell, to whom and for what price. The household also decides on how the property is maintained, renovated and used. The purchaser/occupier is responsible for all maintenance, rates etc during the term of occupation. The sleeping partner ‗wakes up‘ only when the dwelling is sold in order to receive its share of the sale proceeds. The household saves on housing costs each year because the sleeping partner foregoes any rental payment on its share in favour of receiving all its return at the end, when the house is sold. In effect, the investor is swapping rental income for a share of realised capital gain on the dwelling. In the option being developing by Wizard, in return for not receiving any payments during the term the dwelling is occupied by the purchaser/occupier, the purchaser/investor receives a share of the capital growth of the property exactly double their initial share of the dwelling at original purchase.
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In effect the Wizard option would reduce by one third the minimum incomes needed to buy units outlined earlier. Table 10 sets out the current minimum incomes to buy in each of the four areas under normal mortgage and with shared equity. TABLE 10: AFFECT OF SHARED EQUITY ON AFFORABILITY Area
North East North West REP South East

Minimum Household Income p.a. To Buy A Unit: $000’s Normal Mortgage Wizard Option
88.7 71.5 76.0 61.4 62.1 50.0 53.2 43.0

It should be noted that whilst the shared equity option substantially increases purchasing affordability all of the household incomes required under the Wizard Option are still much higher than the threshold household incomes required to rent. Furthermore there is no indication as to whether Wizard will provide the product to those households with incomes in the $40,000 to $60,000 p.a. income range. Jointly with the State Government Council could apply any funds available for Affordable Housing to a sinking fund which would be used to pay any losses on mortgage defaults by shared equity purchasers determined under the scheme in Parramatta, subject to Wizard agreeing to provide mortgages to households currently living and seeking to buy in Parramatta with incomes between $40,000 and $60,000 per annum. Table 11 sets out the target household types, target household incomes, delivery method financing options, operating shortfall payment responsibility, management agency and issues

5.2

Financing Issues And Options

The options available for local government to finance the provision of affordable housing are:
   

provide support from Council retained earnings, by way of land, capital or both. inclusionary zoning – provide or pay; negotiated solutions; and joint ventures.

PROVISION OF RETAINED EARNINGS Council would simply designate either a program of land or capital or both for the provision of affordable housing, this could be applied to either recurrent rental subsidies or stock acquisition, subject to agreements with relevant organisations (DOH and community housing) to fund recurrent shortfalls and/or manage the dwellings. INCLUSIONARY ZONING – DEDICATE OR PAY Planning instruments can adopt ‗inclusionary zoning controls‘ which require either of the following to be provided in certain residential developments:
 

dedication of land which may include a certain number of dwellings for affordable housing; and/or payment of a section 94 monetary contribution for affordable housing.

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The dedication or payment is implemented in conditions of consent on residential developments. The legislation providing for inclusionary zoning controls for affordable housing under sections 94F and 94G of the Environmental Planning and Assessment Act 1979 (EP&A Act) specifies certain requirements that must be satisfied in order to implement inclusionary zoning controls. In particular, these requirements include, but are not limited to, the following: Clause 94F(1): “(1) This section applies with respect to a development application for consent to carry out development within an area if a State environmental planning policy identifies that there is a need for affordable housing within the area and: (a) the consent authority is satisfied that the proposed development will or is likely to reduce the availability of affordable housing within the area, or (b) the consent authority is satisfied that the proposed development will create a need for affordable housing within the area, or (c) the proposed development is allowed only because of the initial zoning of a site, or the rezoning of a site, or (d) the regulations provide for this section to apply to the application.‖ Clause 94F(3): “(3) A condition may be imposed under this section only if: (a) the condition complies with all relevant requirements made by a State environmental planning policy with respect to the imposition of conditions under this section, and (b) the condition is authorised to be imposed by a regional environmental plan or local environmental plan, and is in accordance with a scheme for dedications or contributions set out in or adopted by such a plan, and (c) the condition requires a reasonable dedication or contribution, having regard to the following: (i) the extent of the need in the area for affordable housing, (ii) the scale of the proposed development, (iii) any other dedication or contribution required to be made by the applicant under this section or section 94.” Clause 94G(1) and (2): ―1) Land dedicated in accordance with a condition imposed under this Division must: (a) be made available by the consent authority for the purposes of affordable housing within a reasonable time, or (b) be transferred by the consent authority in accordance with any applicable direction under subsection (3). (2) A consent authority must: (a) hold any monetary contribution paid in accordance with a condition imposed under this Division (and any additional amount earned from its investment) for the purpose for which the payment was required and apply the money for the purposes of affordable housing in the area or an adjoining area within a reasonable time, or (b) pay the monetary contribution in accordance with any applicable direction under subsection (3)” (ie a direction from the Minister). As noted above under clause 94F, the inclusionary zoning controls must be implemented in a State Environmental Planning Policy (SEPP), and in a Local Environmental Plan (LEP) or Regional Environmental Plan (REP). Notably, the inclusionary zoning can only be implemented if it can be demonstrated that there is a need for affordable housing in the area, and there is scheme adopted in the LEP or REP for managing the dedications and/or contributions.
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The legislation imposes significant obligations and responsibilities on councils in implementing an inclusionary zoning model under a planning instrument. Councils will either need to provide the funds or dwelling stock to a Governmental body to provide affordable housing in the area, or they will need to take on responsibility for administering and managing the model to ensure that any land or dwellings dedicated and any s.94 funds collected are made available for affordable housing in a reasonable time. It appears that in the majority of council areas with inclusionary zoning controls, developers tend to choose to pay the s.94 contributions for affordable housing rather than provide affordable housing units. The implications are that affordable housing units are not distributed in new developments, and Council has responsibility for ensuring that s.94 funds are spent on buying or developing affordable housing. Inclusionary zoning is only likely to lead to results in areas with potential for the development of a large number of residential units. Councils can only reasonably require dedication of a relatively small proportion of dwellings (typically under 5%) or equivalent value in monetary contributions for affordable housing. In particular, areas with limited potential for residential development s.94 contributions are likely to yield limited funds to the extent necessary to find and develop sites for affordable housing. However, it is conceivable that provided documentation can be provided to support the need for affordable housing in all areas of Parramatta a LGA wide scheme could be applied. A benefit of inclusionary zoning controls is that they are made clear in planning instruments, and are therefore transparent and provide certainty for developers and the community. However, a balance needs to be made to ensure that inclusionary zoning controls are not too prescriptive as to be inflexible and stifle innovative solutions that may arise in different development scenarios. In this regard, inclusionary zoning controls can either be a prescriptive solution with the same outcome in every development scenario (eg. 3% of dwellings to be affordable), or operate together with a negotiated solutions model discussed below. This financing option would require inclusion of Parramatta LGA within SEPP 70 and other related planning scheme amendments. NEGOTIATED SOLUTIONS The negotiated solutions model involves Council negotiating with developers to make a contribution towards the provision of affordable housing or to provide an affordable housing component in developments. It can operate alone or in conjunction with an inclusionary zoning model. A negotiated solutions model (operating without an inclusionary zoning) can only be based on a ‗voluntary‘ system in which developers have the choice whether or to pay a contribution or dedicate a dwelling. It is understood that Councils do not have the legal authority to require developers to provide affordable housing unless an inclusionary zoning model is in effect. Therefore, the negotiated solutions model (operating without an inclusionary zoning) relies on incentives for developers to provide finance or capital stock for affordable housing. In cases where Councils have an inclusionary model in place (ie a mandatory requirement to dedicate or pay contributions for affordable housing), the model may adopt a negotiated solutions approach. The premise is to provide a flexible model which allows Council and individual developers to negotiate innovative and optimum solutions for both parties in each particular development. The tool available to Councils to negotiate the affordable housing is offering planning related incentives to developers.
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The incentives that can be offered to developers can be in the form of development bonuses or concessions such as increases in floor space or building height, or relaxation of building setbacks, landscaping areas, or car parking numbers. The premise is that the bonuses or concessions either increase returns or reduce costs in a development (ie. increase the profit margin) from which finance or capital stock for affordable housing can then be provided. The main benefit of this approach is that it is flexible and provides the potential to find the best possible solution for the financing of affordable housing in each particular development scenario and to satisfy both Council and the developer. In order to implement a negotiated solutions approach, development sites need to be situated in an environment in which developer bonuses or concessions can be accommodated with acceptable environmental outcomes. The negotiated solutions approach necessitates extra Council resources and competencies to be employed in negotiating good outcomes for the financing of affordable housing. Council would need to have a competent understanding of the range of management issues and economics associated with housing development. However, the additional resources required by Councils to negotiate a solution should be considered against the additional resources that would be required by Council to ensure that s.94 payments (ie. the preference of developers in the absence of negotiated solutions) are spent on buying or developing affordable housing. A possible criticism of the negotiated solution approach is that it can lack transparency and accountability, and raises probity issues. It could also be perceived as lacking certainty for developers and the community. These potential problems can be overcome by council setting a clear policy and guidelines on negotiating and reporting on solutions for the provision of affordable housing, which may well be adopted in an LEP or DCP.

5.3

Targeting And Management Issues

The preceding discussion and the identification of preliminary target groups suggests that affordable housing solutions will require predominately rental dwellings provided at rents considerably lower than current private market rentals. Other responses will simply ensure housing is not affordable for those Parramatta households experiencing the greatest housing stress or hardship. Such an conclusion carries with it a number of management implications. These are discussed below. RENT PAYMENT POLICY If affordable housing is to be provided to households at non-market rentals decisions are required as to how rent payments are to be set. These decisions also carry with them significant funding implications. For example if rents are set in accordance with current State Government policy as a proportion of household income then this opens up the possibility of either additional Commonwealth or State funding under the range of social housing programs currently available. Conversely setting rents by some other means, (as a percentage of market rent say), will result in Council‘s policy for affordable housing being inconsistent with the operating principles of Commonwealth and State Housing Programs and may prejudice obtaining additional funding for any Council affordable housing initiative.

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RATIONING AND TENANT SELECTION The application of rent payment policies which produce a substantial discount to market will imply some form of rationing because every private tenant would seek to obtain the financial benefit applying to a discounted rent. Rationing in turn will require either the establishment of a waiting list, or another such suitable arrangement (such as housing Parramatta residents who are already credentialed on the NSW Department Of Housing‘s, (DOH), waiting list), and in the latter case obtaining an agreement from DOH that affordable housing provided under any Council program will only be available to households currently living in Parramatta LGA. Furthermore if eligibility is to be determined in regard to capacity to pay, i.e. income, income definition and income verification practices will need to be instituted. TENANCY AND DWELLING MANAGEMENT (INCLUDING WAITING LIST MANAGEMENT) For rental delivery options tenancy and dwelling management including waiting list management will be necessary on an on-going basis. The functions of the Manager would include:
        

maintaining a waiting list; maintaining income definitions and verifying tenants initial incomes and priority status re: council target groups; preparing leases; collecting rents; conducting maintenance; obtaining insurance; preparing accounts; and where necessary, establishing subsidy amount requirements where net rents do not cover outgoings; conducting tenancy terminations and evictions.

The Council has two options here, nominating either DOH community housing or DOH to be the manager of the dwellings, or appointing an independent manager determined by a tender process. Choice of DOH would enable all of DOH‘s procedures in regard to Dwelling and Tenancy Management to be imported verbatim. Choice of an external commercial manager would require Council to establish all of the necessary documentation to support the Affordable Housing Program. This documentation would include.
   



Eligibility Criteria; Lease; Management And Agents Agreement; Subsidy Payment Agreement (either with DOH or Commonwealth, such an agreement would need to specify the length of time for which subsidy would be paid and the formula for subsidy payments) Monthly and Yearly Accounts.

arising for each option.

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TABLE 11: AFFORDABLE HOUSING OPTIONS MATRIX Target Groups and Household Incomes Two Parent Families, Single Parent Families, Lone Person and Group Private Renter Households: Maximum Household Income $31,500 p.a.
Delivery Mechanism Council Provide Either Dwellings 1 Or Capital For Stock Operating Shortfall Subsidy Responsibility Financing Method Council Retained Earnings Management Agency State Or Community Housing Advantages Legal Agreement would allow Council influence on who housed and where. State get free stock No shortfall or management responsibilities Provide potential on-going funding not subject to legal challenge as subject to legal agreement with State Legal Agreement would allow Council to influence who housed and where. State get free stock No shortfall or management responsibilities  Provide potential on-going funding not subject to legal challenge as subject to legal agreement with State Legal Agreement would allow Council influence on who housed and where. State get free stock No shortfall or management responsibilities Disadvantages Lack of funds mean program of limited duration Require DOH Agreement to accept shortfall payment and management responsibility Need legal agreement Require DOH agreement to accept shortfall payment and management responsibility Need amendment to SEPP 70 Need changes to all existing statutory Instruments May add to price of housing       No transparency in funding. Unable to estimate capital that might be obtained Voluntary nature suggests funding may not eventuate Would require density concessions Need legal agreement Require DOH agreement to accept shortfalls and management responsibility

State Or Community Housing

2 As in 1 Above

State Or Community Housing

Inclusionary Zoning

State Or Community Housing

3 As in 1 Above

State Or Community Housing

Negotiated Solutions

State Or Community Housing

  

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TABLE 11: AFFORDABLE HOUSING OPTIONS MATRIX (continued) Target Groups and Household Incomes Two Parent Families, Single Parent Families, Lone Person and Group Private Renter Households: Maximum Household Income $31,500 p.a.
Delivery Mechanism Operating Shortfall Subsidy Responsibility Financing Method Any of the methods mentioned In 2 to 4 Management Agency Advantages Provide potential on-going funding not subject to legal challenge as subject to legal agreement with State Legal agreement would allow Council influence on who housed and where. State get free stock Eligibility and other conditions determined jointly Cost effective Closely targeted to need Generates substantial leverage on capital funds Simple financing procedure Allows the profit on the difference between the debt owed and the dwelling price to be returned to Affordable Housing Disadvantages As in 2 above Would require two funds No certainty about shortfall amounts Would reduce volume of stock available under capital only option

4

As In 1 Above

Council

State Or Community Housing

Debt Funded 5 Social Housing

State/Council sinking fund

Any of the methods mentioned In 2 to 4

State

Entails Council taking property risk and rent shortfall risk Would require two funds No certainty about shortfall amounts Requires agreement and funding from both Treasury (loan funds) and DOH (dwelling and tenancy management)

Extend 6 Public Housing

State or Community Housing

State Funded

State Or Community Housing

No Cost To Council No Management Responsibility

Council have little influence on who would housed and how DOH under considerable funding pressures unlikely to result in the provision of additional affordable housing

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TABLE 11: AFFORDABLE HOUSING OPTIONS MATRIX (continued) Target Groups and Household Incomes Two Parent Families, Single Parent Families, Lone Person and Group Private Renter Households: Maximum Household Income $31,500 p.a.
Delivery Mechanism Operating Shortfall Subsidy Responsibility Financing Method Management Agency Advantages Disadvantages All of the issues outlined in Options 1 to 5 apply The principal disadvantages of demand subsidies are that they involve higher subsidy risk, i.e. don‘t know what will happen to market rents, and are much less efficient (i.e. cost more per tenant because no capital gain from dwelling being returned to Affordable Housing) Reduces market efficiency No necessary stock to Parramatta Possible fraud on rents actually charged Politically difficult given prevailing Federal government attitudes to tax driven programs

All Rent Assistance Demand 7 Subsidy Options (Options 6,7,and 8)

State/Council sinking fund

Any of the methods mentioned In 1 to 4

Private landlords

No management issues as is cash payment direct to tenant for rent supplement

8 Tax Credits

Commonwealth

Commonwealth

Private

No cost or management responsibility to Council Subsidy can be capped Could encourage downward filtering of higher cost rental stock to affordable segment

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TABLE 11: AFFORDABLE HOUSING OPTIONS MATRIX (continued) Target Groups and Household Incomes Two Parent Families, Single Parent Families, Lone Person and Group Private Purchaser Households: Maximum Household Income $40,000 to $60,000 p.a.
Delivery Mechanism Operating Shortfall Subsidy Responsibility Financing Method Management Agency Advantages Disadvantages Very high price for investors share May increase housing prices Doesn‘t help households in stress Very small equity left at end of day No control over credentialing, may select higher risk borrowers leading to higher defaults and hence default costs

9

Shared Equity Credit Support

Wizard Shared Equity Package

Provide funds for mortgage default insurance

No management Required

Cost is likely to be low Subsidy can be capped by number of households covered Council can ensure some Parramatta households get access to home ownership

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REFERENCES
ABS, (2003) Special Cross Tabulation of Recent Movers To Parramatta LGA Berry M. (2002), Affordable Housing Project Background Paper, for the Brotherhood of St Lawrence. Berry, M. (2002) New Approaches to Expanding the Supply of Affordable Housing in Australia: An Increasing Role for the Private Sector, Final Report, AHURI, Melbourne. Berry, M. (2000) Responding to Social Exclusion through the Provision of More Affordable Housing, Department of Urban Affairs and Planning, Sydney. Berry, M., Briskman, L., Mackenzie, D. and Ngwenya, T. (2001) Victorian Indigenous Homelessness Study, Aboriginal Housing Board of Victoria, Melbourne. Berry, M. and Hall, J. (2001) Policy Options for Stimulating Private Sector Investment in Affordable Housing Across Australia: Stage 1 Report, Outlining the Need for Action, Affordable Housing National Research Consortium, Sydney (www.consortium.asn.au). Caplin, A. And C. Joye (2002) A Primer on a Proposal for Global Housing Finance Reform, Menzies Research Centre, Sydney . Colebatch, T. (2002a) ‖Housing debt puts pressure on rates―, The Age, 23 September. Colebatch, T. (2002b) ‖Investors defy Reserve and buy up―, The Age, 9 September. Florida, R. (2002) The Rise of the Creative Class, Basic Books, New York. Hall J. (2002) Adelaide Rental Housing Program: Consultants Report to Adelaide City Council Hall, J. and Berry, M. (2002) Risk Management and Housing Assistance: A New Methodology, Final Report, AHURI, Melbourne. Hall, J., Berry, M. and Carter, G. (2001) Policy Options for Stimulating Private Sector Investment in Affordable Housing Across Australia: Stage 2 Report, Identifying and Evaluating the Options, Affordable Housing National Research Consortium, Sydney (www.consortium.asn.au). McNelis, S., Hayward, D. And Bissett, H. (2002) A Private Retail Investment Vehicle for the Community Housing Sector, Final Report, AHURI, Melbourne. Meen, G. and Andrew, M. (1999) ―Spatial Structure and Social Exclusion, Discussion Paper in Urban and Regional Economics no. 40, University of Reading, Reading, UK. National Housing Strategy (1991) The Affordability of Australian Housing, Issues Paper 2, AGPS, Canberra. NATSEM (1999) Income Distribution Report: Assets of the Baby Boomers, National Centre for Social and Economic Modelling, Canberra. Putnam, R. (1998) "Social Capital: Its importance to housing and community development", Housing Policy Debate, vol. 9, no. 1.

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Report Of The Parliamentary Senate Community Affairs Reference Committee, (1997), Housing Assistance In Australia. AGPS Residex P/L, (2003) Special analysis of median prices and rents in four areas of Parramatta. Spiller, M. (2002) ―Far from the last word for silent partner―, Australian Financial Review, 13 August. Stubbs, J. (1996) Social Cost Benefit Analysis of NSW Department of Housing‟s Neighbourhood Improvements Program: Case study, Airds, NSW Department of Housing, Sydney. Van Wyngen, G. (2002) ―Howard‘s housing time bomb―, Australian Financial Review, 28-29 September. Vinson, T. (1999) Social Disadvantage in Western and South-Western Sydney, Society of St. Vincent de Paul, Parramatta and Wollongong Diocesan Councils, N.S.W. (unpublished report). Williams, P. (2000) ‖Inclusionary zoning and affordable housing in Sydney―. Urban Policy and Research, vol. 18, no. 3. Wood, G. (2001) ‖Promoting the supply of low-income rental housing―, Urban Policy and Research, vol. 19, no. 4. Wulff, M. (2001) ―Growth and change in one-person households: implications for the housing market‖, Urban Policy and Research, vol. 19, no. 4. Wulff, M. and C. Maher (1998) ‖Long-term renters in the Australian housing market‖, Housing Studies, vol. 13, no. 1. Yates, J. (1999) ―Decomposing Australia‘s home ownership trends, 1975-1994‖, in J. Yates and M. Wulff (eds.) Australia‟s Housing Choices, University of Queensland Press, Brisbane. Yates, J. (2002) A Distributional Analysis of the Impact of Direct and Indirect Housing Assistance, AHURI Positioning Paper, Australian Housing and Urban Research Institute, Melbourne. Yates, J. and M. Wulff (2000) ‖W(h)ither low cost private rental housing―, Housing Studies, vol. 18, no. 1.

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ATTACHMENT 1: AFFORDABLE HOUSING OPTIONS
A set of eleven preferred policy options was proposed in the Hall and Berry Report. This list was derived by a qualitative evaluation of each potential option in terms of the balance of advantages and disadvantages identified, the aim being to select options that offered maximum advantage and minimum disadvantage against the stated evaluation criteria. These judgments were based on the analysis of risks, taxation impacts and investor responsiveness detailed in chapter 2. It is – to repeat -- particularly important to propose options that have the potential to deliver a large volume of new private investment to this sector in ways which minimise the costs to government and maximise the access of households in housing stress to affordable housing. The eleven options are summarised in the Table drawn from Table 5 in the Stage 2 Report For The Affordable Housing National Research Consortium. This table lists, for each option, the delivery mechanism, type of support by both levels of government, the type of financing to be used, raised by either or both levels of government – and the advantages and disadvantage of the ‗package‘ in terms of the criteria already noted. The table illustrates that support approaches by way of taxation subsidies, guarantees and a prescribed assets ratio are primarily focused on action by the Commonwealth. Conversely, in most cases where outlay support will be required, the States will need to provide it – or, given the Federal structure within which the delivery mechanisms operate, manage the distribution of these outlays. Outlays will often be required in addition to the other forms of support because the delivery of taxation concessions or guarantees (say) may not reduce the rate of return required to investors to a level consistent with affordable housing outcomes for low income households. In short, the States may need to pay ‗top up‘ subsidies in addition, in order to ensure that the housing provided does not cost low income households more than 30 per cent of their incomes. The source of these outlays can either be the States, the Commonwealth or both levels of government, the latter two possibilities involving bilateral agreement between the Commonwealth and the States.

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SUMMARY OF ‘PREFERRED’ POLICY OPTIONS
Delivery Mechanism Support Type Commonwealth State Financing Type Raised By Com’wealth State Advantages   Capital Provision Of Dwelling, Government Management Taxation Concession (income)  Outlays Real Rate Debt No Yes       Outlays Outlays Real Rate Debt Yes No          Simple Accessible to h‘sing provs. Compatible/ Safe & secure High volume Likely lowest subsidy cost of debt options Flexible for States No conflict with CSHA Simple Accessible to h‘sing provs. Compatible Safe and secure High volume Simple Accessible to h‘sing provs. Compatible Safe and secure High volume Guarantees volume of funds    Disadvantages Funding costs still higher than net revenues Dwelling price/CPI mismatch risk Subsidy costs 0.5% higher than if Com‘wealth funds used

18

7*

Capital Provision Of Dwelling, Government Management Capital Provision Of Dwelling, Government Management

    

Not as flexible as state based approaches Com‘wealth do not directly fund Conflicts with CSHA

20*

Taxation Concession (income)

Outlays

Float. Rate Debt

No

Yes

As in 1 Subsidy costs 0.5% higher than if Commonwealth funded

   

59

Capital Provision Of Dwelling, Government Management

Prescribed Assets Ratio

Outlays

Direct investment

Yes

No

  

Possibility of access & compatibility problems Possibility of fraud Targeting a problem Differential performance of super. Funds May encourage switch away of savings Allocation between States a problem Need to impose a price – how establish?

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SUMMARY OF ‘PREFERRED’ POLICY OPTIONS
Delivery Mechanism Support Type Commonwealth State Financing Type Raised By Com’wealth State Advantages   62 Home Loans Outlays Float.Rate Debt No Yes                       Simple Accessible to housing providers Compatible Safe and secure High volume Simple Accessible to housing providers Compatible Safe and secure High volume Flexible for States No confict with CSHA Simple Accessible to housing providers Compatible Safe and secure High volume Simple Accessible to housing providers Compatible Safe and secure High volume Flexible for States No conflict with CSHA      Disadvantages Interest rate risk – greater than fixed rate option Higher default risk than fixed rate option Subsidy costs 0.5% higher than if Com‘wealth funds used Subsidy costs 0.5% higher than if Com‘wealth funds used Significant reinvestment risk

65

Home Loans

Outlays

Fixed rate debt

No

Yes

    

69

Home Loans

Taxation Concession (income)

Outlays

Float. Rate Debt

Either

Either

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Home Loans

Taxation Concession (income)

Interest rate risk – greater than fixed rate option Higher default risk than fixed rate option 2% lower cost of finance than options 60 to 68 Subsidy costs 0.5% higher than if Com‘wealth funds used Significant reinvestment risk

Outlays

Fixed rate debt

No

Yes

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Delivery Mechanism

18/ 65

Shared Equity

Support Type Commonwealth State Taxation Concession (income)/ Outlays Home Loans

Financing Type

Raised By Com’wealth State 

Advantages Mix of advantages list against options 18 and 65 

Disadvantages Mix of disadvantages list against options 18 and 65

Fixed Rate Debt

No

Yes 

Flexible structure

  

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Direct (e.g. rent) Assistance

Taxation Concession (income)

Outlays

Direct investment

No

Yes

     Guarantees volume of funds    

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Direct (e.g. rent) Assistance

Prescribed assets ratio

Outlays

Direct investment

Yes

No

  

High cost to govt. Complex & not replicable in all contexts Possible access & compatibility problems Targting a problem (& possibly fraud) High transaction costs Variable subsidy require-ments between States Problem of market accep- tance of individual deals Possibility of access & compatibility problems Possibility of fraud Targeting a problem Could encourage differential performance of super. Funds May encourage switch of savings to other investment types Allocation between States a problem Need to impose a price – how establish?

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Key Options
Currently 3 of the 11 policy options are the subject of serious investigation by Government or a private sector initiative. Berry6 in another report for the Brotherhood Of St Lawrence succinctly analysed the three key options. A summary of his discussion is set out below. THE PREFERRED AFFORDABLE HOUSING NATIONAL RESEARCH CONSORTIUM MODEL The Consortium‘s preferred model require state and territory governments to each sell long-term bonds at market prices to private investors. Given the current low level of government borrowing in the Australian capital market, institutional investors like superannuation funds appear to be very keen to purchase such instruments. Capital raised in this way would be used by each state housing authority (SHA) to acquire new or existing dwellings, to be let at affordable rents to eligible tenants. However, since investors are receiving commercial interest returns on their loans, affordable rents would fall short of operating costs and interest payments to bond holders. This gap is therefore met by a cash (outlay) subsidy paid by the Commonwealth Government to each state and territory for the term of the transaction (20 years). The transaction is cost neutral to the states as long as the estimated subsidy covers the actual gap between rental yield and SHA costs each year. The model requires SHAs to progressively sell off the dwellings (after a minimum period) when they fall vacant and to use the proceeds to retire (pay back) debt. At the end of the period (20 years) any remaining dwellings in the transaction are sold and the remaining debt retired; sitting tenants are relocated. This keeps the total required Commonwealth subsidy to a manageable level. This model generates a high degree of leverage of private loan funds; for every dollar of subsidy, four or five dollars of private investment is secured (under the base case assumptions). SHAs may, at any stage, decide to retain this stock by re-financing (selling more debt) or committing its own tax revenues. In addition, the Commonwealth and a State can at any time agree to launch another subsidised loan transaction to maintain or expand the dwellings under management. These decisions are made through time in the light of perceived housing need, available Commonwealth funding and the willingness of the State to bear the risks involved (see below) and/or commit its own funds to ‗topping up‘ the scheme. The size of the Commonwealth subsidy to each state is dependent on key factors: the relative rates of tenant turnover in the stock and the level of operating costs in each jurisdiction. The higher a SHA‘s costs, the greater the gap between net revenue and interest costs on the borrowed funds and the larger the subsidy required to ‗break even‘. Similarly, the more rapid the turnover of tenants in public stock, the more quickly the dwellings are sold into the private market and the faster debt is repaid, reducing the interest payments that have to be made and the size of the required subsidy. The model, under the given assumptions, delivers a substantial leverage of private funds. For a $1 billion capital acquisition program across the States and Territories:   7,500 dwellings can be added to SHA stock and rented at affordable levels to eligible tenants the gross subsidy payable by the Commonwealth is $220 million—or a weighted national average of $2,288 per assisted tenant per year. This varies from a high of $3,413 in NSW to a low of $790 in W.A.

6

BERRY, M. Dec 2002, Affordable Housing Project Background Paper: for the Brotherhood Of St Lawrence in Partnership with the Committee For Economic Development Australia.

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

once the flow back of income tax revenues from debt holder to the Commonwealth treasury is included, this subsidy per tenant per year falls to $908 and the total net cost to $90 million.

Hence, for every gross dollar of government subsidy, $4.50 of affordable housing can be acquired. Put another way, the end result is four-and-a-half times as much extra affordable housing as if the government funds were directly committed to acquiring stock. Apart from the high degree of leverage achieved, this model delivers a number of benefits:     It establishes a firm basis for long-term cooperation between Commonwealth and States around housing issues of national importance. The Commonwealth is able to cap its total subsidy exposure upfront, with the knowledge that the states have a strong incentive to manage the affordable stock efficiently and target it effectively to those in need. Each state retains control over the stock and receives subsidies tailored to the conditions in its jurisdiction. This model meets the Consortium‘s four key criteria for an acceptable model—it is equitable (targeted to need), efficient (high leverage), promises to deliver a high volume of extra affordable housing and is feasible, both with respect to the requirements of private investors and nature of fiscal politics in Australia

In reality, the Consortium model reinvents public borrowing for social housing. But it does so in a very transparent way that imposes a strong discipline on governments at both levels to efficiently match available housing assistance to real housing need and continually monitor outcomes to generate maximum reach. Research (Hall and Berry, 2001) clearly demonstrates that this model:   has the capacity to double output compared with current policy—that is, double the number of households in need achieving affordable housing for any level of government subsidy—in Sydney and Melbourne and deliver excellent outcomes in Adelaide. is clearly the least-cost way for government to quickly stimulate a substantial expansion of the affordable housing stock.

It is very likely that an overall policy that mixes this approach with the existing measures of rent assistance and capital provision through the CSHA will have efficient outcomes in most if not all the major housing markets in Australia. The Consortium model is therefore best seen as complementary to, rather than a substitute for, existing housing assistance policies. THE WIZARD/FINANCE (CAPLIN AND JOYE), SHARED EQUITY/LISTED HOUSING TRUST MODEL The model proposed by Caplin and Joye (2002)7, posted on the web site of the Menzies Research Centre, aims to reduce the costs of home ownership, especially in the early years of purchase when most households are heavily mortgaged. Instead of committing a large part of household income to servicing a large mortgage debt, a household could buy its house in partnership with another investor. Equity would be shared and the household would only have to borrow to finance its share. The income saved from servicing a smaller debt (and splitting rates, insurance costs, etc.) could then be invested in a range of other assets (eg extra superannuation contributions), rather than locked into the house, a large illiquid and risky asset.

7

CAPLIN A. & JOYE C., (2002), A Primer On A Proposal For Global Housing Finance Reform, Menzies Research Centre, Sydney

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Under this shared equity arrangement, the household is the managing partner and the investor the sleeping partner. The former decides when to sell, to whom and for what price. The household also decides on how the property is maintained, renovated and used. The sleeping partner ‗wakes up‘ only when the dwelling is sold in order to receive its share of the sale proceeds. The household saves on housing costs each year because the sleeping partner foregoes any rental payment on its share in favour of receiving all its return at the end, when the house is sold. In effect, the investor is swapping rental income for a share of realised capital gain on the dwelling. In the option being developing by Wizard, in return for not receiving any payments during the term the dwelling is occupied by the purchaser/occupier, the purchaser/investor receives a share of the capital growth of the property exactly double their initial share of the dwelling at original purchase. The purchaser/occupier is responsible for all maintenance, rates etc during the term of occupation. After paying all their share of the transaction costs at purchase and sale the investors pre-tax return for a ten year term (assuming current median house prices as the purchase price, and Sydney‘s average rates of dwelling price appreciation for the last ten years), is approximately 14.1%. This is akin to saying the purchaser/occupier will have paid 14.1% compound annual interest, (calculated at monthly rests), for the privilege of the silent partners investment, This assumes that the transaction costs are shared 70% to the purchaser and 30% to the investor at purchase and are deducted from the gross capital gain at sale before the 60/40 capital gain split is completed. Capital growth rates and median dwelling prices are drawn from Residex P/L. The assumptions for the modeling are set out below in the Table. ASSUMPTIONS FOR INVESTOR’S RATE OF RETURN Assumption
Purchase Price Purchasers Initial Share Investors Initial Share Legal Costs At Purchase and Sale Stamp Duty Agents Fee Purchasers Share Of Net Gain Investors Share Of Net Gain Term

Amount Or %
$462,000 $323,400 $138,600 $1,000 $16,280 2.5% Of Selling Price 40% 60% 10 years

As Spiller8, (2002) has suggested, to make a commercial return the investor ends up appropriating most of the realised capital gain. Spiller also makes the point that the model favours the purchase of housing with high capital gains prospects. These opportunities are likely to restrict use of this approach to particular parts of the metropolitan housing markets, normally at the higher value end. Again, this is unlikely to help lower income people searching for affordable housing in areas where property values are growing more slowly. This model has been the target of even more intense criticism by van Wyngen (2002, p. 27), 9 who argues that the model does little to increase the supply of housing. By increasing the funds available for the purchase of existing homes it would force prices up, placing home ownership further out of reach to low-income households.
8 9

SPILLER M, (2002), Far From The Last Word For Silent Partner, Australian Financial Review, 13 August VAN WYNGEN, G. (2002) Howard’s Housing Time Bomb, Australian Financial Review, 28-29 September

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THE LOW-INCOME HOUSING TAX CREDITS MODEL The economist Gavin Wood (2001)10 also proposed a way of delivering greater incentives for small landlord-investors to provide more low cost rental housing. He argues that this stock has been declining in Australia because the after-tax returns of landlords of low-cost dwellings are lower than the returns accruing to the landlords of higher-value dwellings. There are three reasons for this divergence:  Federal income tax: negative gearing delivers higher after-tax returns to high marginal tax rate investors than to lower income investors. Since high-income investors tend to be concentrated in the high value end of the rental market—and low-income investors at the low rent end— after-tax returns are lower and rental yields higher in the low rent segment. Economies of scope: the management and associated costs (land tax, real estate agents‘ fees) of holding one high value rental dwelling are less than the costs for two cheaper dwellings of equal total value. Higher maintenance costs: low rent stock tends to be older and in need of more maintenance than newer high value dwellings.

 

Lower after-tax net returns provide a financial incentive for landlord-investors to exit the low rent segment. Wood proposes two tax-related policies to offset or even reverse this disincentive to remain in the low cost rental business. Low-income housing tax credit A US-style tax credit paid to investors of dwellings renting below a threshold level (assumed in Wood‘s base case to be $100 per week in 1996 prices). The tax credit is delivered as a reduction in the investor‘s annual total tax liability. Wood (following the US example) calculates the annual credit at the rate of 4 per cent of the dwelling‘s building value. Wood‘s microsimulation analysis concludes that this would increase the annual after-tax return to lowincome investors by almost 1 per cent of the total capital value of the dwelling. The gain, on average, to high income investors is only 0.1 per cent, suggesting that this measure would be effective in targeting the tax subsidy to the low rent segment of the market. Capital gains reform An annual threshold on capital gains taxation (CGT); i.e. tax is not payable on the first, say, $10,000 of capital gain. Wood‘s analysis shows that if the current British capital gains tax regime (which has a GST threshold) replaced the Australian regime, landlords of low rent dwellings would gain an average of 0.3 per cent of dwelling value each year. This compares to an increase in CGT liability of about 0.1 per cent of dwelling value for landlords in the high rent segment. Wood‘s analysis suggests that, properly targeted, subsidies delivered through the income and capital gains tax systems could increase the financial incentive for existing and prospective private landlords to remain in and expand the low rent segment of the market. However, this approach depends for its effectiveness on landlords who receive the tax benefit actually passing it on in lower rents and renting their dwellings to lower income tenants. The fact that the low-rent segment of the housing market is not efficient reduces the likelihood that normal market forces will bring about the desired ‗rational‘ response.

10

WOOD G. (2001), Promoting The Supply Of Low-Income Rental Housing , Urban Policy and Research, Vol 19, No 4

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In short, landlords may claim the tax benefit and yet rent to higher income people unless stringent and effective administrative checks are in place and efficiently imposed. In the United States, State and local government have developed such checks, at a further cost of program implementation. Similar arrangements would need to be introduced and funded in Australia, reducing the leverage effect. Table 4 below summarises the main advantages and disadvantages of each of the models outlined above. OVERVIEW OF MODELS DISCUSSED Advantages Consortium Bond Model
 Cost effective (efficient)  Effective partnership between Commonwealth & States  Total subsidy capped for the Commonwealth  Closely targeted to need  High leverage of private investment  Generates a large volume of private investment  Draws on existing financial instruments (bonds)  Helps maintain a deep market for govt. bonds in Australia  Provides strong incentives for states to manage the expanded public stock efficiently  Simple and straightforward financing procedure  Does not require govt. subsidy  Allows households to diversify their savings, leading to greater lifetime wealth accumulation  Reduces initial barriers to accessing home ownership  Reduces housing stress, especially in early years of purchase  Potential to develop a large secondary market in ‗bundled‘ mortgages  Targeted at households in the broad middle of the income hierarchy (fourth to sixth income deciles)  Concentrates financial and operational risk on States  Relies on public borrowing in a neo-liberal climate of public debt reduction  Requires new management systems to be put in place in SHAs to manage risks

Disadvantages

Shared Equity/Listed Housing Trusts Models
 Stimulates housing demand without necessarily stimulating supply, thus reinforcing rising housing prices  Model has not emerged ‗naturally‘ through market forces anywhere in world  Unclear what government facilitation would be necessary to overcome market barriers  Of limited relevance to households in bottom three income quintiles  Model driven by realising future capital gains, but institutional investors are yield-driven  No track record, so high risk premium demanded by investors  Model only suits dwellings and areas promising high capital gains  Home-owner may be left with little equity  Banks unlikely to invest, constrained by capital adequacy requirements  Difficulty in quarantining tax benefits to affordable stock—‗deadweight cost‘  ‗Distorts‘ market outcomes, reduces efficiency  Possibility for fraud via benefits claimed on stock not rented at affordable rents  High surveillance costs to ensure compliance with rules  Politically infeasible, contradicting existing fiscal philosophy of govt. central agencies winding back special tax concessions

Woods Tax Credit Model
 Trades on existing ‗cottage industry‘ nature of the rental sector  Total tax subsidy can be capped (as in the U.S.)  Could be facilitated by states granting targeted land tax and stamp duty concessions to investor-landlords  Provides a long-term basis for secure leases (tenure) and cost savings on maintenance, etc.  Could encourage downward ‗filtering‘ of higher rent stock to affordable segment

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ATTACHMENT 2: AFFORDABLE HOUSING IN OTHER COUNCIL AREAS: SYNOPSIS
Council/ Area Delivery Mechanism
Capital provision by private developers Voluntary bonus density provisions in return for a component of affordable housing, and Section 94 contribution to compensate for the loss of low cost accommodation Capital provision by private developers Mandatory inclusionary zoning (3% of residential floor space and 1% of commercial floor space, or equivalent monetary contribution)

Government Support
Department of Housing eligible tenants housed.

Funding Method Or Source
Cash contributions or units dedicated to Council in perpetuity or rented with a rent cap for a specified period of time.

Management Approach
Management by Eastern Suburbs Rental Housing Association (ESRHA) under Community Tenancy Scheme (CTS) guidelines (accommodation for households on DoH waiting list only). Management by City West Housing Ltd. Mix of low, and moderate income earners. Rent paid by moderate income earners cross-subsidises shortfall from rents from low income households. Management by City West Housing Ltd intended. To date no affordable dwellings constructed or acquired.

Waverley

Sydney (City West)

No ongoing financial commitment by Council

Contribution collected by Council (condition on consent). Funds paid to State Government. State Government to pass funds on to affordable housing provider (City West Housing) ltd.

South Sydney (Green Square)

Capital provision by private developers Mandatory inclusionary zoning (3% of residential floor space and 1% of commercial floor space, or equivalent monetary contribution) Capital provision by private developers Mandatory inclusionary zoning (4% of residential floor space and 1% of commercial floor space, or equivalent monetary contribution) Capital provision by Government. Land provision by Council and/ or Government Section 94 contribution to compensate for the loss of low cost accommodation

No ongoing financial commitment by Council

Contribution collected by Council (condition on consent). Funds paid to State Government. State Government to pass funds on to affordable housing provider (City West Housing) ltd.

Willoughby

TBA

Contribution collected by Council (condition on consent).

Management by Community Housing Lower North Shore. Management by Community Housing Lower North Shore under Community Tenancy Scheme (CTS) guidelines (accommodation for households on DoH waiting list only).. Management by Community Housing Lower North Shore under CTS guidelines (accommodation for households on DoH waiting list only).

North Sydney

TBA

S94 Contribution collected by Council (condition on consent).

Port Phillip (Vic)

Capital provision by Government Joint ventures on Council or other public land.

Percentage of Council‘s rent from commercial premises applied to affordable housing trust fund. Commonwealth Rent Assistance

Cash contributions form developers of projects resulting in a loss of low cost accommodation. Joint venture funds from Department of Housing. Use of surplus Council land or Department of Housing land. State government contribution of $50 m and Brisbane City Council contribution of $10m to establishment of Brisbane Housing Co. Commonwealth Rent Assistance

Brisbane

Brisbane Housing Company established with charter to provide affordable housing.

Management Company

by

Brisbane

Housing

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ATTACHMENT 3: DETAILED AFFORDABILITY ANALYSIS
The North East
PRICE AND AFFORDABILITY IN THE NORTH EAST Graphs 1 and 2 set out the median dwelling prices and rents for the four areas of Parramatta and the North East as at December 2002. GRAPH 1

Source: Residex P/L special data series provided for Parramatta LGA

GRAPH 2

Source: Residex P/L special data series provided for Parramatta LGA

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Presuming a 5% deposit, interest rates of 6.5%, and a 25 year loan term graph 3 sets out the minimum annual household income required to rent or buy houses or units, assuming a maximum payment of 30% of household income in mortgage or rent payments. GRAPH 3

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

Overall then at a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $48,000 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about one third of all mover households from obtaining affordable housing. THE NORTH EAST AREA: RECENT MOVER ANALYSIS Origin Graph 4 sets out the origin of households who moved to the North East in the period 1996-2001. GRAPH 4

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census.

65% of all the households who moved to the North East, did not originate from any of the adjoining Local Government Areas (LGA), with a further 19%, (approximately), coming from Ryde LGA and 6% from Baulkham Hills. Less than 3% of the total movers came from any other LGA.

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Household Type Table 1 sets out the proportion of total mover households to the North East represented by each family type, and compares that to the proportions for movers to Parramatta LGA as a whole. Two parent families and couples without offspring together account for over 60% of all households moving to the North East, with lone person households making up a further 20% of mover households. Compared to the averages for Parramatta as a whole the North East is overrepresented in couples without offspring, two parent families and families with child; and is underrepresented in group households, single parent families and lone person households. TABLE 1: NORTH EASTERN AREA: MOVER HOUSEHOLDS BY FAMILY TYPE Family Type
Group Household Single Parent Families Lone Person Households Couples Without Offspring Two Parent Families 1 FAMILIES WITH CHILD 2 TOTALS

Numbers North East Area
280 474 873 1,007 1,673 2,147 4,307

Percentage Of Total North East
6.5 11.0 20.3 23.4 38.8 49.8 100.0

Percentage Of Total Parramatta
8.2 11.2 21.9 23.1 35.6 46.8 100.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census 1 Includes the two categories of single parent families and two parent families 2 Excludes not stated.

Household Income Table 2 sets out the proportion of total mover households to the North East represented by each household income band, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 2: NORTH EASTERN AREA: MOVER HOUSEHOLDS BY HOUSEHOLD INCOME Ann. Household Income
Less than $10,348 $10,349-$20,748 $20,749-$31,148 $31,149-$41,548 $41,549-$51,848 $51,949-$62,348 $62,348-$77,948 More than $77,948

Numbers North East Area
243 361 367 356 372 438 448 1,499

Percentage Of Total North East Area
6.0 8.8 9.0 8.7 9.1 10.7 11.0 36.7

Percentage Of Total Parramatta
5.6 10.2 11.3 11.6 11.2 11.5 10.4 28.1

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census 1 Excludes not stated.

Movers to the North Eastern Area enjoy considerably higher average household incomes than movers to Parramatta LGA as a whole with nearly 37% experiencing incomes in excess of $77,948, and some 57% enjoying incomes greater than the median for Parramatta movers of $51,848.

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As would be expected with this income profile, when compared to the Parramatta LGA averages the North East is over-represented in the top two income ranges, but also, surprisingly in the bottom income range of less than $10,348. Movers to the North East are under-represented in all income ranges from $10,349 to $62,348 being most strongly under-represented in the $31,149$41,548 income category. Dwelling Type Graph 5 sets out the dwellings occupied by movers to the North Eastern Area. The graph sets out for each dwelling type and bedroom size the proportion of total dwellings occupied by households moving to the North East. Some 52.8% of all dwellings occupied are detached dwellings with approximately some 17% of the total detached dwellings being two bedrooms or less, (9.1% of the total), and 83% of detached dwellings having three bedrooms or more, (43.7% of the total). Town houses and semi detached amounted to almost 25% of all dwellings moved to, with almost 23.7% of that group being smaller dwellings, (5.9% of the total), and 76.3% being larger dwellings of three bedrooms or more, (18.9% of the total). Flats amounted to 21.9% of the dwellings moved to, with 83.6% of that group being smaller dwellings, (18.9% of the total), and 16.4% being larger dwellings of three bedrooms or more, (3.6% of the total. Overall two thirds of all dwellings occupied were characterised by three bedrooms or more with only one third being dwellings containing two bedrooms or less. GRAPH 5

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Graph 6 sets the same comparison for the Parramatta LGA as a whole.

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GRAPH 6

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Compared to the average for Parramatta LGA the movers to the North East are over-represented in the occupation of both smaller and larger detached dwellings and larger semi detached and townhouses. The proportion in the latter category being almost three times the average for Parramatta as a whole. Overall proportionately, one third more larger dwellings were occupied than occurring with movers to Parramatta as a whole. Conversely dwellings occupied by movers to the North East are under-represented in the smaller semi-detached and townhouses, and both smaller and larger flats categories with smaller dwellings and flats being almost half the proportion of that applying to movers to Parramatta LGA as a whole. Housing Stress. Clearly households who are not paying more than 30% of their income in rent are not experiencing major housing affordability problems and hence stressed private renter households and their characteristics represent a good proxy for to whom affordable housing might be targeted. Graph 7 sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. It should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress.

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GRAPH 7

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 36.3% of private renter mover households were experiencing housing stress as at the 30 th June 2001. This represented almost 600 households and slightly more than the average of 35.1% for the Parramatta LGA as a whole. Stressed Households By Household Type Graph 8 sets out the proportion of total stressed mover households occupied by each family type. Exactly 60% of all stressed renters are made up of the two groups of two parent families and lone person households. When combined with single parent families they represent over 80% of all stressed renters. GRAPH 8

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

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Graph 9 set out below examines the proportion of the total numbers for each family type represented by stressed households. GRAPH 9

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

To explain for the cross hatched bars (percentage of total stressed renters), stressed couples without offspring constitute some 44 households representing 8% of the total stressed renter households numbering 551. For the white bars these 44 stressed renter households represent some 4.9% of all couples without offspring households who moved into the North East and number some 1007 households. When we examine the results from this perspective it is obvious that stressed renters are very substantially over-represented in the single parent family category and significantly overrepresented in the group household family category. Whilst two parent families and lone person households represent over 60% of stressed households they only comprise 9.0% and 14%, respectively of all mover households of these family types. The Household Income Of Stressed Households Graph 10 sets out the income distribution of stressed households compared with the income distribution of total mover households. For example for the cross hatched bars (percentage of total stressed renters), 78 stressed renter households earn less than $10,348 per annum, constituting 13.4% of total stressed renters households numbering 584. For the white bars total mover households earning less than $10,348 per annum, number 243, representing some 6% of all mover households who moved into the North East who number some 4,084 households. As would be expected over 50% of stressed movers earn less than $31,148 per annum and almost 80% of stressed renters less than $41,548 per annum. Stressed renters are over-represented in all income categories up to $51,848 per annum.
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GRAPH 10

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

To illustrate graph 11 sets out stressed renter households as a percentage of total mover households in each income category or range. GRAPH 11

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

Nearly 40% of all mover households with incomes of between $20,748 and $41,548 are stressed renters. Some 32% and approximately 25% respectively, of mover households with incomes of less than $10,348 and incomes between $10,349 and $20,748 are also stressed renters. The proportions in these latter groups are probably lower because a significant number of movers in

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these categories would be public tenant movers whose rent payment to income is protected from being more than 25%. This would significantly reduce the stressed proportions. Stressed Households By Dwelling Choice Table 3 sets out by smaller and larger dwellings and types of dwellings the proportion of total dwellings occupied by each stressed family type. The dwelling choices of stressed single parent families, (22.1% of stressed households), are concentrated in the small flats and larger townhouses categories with 80% of dwellings chosen falling into these two dwelling types. For stressed couples without offspring, (8.0% of stressed households), dwelling choices are concentrated in the small flats, (33%), larger townhouses, (24.4%), and larger detached dwellings segments with these three types accounting for nearly 80% of dwellings chosen by this group. The dwelling choices of stressed two parent families, (33.8% of stressed households), are concentrated in the larger detached dwellings and townhouses categories with nearly 70% of dwellings chosen falling into these two dwelling types. For stressed group households, (8.9% of stressed households), dwelling choices are concentrated equally in the small flats, and larger detached dwellings segments, (29.2% each), followed by smaller detached dwellings, (16.7%), with these three types accounting for nearly 75% of dwellings chosen by this group. The dwelling choices of stressed lone person households, (27.2% of stressed households), are concentrated in the smaller flats, (39%), and larger detached dwellings categories, (22.7%) followed by smaller detached dwellings, (14.2%), with 75% of dwellings chosen falling into the former two dwelling types.

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TABLE 3 NORTH EASTERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Family Type

Detached Dwellings
9.3 6.7 2.1 16.7 14.2 0.0 22.2 38.2 29.2 22.7 9.3 28.9 40.3 45.8 36.9

Total
60.0 46.7 24.1 52.1 63.8 40.0 53.3 75.9 47.9 36.2

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

6.7 6.7 7.9 6.3 10.6 36.0 24.4 31.4 12.5 10.6
Total

44.0 33.3 14.1 29.2 39.0 4.0 6.7 6.3 6.3 2.8 48.0 40.0 20.4 35.4 41.8

Greater Than Two Bedrooms

42.7 31.1 39.3 18.8 21.3

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Graph 12 summarizes the dwelling demand from all stressed households moving to the North Eastern area. This suggests some 38.5% of dwellings occupied were detached dwellings with only 20% of these being smaller dwellings of two bedrooms or less, 29.4% townhouses and semi detached with some 25.5% of these being smaller dwellings, and 31.1% flats with, by contrast, 85% being smaller dwellings. Overall 41.7% of the total dwellings occupied comprised dwellings of 2 bedrooms or less and 58.3% dwellings with three bedrooms or more. GRAPH 12

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Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type not stated.

The North West Area
PRICE AND AFFORDABILITY IN THE NORTH WEST Turning now to our affordability analysis as at the December quarter 2002, the median price of houses and units was $327,600 and 264,700 respectively, and median weekly rents were $250 and $230 respectively. Presuming assumptions as outlined earlier, Graph 13 sets out the minimum annual household income required to rent or buy houses or units. GRAPH 13

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

Overall, at a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $39,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 28.5% of mover households from obtaining affordable housing. THE NORTH WEST AREA: RECENT MOVER ANALYSIS Origin Graph 14 sets out the origin of households who moved to the North West in the period 1996-2001. 51% of all the households who moved to the North West, did not originate from any of the adjoining Local Government Areas (LGA), with a further 14% coming from Holroyd LGA and 11.7% from Baulkham Hills and 11% from Blacktown. When combined with Ryde over 40% of movers originated from immediately adjacent LGA‘s. 3% or less of the total movers came from any other LGA.

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GRAPH 14

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census.

Household Type Table 4 sets out the proportion of total mover households to the North West represented by each family type, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 4: NORTH WESTERN AREA: MOVER HOUSEHOLDS BY FAMILY TYPE Family Type
Group Household Single Parent Families Lone Person Households Couples Without Offspring Two Parent Families 1 FAMILIES WITH CHILD 2 TOTALS

Numbers North West
158 306 483 695 1,115 1,598 2,757

Percentage Of Total North West
5.7 11.1 17.5 25.2 40.4 58.0 100.0

Percentage Of Total Parramatta
8.2 11.2 21.9 23.1 35.6 46.8 100.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census 1 Includes the two categories of single parent families and two parent families 2 Excludes not stated.

Two parent families and couples without offspring together account for over 65% of all households moving to the North West, with lone person households making up a further 17.5% of mover households. Similar to the North East, compared to the averages for Parramatta as a whole the North West is over-represented in couples without offspring, two parent families and families with child; and under-represented in group households, single parent families and lone person households. Household Income

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Table 5 sets out the proportion of total mover households to the North West represented by each household income band, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 5: NORTH WESTERN AREA: MOVER HOUSEHOLDS BY HOUSEHOLD INCOME Ann. Household Income
Less than $10,348 $10,349-$20,748 $20,749-$31,148 $31,149-$41,548 $41,549-$51,848 $51,949-$62,348 $62,348-$77,948 More than $77,948

Numbers North West
71 223 226 227 294 325 350 909

Percentage Of Total North West
2.7 8.5 8.6 8.6 11.2 12.4 13.3 34.6

Percentage Of Total Parramatta
5.6 10.2 11.3 11.6 11.2 11.5 10.4 28.1

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Movers to the North Western Area enjoy considerably higher average household incomes than movers to Parramatta LGA as a whole with nearly 35% experiencing incomes in excess of $77,948, and some 60% enjoying incomes greater than the median for Parramatta movers of $51,848. As would be expected with this income profile, when compared to the Parramatta LGA averages, the North West is over-represented in the top three income ranges, and is under-represented in all income ranges from the bottom to $41,548 with the proportions being equal in the income range, $41,549-$51,848. The area is most strongly under-represented in the less than $10,348 income category. Dwelling Type Graph 15 sets out the dwellings occupied by movers to the North Western Area The graph sets out for each dwelling type and bedroom size the proportion of total dwellings occupied by households moving to the North West. Higher than in the North East, 70% of all dwellings occupied are detached dwellings with only some 9.1% of the total detached dwellings being two bedrooms or less, (6.6% of the total), and 90% of detached dwellings having three bedrooms or more, (63.4% of the total). Town houses and semi detached amounted to almost 26% of all dwellings moved to, with 42.4% of that group being smaller dwellings, (11% of the total), and 57.6% being larger dwellings of three bedrooms or more, (14.9% of the total). Flats amounted to only a very small 4.2% of the dwellings moved to, with 90.7% of that group being smaller dwellings, (3.9% of the total), and 9.3% being larger dwellings of three bedrooms or more, (0.3% of the total). Overall nearly 80% of the dwellings occupied were characterised by three bedrooms or more with only 21.4% being dwellings containing two bedrooms or less.

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GRAPH 15

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Graph 16 sets the same comparison for the Parramatta LGA as a whole. GRAPH 16

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census: Excludes not stated.

Compared to the average for Parramatta LGA the movers to the North West are over-represented in the occupation of larger detached dwellings and smaller and larger semi detached and townhouses. The proportion of detached dwellings is almost two thirds greater than the average for

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Parramatta as a whole. Overall almost 60% more larger dwellings were occupied proportionately than for Parramatta as a whole. Conversely dwellings occupied by movers to the North West are under-represented in the smaller detached dwellings and both smaller and larger flats with flats being a negligible proportion compared to that applying to movers to Parramatta LGA as a whole. Housing Stress. Graph 17 sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. As with the North East, it should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress. GRAPH 17

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 30.9% of private renter mover households were experiencing housing stress as at the 30 th June 2001. This represented some 293 households and considerably less proportionately, than the average of 35.1% for the Parramatta LGA as a whole. Stressed Households By Household Type Graph 18 sets out the proportion of total stressed mover households occupied by each family type. Almost 60% of all stressed renters are made up of the two groups of lone person households and single parent families. When combined with two parent families they represent over 83% of all stressed renters.

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GRAPH 18

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

Graph 19 examines the proportion of the total numbers for each family type represented by stressed households. GRAPH 19

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

To explain for the cross hatched bars (percentage of total stressed renters), stressed group households constitute some 15 households representing 5.4% of the total stressed renter households numbering 278. For the white bars these 15 stressed renter households represent some 9.5% of all group households who moved into the North West and number some 158 households. When we examine the results from this perspective it is obvious that stressed renters are very substantially over-represented in the group households category. Whilst lone person households

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and single parent families represent over 60% of stressed households they only comprise 18% and 25.8%, respectively of all mover households of these family types. The Household Income Of Stressed Households Graph 20 sets out the income distribution of stressed households compared with the income distribution of total mover households. GRAPH 20

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

For example for the cross hatched bars (percentage of total stressed renters), 34 stressed renter households earn less than $10,348 per annum, constituting 11.6% of total stressed renters households numbering 293. For the white bars total mover households earning less than $10,348 per annum, number 71, representing some 2.7% of all mover households who moved into the North West who number some 2,635 households. As would be expected almost 70% of stressed movers earn less than $31,148 per annum and almost 90% of stressed renters less than $41,548 per annum. Stressed renters are overrepresented in all income categories up to $41,848 per annum. To illustrate Graph 21 sets out stressed renter households as a percentage of total mover households in each income category or range. Because of the much lower proportion of total dwellings being public housing in these areas the proportion of stressed renters is highest in the lowest income category of less than $10,348 p.a. with nearly 50% paying more than 30% of their income in rent. Similarly over a third of all mover households in the next income category are stressed with a further 43.8% of movers in the income category, $20,748-$31,148. Even 25% of mover households in the income category $31,149$41,548 are stressed with the proportions only being minor in the remaining income groups.

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GRAPH 21

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

Stressed Households By Dwelling Choice Table 6 sets out by smaller and larger, and types of dwellings the proportion of total dwellings occupied by each stressed family type. The dwelling choices of stressed single parent families, (28.4% of stressed households), are concentrated in the smaller and larger townhouses categories with 71% of dwellings chosen falling into these two dwelling types. For stressed couples without offspring, (11.5% of stressed households), dwelling choices are concentrated in the larger detached dwellings (45.2%), and larger townhouses, (19.45%), segments with these two types accounting for nearly 65% of dwellings chosen by this group. Smaller detached dwellings and flats account for a further 26% of all dwellings occupied. The dwelling choices of stressed two parent families, (23.4% of stressed households), are concentrated in the larger detached dwellings and townhouses categories with 80% of dwellings chosen falling into these two dwelling types. For stressed group households, (5.4% of stressed households), dwelling choices are concentrated first in the larger detached dwellings, (47.1%) and then equally in the small detached dwellings and flats, and larger townhouses segments, (17.6% each). The dwelling choices of stressed lone person households, (31.3% of stressed households), are concentrated in the larger detached dwellings, (46.6%), and smaller townhouses categories, (22.1%) followed by larger townhouses, (15.6%), with 84% of dwellings chosen falling into these two dwelling types. TABLE 6 NORTH WESTERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE

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OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Family Type

Detached Dwellings
17.9 12.9 6.2 17.6 11.7 0.0 45.2 49.2 47.1 46.6 17.9 58.1 55.4 64.7 58.4

Total
57.1 35.5 20.0 35.3 37.7 42.9 64.5 80.0 64.7 62.3

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

28.6 9.7 9.2 0.0 22.1 42.9 19.4 30.8 17.6 15.6
Total

10.7 12.9 4.6 17.6 3.9 0.0 0.0 0.0 0.0 0.0 10.7 12.9 4.6 17.6 3.9

Greater Than Two Bedrooms

71.4 29.0 40.0 17.6 37.7

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Graph 22 summarizes the dwelling demand from all mover households to the North Western area experiencing housing stress. This suggests some 60.8% of dwellings occupied were detached dwellings with only 9.5% of these being smaller dwellings of two bedrooms or less, 33.1% townhouses and semi detached with some 12.9% of these being smaller dwellings, and 6.1% flats with, by contrast, all of them being smaller dwellings. Overall 28.5% of the total dwellings occupied comprised dwellings of 2 bedrooms or less and 71.5% dwellings with three bedrooms or more. GRAPH 22

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Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type not stated.

The REP, (Central), Area
PRICE AND AFFORDABILITY IN THE REP AREA Turning now to our affordability analysis as at the December quarter 2002, the REP area is the most expensive place in Parramatta to buy a house and the second most expensive place to buy a multi-unit with the median price of houses and units being $445,800 and 281,500 respectively, and median weekly rents were $281 and $265 respectively. Presuming assumptions as outlined earlier, Graph 23 sets out the minimum annual household income required to rent or buy houses or units. GRAPH 23

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

At a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $45,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 50% of mover households from obtaining affordable housing. THE REP AREA: RECENT MOVER ANALYSIS Origin Graph 24 sets out the origin of households who moved to the REP Area in the period 1996-2001. Almost 75% of all the households who moved to the REP Area, did not originate from any of the adjoining Local Government Areas (LGA), the highest proportion of all areas, with a further 6.1% coming from Blacktown LGA, 5.3% from Baulkham Hills and 5.2% from Holroyd. 3.5% or less of the total movers came from any other LGA.

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GRAPH 24

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census.

Household Type Table 7 sets out the proportion of total mover households to the REP Area represented by each family type, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 7: REP AREA: MOVER HOUSEHOLDS BY FAMILY TYPE Family Type
Single Parent Families Group Household Couples Without Offspring Lone Person Households Two Parent Families 1 FAMILIES WITH CHILD 2 TOTALS

Numbers REP Area
555 670 1,447 1,551 1,598 2,153 5,821

Percentage Of Total REP Area
9.5 11.5 24.9 26.6 27.5 37.0 100.0

Percentage Of Total Parramatta
11.2 8.2 23.1 21.9 35.6 46.8 100.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census

Two parent families, lone person households and couples without offspring each make up almost the same proportions of total households and together account for over 75% of all households moving to the REP, with group households making up a further 11.5% of mover households. Compared to the averages for Parramatta as a whole the REP is over-represented in lone person households, couples without offspring, and group households, and under-represented in single and two parent families and families with child. Household Income Table 8 sets out the proportion of total mover households to the REP Area represented by each household income band, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 8: REP AREA: MOVER HOUSEHOLDS BY HOUSEHOLD INCOME Ann. Household Income Numbers REP Area Percentage Of Total REP Area Percentage Of Total Parramatta

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Less than $10,348 $10,349-$20,748 $20,749-$31,148 $31,149-$41,548 $41,549-$51,848 $51,949-$62,348 $62,348-$77,948 More than $77,948

339 546 699 781 710 700 507 1,284

6.1 9.8 12.6 14.0 12.8 12.6 9.1 23.1

5.6 10.2 11.3 11.6 11.2 11.5 10.4 28.1

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census 1 Excludes not stated.

Movers to the REP Area experience slightly lower average household incomes than movers to Parramatta LGA as a whole, with some 55% enjoying incomes lower than the median for Parramatta movers of $51,848. As would be expected with this income profile, when compared to the Parramatta LGA averages the REP is over-represented in the bottom and middle income ranges, and is under-represented in the top two income ranges i.e. above $62,348. The area is most strongly under-represented in the top income category of more than $77,948. Dwelling Type Graph 25 sets out the dwellings occupied by movers to the REP Area The graph sets out for each dwelling type and bedroom size the proportion of total dwellings occupied by households moving to the REP Area. Much lower than in the other areas, only 11.7% of all dwellings occupied are detached dwellings with some 30.7% of the total detached dwellings being two bedrooms or less, (3.6% of the total), and 69.3% of detached dwellings having three bedrooms or more, (8.1% of the total). Town houses and semi detached amounted to only 8.1% of all dwellings moved to, with 49.4% of that group being smaller dwellings, (4% of the total), and 50.6% being larger dwellings of three bedrooms or more, (4.1% of the total). Flats amounted to an overwhelming 80.2% of the dwellings moved to, with 88.5% of that group being smaller dwellings, (71% of the total), and 11.5% being larger dwellings of three bedrooms or more, (9.2% of the total). Overall nearly 80% of the dwellings occupied were characterised by two bedrooms or less with only 21.4% being dwellings containing three bedrooms or more.

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GRAPH 25

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Graph 26 sets the same comparison for the Parramatta LGA as a whole. GRAPH 26

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Compared to the average for Parramatta LGA the movers to the REP are very substantially overrepresented in the occupation of smaller flats and slightly over-represented in larger flats with the proportion of flats being almost double the average for Parramatta as a whole. Overall the REP had almost 50% more smaller dwellings occupied than Parramatta as a whole. Conversely dwellings occupied by movers to the REP are under-represented in all types of detached dwellings and townhouses with detached dwellings being almost a third of the proportions to those applying to movers to Parramatta LGA as a whole.

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Housing Stress. Graph 27 sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. As with the North East, it should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress. GRAPH 27

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

Overall 34% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented some 1,295 households and slightly less than the average of 35.1% for the Parramatta LGA as a whole. Stressed Households By Household Type Graph 28 sets out the proportion of total stressed mover households occupied by each family type. 60% of all stressed renters are made up of the two groups of lone person households and group households. When combined with single parent families they represent over 75% of all stressed renters.

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GRAPH 28

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

Graph 29 set out below examines the proportion of the total numbers for each family type represented by stressed households. GRAPH 29

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

To explain for the cross hatched bars (percentage of total stressed renters), stressed group households constitute some 116 households representing 9.3% of the total stressed renter households numbering 1,245. For the white bars these 116 stressed renter households represent some 17.3% of all group households who moved into the REP and number some 670 households.

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When we examine the results from this perspective it is obvious that stressed renters are very substantially over-represented in the group households and single parent families categories. Whilst lone person households represent over 24% of stressed households they only comprise 7.5% of all mover households of this family type. The Household Income Of Stressed Households Graph 30 sets out the income distribution of stressed households compared with the income distribution of total mover households. GRAPH 30

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

For example for the cross hatched bars (percentage of total stressed renters), 208 stressed renter households earn less than $10,348 per annum, constituting 16.1% of total stressed renters households numbering 1,295 (note some minor differences between household types for not stated). For the white bars total mover households earning less than $10,348 per annum, number 208, representing some 6.1% of all mover households who moved into the REP who number some 5,566 households. As would be expected over 75% of stressed movers earn less than $31,148 per annum and over 90% of stressed renters less than $41,548 per annum. Stressed renters are over-represented in all income categories up to $41,848 per annum. To illustrate Graph 31 sets out stressed renter households as a percentage of total mover households in each income category or range. For the bottom three income ranges, (less than $31,148) stressed households as a proportion of total households are the highest of the areas so far examined. Stressed households constitute

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almost, or more than, 60% of households in all three income ranges. Even 28% of mover households in the income category $31,149-$41,548 are stressed with the proportions only being minor in the remaining income groups. GRAPH 31

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

Stressed Households By Dwelling Choice Table 9 sets out by smaller and larger, and types of dwellings, the proportion of total dwellings occupied by each stressed family type. The dwelling choices of stressed single parent families, (14.1% of stressed households), are concentrated in the smaller flats category with 83% of dwellings chosen falling into this dwelling type. For stressed couples without offspring, (15% of stressed households), dwelling choices are also concentrated in the smaller flats category with this type accounting for 86% of dwellings chosen. The dwelling choices of stressed two parent families, (9.3% of stressed households), are concentrated in the smaller and larger flats categories with 82% of dwellings chosen falling into these two dwelling types. For stressed group households, (35.3% of stressed households), dwelling choices are also concentrated in the smaller and larger flats categories with 84% of dwellings chosen falling into these two dwelling types. The dwelling choices of stressed lone person households, (25.2% of stressed households), are concentrated in the smaller flats category with 81.7% of dwellings chosen falling into this dwelling type. TABLE 9 REP AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL

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DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Family Type Detached Dwellings
2.4 1.6 1.9 3.4 2.3 0.0 1.6 7.1 2.5 4.0 2.4 3.2 9.0 5.9 6.3

Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Total
89.1 93.0 75.5 72.0 87.6 10.9 7.0 24.5 28.0 12.4

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

3.6 5.3 4.2 2.5 3.5 1.8 2.7 4.5 6.8 1.9
Total

83.0 86.1 69.4 66.1 81.7 9.1 2.7 12.9 18.6 6.6 92.1 88.8 82.3 84.7 88.3

Greater Than Two Bedrooms

5.5 8.0 8.7 9.3 5.4

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Graph 32 summarizes the dwelling demand from all stressed mover households to the REP Area. GRAPH 32

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type not stated.

This suggests that overwhelmingly households moving to the REP Area are occupying small flats which make up 85% of all the dwellings chosen.

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The Southern Area
PRICE AND AFFORDABILITY IN THE SOUTHERN AREA Turning now to our affordability analysis as at the December quarter 2002, the Southern area is the cheapest place in Parramatta to buy or rent any type of dwelling, with the median price of houses and units being $313,100 and 227,500 respectively, and median weekly rents were $248 and $178 respectively. Presuming assumptions as outlined earlier, Graph 33 sets out the minimum annual household income required to rent or buy houses or units. GRAPH 33

Source: Derived from Residex P/L special data series provided for Parramatta LGA.

At a maximum of 30% of household income in housing payments, the minimum income required to obtain any median rented dwelling is $30,900 per annum. Returning to the income profile of households who moved into the area, these prices and rents would effectively exclude about 38% of mover households from obtaining affordable housing. THE SOUTHERN AREA: RECENT MOVER ANALYSIS Origin Graph 34 sets out the origin of households who moved to the Southern Area in the period 19962001. GRAPH 34

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Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census.

Approximately 56% of all the households who moved to the Southern Area, did not originate from any of the adjoining Local Government Areas (LGA), the lowest proportion of all areas, with a further 16% coming from Auburn LGA, 12.2% from Holroyd, and 6.2% from Fairfield. 4% or less of the total movers came from any other LGA. Household Type Table 10 sets out the proportion of total mover households to the Southern Area represented by each family type, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 10: THE SOUTHERN AREA: MOVER HOUSEHOLDS BY FAMILY TYPE Family Type
Group Household Couples Without Offspring Single Parent Families Lone Person Households Two Parent Families 1 FAMILIES WITH CHILD 2 TOTALS

Numbers Southern Area
115 300 340 374 944 1,284 2,073

Percentage Of Total Southern Area
5.5 14.5 16.4 18.0 45.5 61.9 100.0

Percentage Of Total Parramatta
8.2 23.1 11.2 21.9 35.6 46.8 100.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census 1 Includes the two categories of single parent families and two parent families 2 Excludes not stated.

Two parent families and lone person households together account for over 64% of all households moving to the Southern Area, with single parent families making up a further 16.4% of mover households. Compared to the averages for Parramatta as a whole the Southern Area is over-represented in single and two parent families and families with child, and under-represented in lone person households, couples without offspring, and group households. It is most under-represented in couples without offspring. Household Income Table 11 sets out the proportion of total mover households to the Southern Area represented by each household income band, and compares that to the proportions for movers to Parramatta LGA as a whole. TABLE 11: THE SOUTHERN AREA: MOVER HOUSEHOLDS BY HOUSEHOLD INCOME Ann. Household Income
Less than $10,348 $10,349-$20,748 $20,749-$31,148 $31,149-$41,548 $41,549-$51,848 $51,949-$62,348 $62,348-$77,948

Numbers Southern
137 323 313 283 219 173 177

Percentage Of Total Southern Area
7.2 16.9 16.4 14.8 11.4 9.0 9.3

Percentage Of Total Parramatta
5.6 10.2 11.3 11.6 11.2 11.5 10.4

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More than $77,948

288

15.1

28.1

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census

Movers to the Southern Area experience significantly lower average household incomes than movers to Parramatta LGA as a whole, and have the lowest median incomes of all areas, with some two thirds experiencing incomes lower than the median for Parramatta movers of $51,848. As would be expected with this income profile, when compared to the Parramatta LGA averages the Southern Area is over-represented in the lowest four income ranges, and is under-represented in the top three income ranges i.e. above $51,848. The area is most strongly under-represented in the top income category of more than $77,948, with the proportion of incomes being almost half that applying to Parramatta as a whole. Dwelling Type Graph 35 sets out the dwellings occupied by movers to the Southern Area The graph sets out for each dwelling type and bedroom size the proportion of total dwellings occupied by households moving to the Southern Area. Higher than in all the other areas, almost 70% of all dwellings occupied are detached with some 27.6% of the total detached dwellings being two bedrooms or less, (19.2% of the total), and 72.4% of detached dwellings having three bedrooms or more, (50.2% of the total). Town houses and semi detached amounted to only 11.7% of all dwellings moved to, with 47.8% of that group being smaller dwellings, (5.6% of the total), and 52.2% being larger dwellings of three bedrooms or more, (6.1% of the total). GRAPH 35

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes not stated.

Flats amounted to just 18.7% of the dwellings moved to, with 91.4% of that group being smaller dwellings, (17.1% of the total), and 8.6% being larger dwellings of three bedrooms or more, (1.6% of the total).

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Overall 42% of the dwellings occupied were characterised by two bedrooms or less with 58% being dwellings containing three bedrooms or more. Graph 36 sets the same comparison for the Parramatta LGA as a whole. GRAPH 36

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census: Excludes not stated.

Compared to the average for Parramatta LGA the movers to the Southern Area are very substantially over-represented in the occupation of larger and smaller detached dwellings. Overall the Southern Area had almost 16% more larger dwellings occupied than Parramatta as a whole. Conversely dwellings occupied by movers to the Southern are under-represented in the all types of townhouses and flats with flats being less than half of the proportions to those applying to movers to Parramatta LGA as a whole. Housing Stress. Graph 37 sets out the proportions of private renter households experiencing housing stress as at the 30th June 2001. As with the North East, it should be noted that with the movement in both dwelling prices and rents since that date these numbers probably represent a severe underestimate of the actual numbers now in housing stress. GRAPH 37

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated.

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Overall 42.5% of private renter mover households were experiencing housing stress as at the 30th June 2001. This represented some 358 households and is the highest of all areas and much higher than the average of 35.1% for the Parramatta LGA as a whole. Stressed Households By Household Type Graph 38 sets out the proportion of total stressed mover households occupied by each family type. 64% of all stressed renters are made up of the two groups of lone person households and couples without offspring. When combined with group households they represent over 82% of all stressed renters. GRAPH 38

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

Graph 39 set out below examines the proportion of the total numbers for each family type represented by stressed households. GRAPH 39

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Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes family type not stated.

To explain for the cross hatched bars (percentage of total stressed renters), stressed group households constitute some 23 households representing 6.7% of the total stressed renter households numbering 342. For the white bars these 23 stressed renter households represent some 20% of all group households who moved into the Southern Area and number some 115 households. When we examine the results from this perspective it is obvious that stressed renters make up almost all the group households and are also slightly over-represented in the two parent families category. Whilst stressed lone person households represent over 37% of stressed households they only comprise 16.6% of all mover households of this family type. The Household Income Of Stressed Households Graph 40 sets out the income distribution of stressed households compared with the income distribution of total mover households.

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GRAPH 40

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

For example for the cross hatched bars (percentage of total stressed renters), 29 stressed renter households earn less than $10,348 per annum, constituting 8.1% of total stressed renters households numbering 358. For the white bars total mover households earning less than $10,348 per annum, number 137, representing some 7.2% of all mover households who moved into the Southern Area who number some 1,913 households. As would be expected over 80% of stressed movers earn less than $31,148 per annum and over 97% of stressed renters less than $41,548 per annum. Stressed renters are over-represented in all income categories up to $41,848 per annum. To illustrate Graph 41 sets out stressed renter households as a percentage of total mover households in each income category or range. For the bottom three income ranges, (less than $31,148) stressed households as a proportion of total households are similar to those being experienced in the North East. The low proportion of stressed households in the lowest income ranges is due to the number of public tenant movers to the area whose rent payments to income are protected. Stressed households constitute almost or more than 40% of households in the next two income ranges, (i.e. $10,349-$31,148) Some 21% of mover households in the income category $31,149-$41,548 are also stressed with the proportions only being minor in the remaining income groups.

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GRAPH 41

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and tenure not stated

Stressed Households By Dwelling Choice Table 12 sets out by smaller and larger, and types of dwellings the proportion of total occupied by each stressed family type. The dwelling choices of stressed single parent families, (10.5% of stressed households), are concentrated in the smaller detached dwellings and smaller flats categories with almost 80% of dwellings chosen falling into this dwelling type. For stressed couples without offspring, (26.9% of stressed households), dwelling choices are also concentrated in these two categories, (smaller detached dwellings and smaller flats), with these types accounting for 76% of dwellings chosen. The dwelling choices of stressed two parent families, (6.7% of stressed households), are concentrated in the larger detached dwelling category, (55.5% of stressed households), and equally in the smaller detached dwellings and flats with 19.5% each falling into these two dwelling types. For stressed group households, (18.1% of stressed households), dwelling choices are concentrated in the larger detached dwellings and smaller flats categories with 57% of dwellings chosen falling into these two dwelling types. The remaining dwellings chosen fall equally between all other types. The dwelling choices of stressed lone person households, (37.7% of stressed households), are concentrated in the larger detached dwellings, (33.3%), small flats, (28.3%), and small detached dwellings categories, (23.3%), with 85% of dwellings chosen falling into these dwelling types.

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TABLE 12 THE SOUTHERN AREA: DWELLING TYPE BY STRESSED FAMILY TYPE: PERCENTAGE OF TOTAL DWELLINGS OCCUPIED BY STRESSED FAMILY TYPE Family Type Detached Dwellings
46.9 43.3 19.5 10.7 23.3 0.0 23.3 55.5 32.1 33.3 46.9 66.7 75.0 42.9 56.7

Dwelling Type TownhousesFlats Semi Detached
Two Bedrooms Or Less

Total
85.7 76.7 41.4 46.4 56.7 14.3 23.3 58.6 53.6 43.3

Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households Single Parent Families Couples Without Offspring Two Parent Families Group Households Lone Person Households

6.1 0.0 2.3 10.7 5.0 8.2 0.0 3.1 10.7 10.1
Total

32.7 33.3 19.5 25.0 28.3 6.1 0.0 0.0 10.7 0.0 38.8 33.3 19.5 35.7 28.3

Greater Than Two Bedrooms

14.3 0.0 5.5 21.4 15.0

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type and tenure not stated.

Graph 42 summarizes the dwelling demand from all stressed mover households to the Southern Area. GRAPH 42

Source: Australian Bureau Of Statistics: Special Cross Tabulation of 2001 Census Excludes incomes not stated, partial incomes stated and dwelling type not stated.

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This suggests that households moving to the Southern Area are primarily occupying detached dwellings both small, (23.4%), and large, (43.5%), which make up 68% of all the dwellings chosen. Small flats are being chosen by a further 22.5% of households.

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