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					Private renters squeezed by high
rents
Problem
The general trend in rents is for them to increase. A shortage of supply of rental housing and low
vacancy rates means that rents are pressured upwards. There has been a 52% increase in rents for 3-
bedroom houses, and a 60% increase in rents for 2-bedroom flats over the last decade. See Figure 1.1
Among capital cities, Sydney is the least affordable for low-income private renters.

New South Wales has the largest proportion of its low-income private renter households in housing
stress, and it is the only state where the proportion of low-income private renter households in housing
stress is greater than 50%. See Figure 2.2 By stress, we mean they are paying more than 30% of their
income on rent.

The financial position of renters, especially low-income renters, is considerably more serious than that
for owner-occupiers, with more than 40 percent of the lowest-income quartile spending 30 percent or
more of their disposable income on housing costs.3

Figure 1: Trends in private rents, Sydney, 2000–2009
   450


   400


   350


   300


   250


   200


   150


   100
           2000      2001      2002      2003     2004      2005      2006   2007       2008   2009

                                  3-bedroom houses              2-bedroom flats/units

Source: Productivity Commission reports on government service provision.




                 Shelter NSW       The voice of affordable housing     www.shelternsw.org.au
                            Suite 2, Level 4, 377–383 Sussex St, Sydney NSW 2000
                Shelter NSW state election campaign factsheet      17 December 2010   Page 1
Figure 2: Proportion of low-income private renter households in housing stress, 2007–08
   60.0




   50.0




   40.0




   30.0




   20.0




   10.0
            NSW        Vic        Qld        WA         SA        Tas        ACT        NT        Aust


Source: COAG Reform Council, National Affordable Housing Agreement: baseline performance report for 2008-09, vol. 2,
Performance data, 2010, p.14.



A solution
Both the Commonwealth and state governments have programs to assist private renters pay their rent
and to establish new tenancies, such as rent assistance (Commonwealth), private rental subsidies
(NSW) and Rentstart (NSW). Academic surveys have shown that most low-income private renters
prefer to stay in the private rental market rather than move into public housing.4 But for every two
private renters who want to stay in private rental there is one who would prefer the relative stability
offered by social housing, in terms of greater security of tenure, as well as the greater subsidy of their
rents.

For private renters in housing stress or housing crisis, there needs to be an option of stable housing
where rents are not charged on a market basis. This is the role of the social housing and intermediate
housing sectors, and they need to grow, not shrink. The addition of some 6,000 extra social housing
dwellings through the economic stimulus response has been terrific. But that addition was a ‘one-off’
because of an anti-recessionary response to a global financial crisis. Now, the main source of growth
in affordable rental housing is likely to be through the National Rental Affordability Scheme.5 The
Commonwealth government wound this scheme back mid-2010.6 A key reason for that seems to have
been a reluctance by state governments, including New South Wales, to match the subsidies the
Commonwealth was offering.7 Those subsidies cannot be got from current resources within Housing
NSW.8

The amount of subsidy from the State Budget to Housing NSW for ongoing social housing programs is
inadequate, generally. There has been a 44% decrease in state government subsidies to that agency
between 2008–09 and 2010–11. See Figure 3.9




ACCESS CHOICE LIVABILITY             Shelter NSW state election campaign factsheet         17 December 2010       Page 2
Figure 3: State Budget subsidy to Housing NSW/AHO Housing Policy and Assistance Program, 2006
to 2011


                                               300




                                               250




                                               200
                                   $ million




                                               150



                                               100




                                                50



                                                 0
                                                      2005-06             2006-07         2007-08            2008-09         2009-10          2010-11


Source: Housing NSW and Aboriginal Housing Office budget information.

Unless there is an enhancement of the Housing NSW budget from the State Budget the agency will be
forced to look to ‘internal sources’, such as sales, to maintain its operations. More fundamentally, the
state’s social housing program will not be able to provide an alternative option to very–low income and
low-income private renters looking for nonmarket housing. The gap between likely potential demand
for and likely supply of social housing is quite wide: see Figure 4.10

Figure 4: Trends in provision of social housing
                                   700
                                                         Social housing required to keep pace with low household growth
                                                         Social housing required to keep pace with medium household growth
                                   650
                                                         Actual/projected social housing dwellings
 Social Housing Dwellings ('000)




                                   600



                                   550


                                   500



                                   450


                                   400



                                   350
                                               1996    2000        2004        2008        2012       2016        2020       2024      2028

                                                                                           Year


Source: Housing Ministers Conference, ‘Implementing the national housing reforms’, Victorian Government Department of
Human Services, 2009, p.16.




ACCESS CHOICE LIVABILITY                                                      Shelter NSW state election campaign factsheet             17 December 2010   Page 3
There needs to be a specific enhancement of the Housing NSW budget from the State Budget to
enable New South Wales to seek 30% of the NRAS subsidies going nationally. And there needs to an
enhancement of the Housing NSW budget from the State Budget to enable the agency to maintain its
operations.




1
  The graph indicates market rents in the private housing market, Sydney, in dollars per week, for the June
quarter. The source of the data is various annual Reports on government service provision published by the
Productivity Commission; their source is the Real Estate Institute of Australia’s Market Facts.
2
  COAG Reform Council, National Affordable Housing Agreement: baseline performance report for 2008-09, vol.
2, Performance data, COAG Reform Council, Sydney, 2010, p.14. This report defines low-income households as
those in the bottom 40% of equivalized disposable household income, excluding Commonwealth rent assistance.
3
  Gary N Marks and Stephen T Sedgwick, ‘Is there a housing crisis? The incidence and persistence of housing
stress 2001-2006’, Australian Economic Review, vol.41, no.2, June 2008, p.220.
4
  Terry Burke, Caroline Neske and Liss Ralston, ‘Entering rental housing’, AHURI, Melbourne, 2004, pp.9-12.
5
  Craig Johnston, Supply of social housing, Shelter Brief no. 41, Shelter NSW, Sydney, November 2009.
6
  Nick Lenaghan and Sophie Morris, ‘Low-rent scheme raided for regions’, Australian Financial Review, 20 July
2010, p.13..
7
  For the first two rounds of the Scheme the NSW government said it would match up to 3,000 of the 11,000
incentives available in those rounds. This target of 27% of the total going was short of the share of the Australian
population that New South Wales has (32%). As it happened NSW applicants won 23% of the incentives from the
first two rounds. In the third round of the Scheme, the NSW government said it would contribute 910 basic
incentives (being 7% of the 14,000 incentives available nationally under the original schedule).
8
  State matching contributions in 2008-09 were paid for from a grant from the Rental Bond Board and from
interest from the Housing Reserve Fund. The Rental Bond Board money ($17.3 million) comprised money left in
an Affordable Housing Innovation Fund, and this went to 287 dwellings developed by community housing
providers through ‘NRAS A’ subsidies. (‘NRAS A’ incentives consisted of a state grant to registered community
housing providers valued up to 40% of a project’s development costs.) The 2009-10 State Budget did not provide
for any Budget (Consolidated Fund) financing of the state incentives. Housing NSW, in its budget commentary,
identified 89 dwellings as getting ‘NRAS A’ incentives: these projects were approved in 2008-09. The (normal)
NRAS incentives in 2009-10 were financed from the Housing Reserve Fund’s cash reserves. The 2010-11 State
Budget indicated a sum of $72.5 million over 10 years for state NRAS contributions; this $72.5 million includes a
grant to Housing NSW of $25 million from the Rental Bond Board. While the state government contribution to
NRAS dwellings from the first two rounds of the Scheme was about 51% of the combined Commonwealth and
state governments' contributions, the reason for this was a one-off input of money from the Affordable Housing
Innovation Fund in the first round.
9
  Figures are estimates for each year from the relevant year’s supplementary budget information prepared by the
Department of Housing/Housing NSW and the Aboriginal Housing Office.
10
   Housing Ministers Conference, ‘Implementing the national housing reforms: a progress report to the Council of
Australian Governments from Commonwealth, State and Territory housing ministers’, Victorian Government
Department of Human Services, 2009, p.16.




ACCESS CHOICE LIVABILITY           Shelter NSW state election campaign factsheet      17 December 2010       Page 4

				
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