Why Australia’s housing system is failing and investment in affordable housing is key

Last week we saw that the median rents across Melbourne had jumped by up to 22 percent in the last year. At the same time the median house price in Melbourne passed $700,000, hitting $707,415 on the weekend. And this is in the middle of what property experts are saying is a ‘cool period’ in the property market.

With house prices showing no signs of slowing down, less people can afford to buy and are therefore crowding the rental market, leading to the kind of rent increases mentioned above. This has the greatest effect on low income earners who are squeezed out of the market and forced into unstable housing arrangements, and even homelessness.

It is in this environment that University of New South Wales Associate Professor Vivienne Milligan has come out and reinforced how Australia’s housing system is failing in the key areas of reducing poverty and housing insecurity.

Speaking at the Institute of Public Administration’s annual conference last week, Associate Professor Milligan said that there are fundamental problems with how the Commonwealth rent assistance program operates, because it doesn’t have “affordability objectives.”

“[Commonwealth Rent Assistance] payment rates are derived from historic levels and have not kept pace with rents,” Milligan said.

“Maximum payments are capped and have no consistent or equitable relationship with rents across Australia.”   

However, Associate Professor Milligan stressed that the answer was not simply to increase rent assistance, but to examine closely the relationship between the supply-side assistance and the demand-side assistance. She also pointed out that, unsurprisingly, one major problems is the lack of affordable housing in Australia. According to Milligan, the former National Housing Supply Council estimated that the backlog of affordable housing supply was 90,000 dwellings in 2012, and will reach 150,000 in 2020 unless action is taken. Another important issue is making sure the social housing system is financially sustainable.

These figures reinforce just how desperately we need an affordable housing strategy both in Victoria and nationally. CHP has detailed an affordable housing strategy in its 2016-17 pre-Budget Submission which can be viewed here.