Housing Affordability

Last Updated: 
2013
Update Frequency: 
Annual and Census every 5 years

Indicator Rationale

Housing satisfies the essential needs of people for shelter, security and privacy. Shelter is recognised throughout the world as a basic human right. The adequacy or otherwise of housing is an important component of individual wellbeing. Housing also has great significance in the national economy, with its influence on investment levels, interest rates, building activity and employment. Affordability of housing will affect choice of location, access to employment, education, essential services and proximity to social and family networks (Onkaparinga, 2000). 

The cost of housing is particularly significant to people on lower incomes.  When costs are high, people have less residual income to spend on other essential household items. There is no accepted definition of housing affordability. It is a relative term that is about the capacity to enter the housing market; that is, cost and availability. The cost of housing relates to the prosperity of the community, the functioning of the economy, location choices relating to employment opportunities, and transportation issues. 

Data Sources

Australian Bureau of Statistics 2011 Census

Australian Bureau of Statistics 2006 Census, data available on request and Basic Community Profile Table B32.

Land Victoria, Department of Sustainability and Environment, 2013, A Guide to Property Values, Government of Victoria.

Land Victoria, Department of Sustainability and Environment, 2012, A Guide to Property Values, Government of Victoria.

Land Victoria, Department of Sustainability and Environment, 2011, A Guide to Property Values, Government of Victoria.

Land Victoria, Department of Sustainability and Environment, 2010, A Guide to Property Values, Government of Victoria.

Land Victoria, Department of Sustainability and Environment, 2009, A Guide to Property Values, Government of Victoria.

Information is obtained from Notices of Acquisition (NOAs) supplied to the Valuer-General by the State Revenue Office.  An NOA is required to be completed by each purchaser within one month of the acquisition of any real estate in Victoria. 

Measures

Four measures looking at different aspects of housing afforability have been derived:

Households with Housing Costs 30% or More of Gross Income: Sourced from ABS. The measure is expressed as a percentage of all households. Supplementary information is provided for two subpopulations - households paying rent, and households with a mortgage. In the 2006 Census, information sufficient to determine the proportion of gross income spent on housing costs was not obtained from 12.0% of Victorian households (varying between 8.8% and 14.6% in individual LGAs). These households were excluded from the population prior to the calculation of proportions.

Median House Price: Sourced from Land Victoria.  The median sale price is the value of the middle item when all sale prices are arranged in ascending order of magnitude.  The category 'house' is an aggregation of the land use categories 'house (previously occupied)', 'house (new - detached)' and 'terrace - attached house'.

Median Flat/Unit Price: Sourced from Land Victoria.  The median sale price is the value of the middle item when all sale prices are arranged in ascending order of magnitude.  The category 'flat/unit' is an aggregation of the land use categories 'flat/unit/apartment', 'townhouse (unit)' and 'retirement unit'.

Occupied Private Dwellings which are Government-Owned Rental Dwellings: Sourced from ABS.  The measure is expressed as a percentage of all occupied private dwellings. In the 2006 Census, information sufficient to determine whether a dwelling was public housing was not obtained from 3.8% of occupied private dwellings in Victoria (varying between 2.3% and 6.7% in individual LGAs).  These dwellings were excluded from the population prior to the calculation of proportions.

Data available: 2002; 2003; 2004; 2005; 2006; 2007; 2008; 2009; 2010; 2011; 2012; 

                       2013

Census Questions

The ABS data have been derived from the following census variables: Household Income; Tenure Type; Housing Loan Repayments; Rent and Landlord Type.

These variables were derived from responses to a number of questions on the 2006 Census form:

Question 33: What is the total of all wages/salaries, government benefits, pensions, allowances and other income the person usually receives?
Question 56: Is this dwelling owned outright, owned with a mortgage, being purchased under a rent/buy scheme, being rented, being occupied rent free, being occupied under a life tenure scheme, or other?
Question 57: If this dwelling is being rented, who is it rented from?
Question 58: How much does your household pay for this dwelling?

Notes regarding household income and housing costs:

Individual income was collected in ranges, so before these can be summed to a household level, a specific dollar amount needs to be imputed for each person. Median incomes for each range, derived using data from the 2003-04 Survey of Income and Housing, are used for this purpose. This method gives the best practical approximation that results in the majority of households being included in the same household income range (census output categories) as they would have had individuals reported their incomes in dollar amounts rather than in ranges.

The imputation used in deriving household incomes is likely to understate some household incomes - for lower household incomes in general, but particularly for single income households.

The ABS recommends that care should be exercised in any use of census household income information that relies on the imputed value rather than the broad range within which that imputed value lies. In particular, the ratio of reported housing costs to imputed incomes may significantly overstate that ratio for lower income households and for single person households. This caution extends to comparisons of housing costs to income ratios across geography where the socio-demographic characteristics such as income, age and family and household composition vary across those geographies.

In regard to the interpretation of this measure, the ABS advises that housing costs to income ratios using census data across tenure and landlord types may not be comparable for the following reasons:

(i) census data do not provide disposable incomes;

(ii) households are often reimbursed some of their housing costs - in census data, these reimbursements may be included in income instead of being offset against housing costs (e.g. employer subsidies and Commonwealth Rent Assistance (CRA));

(iii) reported mortgage repayments would normally include both an interest component and a principal or capital component - repayments of principal may sometimes be considered a form of saving rather than a housing cost;

(iv) householder preferences may influence how much is spent on housing costs - e.g. some people may choose to live in an area with high housing costs because it is close to their place of employment, or some people may choose to incur higher housing costs because they prefer a higher standard of housing instead of other consumption possibilities;

(v) high mortgage repayments may reflect a choice to purchase an expensive home, or pay off a mortgage faster, as a form of investment.

(vi) some analysis of housing costs to income ratios is limited to lower income households (i.e. those in the range from the 10th percentile to the 40th percentile of equivalised disposable household income).

For a further discussion of some of these issues, please refer to paragraphs 14-21 of the Explanatory Notes to Housing Occupancy and Costs.

Notes regarding public housing:

The ABS conducted a study of 2001 Census data to investigate the difference between the census count for the Landlord Type category 'State or territory housing authority' and public housing counts from other data sources. The results of the study concluded that counts for 'State or territory housing authority' are affected by the incidence of non-responding and unoccupied dwellings. Please refer to Appendix C of Census Paper 03/02 - Housing, 2001 (ABS Cat. 2934.0). A similar study is being conducted for 2006.

References

Victorian Government, Department of Human Services, (2006) Towards an Integrated Victorian Housing Strategy, A framework to address our future housing challenges, Melbourne.

Institute for Social Research, Swinburne University of Technology (2000) Social Benchmarks and Indicators for Victoria, Consultants’ Report for the Department of Premier and Cabinet, Victoria, Melbourne.

Australian Bureau of Statistics, 2006 Census of Population and Housing - Reference and Information.