With rising interest rates, dwindling housing supply and a rental market in crisis, what is happening to Australian housing affordability, and is there any relief in sight?
With rising interest rates, dwindling housing supply and a rental market in crisis, what is happening to Australian housing affordability, and is there any relief in sight?
In this episode, David Karsten is joined by researchers Dr Adam Crowe and Ryan Brierty to discuss their new report on housing affordability in Western Australia in 2023 and what we can expect from the housing market in the future.
Renters face increasing “deposit hurdle” [03:10]
WA’s social housing deficit [06:23]
Intergenerational impact on housing [10:16]
The perfect storm: ‘Homebuilder’ scheme and COVID-19[17:52]
Reforming tenants’ rights [24:46]
Moving away from ‘detached dwellings’ [28:02]
Resources to help with cost of living [36:53]
Read the report: ‘Housing Affordability in Western Australia 2023’
Find out more about the BankWest Curtin Economics Centre
Responding to the pandemic, can building homes rebuild Australia?
Australia's Covid-19 housing policy responses
Not-for-profit housing assistance services:
Circle Green Legal: https://circlegreen.org.au/
St Barts: https://stbarts.org.au/
St Pats: https://stpats.com.au/housing/
Uniting: https://unitingwa.org.au/
RUAH: https://www.ruah.org.au/need-help/
Government services:
WA Government renting assistance programs and service
Dr Adam Crowe, Postdoctoral Research Fellow, AHURI (Australian Housing and Urban Research Institute), Curtin University
Adam Crowe is currently completing a Postdoctoral Fellowship at the AHURI – Curtin Research Centre. His research examines innovative ways to improve tenure security within the private rental sector, with a focus on tenant experiences and outcomes, policy innovation, and Build-to-Rent as an emerging asset class touted to increase rental supply.
Ryan Brierty, PhD student, School of Accounting, Economics and Finance, Curtin University
Ryan is a property economics tutor and research assistant at Curtin University. He co-authored the report ‘Housing affordability in Western Australia 2023: Building for the future’. He is currently completing a PhD at Curtin, centred on housing economics.
This podcast is brought to you by Curtin University. Curtin is a global university known for its commitment to making positive change happen through high-impact research, strong industry partnerships and practical teaching.
Got any questions, or suggestions for future topics?
Email thefutureof@curtin.edu.au
Host: David Karsten
Content creator: Anne Griffin-Appadoo
Producer and recordist: Emilia Jolakoska
Editor: Karen Green
Executive producers: Anita Shore and Jarrad Long
Curtin University acknowledges the traditional owners of the land on which Curtin Perth is located, the Whadjuk people of the Nyungar Nation, and on Curtin Kalgoorlie, the Wongutha people of the North-Eastern Goldfields; and the First Nations peoples on all Curtin locations.
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00:00:00:00 - 00:00:50:23
David Karsten
This is The Future Of where experts share their vision of the future and how their work is helping shape it for the better. I'm David Karsten. If you’re watching the news, chatting with loved ones or making small talk with strangers, it's hard to avoid the topic dominating the national conversation: Australia's housing crisis. With living costs skyrocketing across the country, many of us are asking the same questions; “Can I afford this rent increase? Will interest rates rise again? When will my house be completed? Am I going to lose my home?”. In this episode, I was joined by Dr Adam Crowe, a Curtin research fellow at the Australian Housing and Urban Research Institute (AHURI) and researcher, Ryan Brierty from the Curtin School of Accounting, Economics and Finance to unpack a new report on housing affordability.
00:00:50:24 - 00:01:11:20
David Karsten
Adam and Ryan talked us through the current situation in Western Australia and discussed what we can expect from the housing market in the future. If you'd like to find out more about this report, you can find the links provided in the show notes. Adam, Ryan, thank you very much for joining us. You've published a report with the Bankwest Curtin Economics Centre on Housing Affordability.
00:01:11:22 - 00:01:33:04
David Karsten
Your report reveals that mortgage delinquency rates have more than tripled for new homeowners who took out loans in 2022. That's frightening. While Perth house rental prices have increased by 13%, also frightening, the largest spike in any capital city in the country, those numbers represent. So what is going on and how did we get here?
00:01:33:06 - 00:01:54:13
Adam Crowe
First of all, thanks for having us here. It is a great question. One of the first things that I'd like to use to, I guess just preface the entire conversation is that the housing system is complex and any challenges faced in one aspect or one kind of tenure of the housing system is going to have flow on effects throughout the entire what we call the housing continuum in terms of how we got here…
00:01:54:15 - 00:02:19:04
Adam Crowe
I guess we could talk about some of the issues and challenges that we're facing and age of the housing, tenures, homeownership, social housing, private rental, and how that intersects with homelessness. Let's start with... with ownership. Okay. So obviously, we've got a cost of living crisis that's squeezing a lot of households. Included in that is rising interest rate environment coupled with a rising house price environment.
00:02:19:05 - 00:02:44:15
Adam Crowe
This is particularly challenging and the report shows it's particularly challenging for new entrants. So, first time homebuyers who have recently bought because they're buying in with very high debt and often with low equity, I mean, they own very little of their homes, so the debt repayments are significant. So that could be one of the key contributors to higher delinquency rates.
00:02:44:17 - 00:03:06:00
Adam Crowe
But it just also puts additional pressure on the household to be able to manage and cope with rising housing costs in addition to all of the other living costs that have been increasing over the past two or so years.
David Karsten
Well, you've got a rental market there that a large portion of whom would be aspiring to one day own a home.
00:03:06:06 - 00:03:35:20
David Karsten
It's especially difficult for them to take the next step.
Adam Crowe
That's right. And one of the most difficult aspects of that is what we call the deposit gap or the deposit hurdle, as the prices of housing have risen so significantly, to be able to save up the required deposit to first become eligible for a mortgage has become so large that it's pricing a lot of people out from even getting into what we call the housing market in terms of being able to secure a mortgage.
00:03:35:22 - 00:04:01:21
Adam Crowe
And I guess there's a flipside to that as well, where people are unable to get, say, a 20% deposit that they need to be able to secure a mortgage. So then they're taking out mortgages with less equity. So perhaps only 15% deposit or 10% deposit, which means that you're most likely going to be paying a higher interest rate, but you are also going to be paying lenders mortgage insurance.
00:04:01:21 - 00:04:26:19
Adam Crowe
So it's just increasing those costs on the mortgage just as an example.
David Karsten
And that's alongside that 13% rise in the rental you're paying just to be in a home. It's really looking quite insurmountable.
Ryan Brierty
That's right. Because not only are you faced with a higher deposit due to the higher dwelling prices, but you're also, if you're renting, you've got to pay more rent and with the cost of living going up.
00:04:26:23 - 00:04:49:21
Ryan Brierty
So it's like a triple whammy for you. Your rent's gone up, your bills have gone up and the deposit you need to save has gone up. So it makes it extremely difficult.
David Karsten
Well, Ryan, the key phrase here is affordable housing. What are the challenges to making that happen in Western Australia in this environment?
Ryan Brierty
That's actually a really complex question because there are so many tenures involved.
00:04:50:02 - 00:05:15:10
Ryan Brierty
First of all, if you looked at (and Adam's far more versed on social housing than I am), but if you look at the neglect that social housing has seen over many years, then we bring into this the, the general lack of supply of dwellings. And then you have a look at the, the limited dwelling types that we construct here in Perth it needs to be tackled from so many different directions.
00:05:15:12 - 00:05:44:12
Ryan Brierty
I know Adam and I sort of have a little bit of different opinions or views on the private rental market, but I sort of see over a period they were from, sort of the end of the mining boom here in Perth, property prices dropped and a lot of investors got into the market and the mining boom because it looked like a good opportunity when the population interstate migration dropped right off and the population dropped right off, dwelling prices dropped, rents dropped and we saw investors leave the market.
00:05:44:14 - 00:06:08:13
Ryan Brierty
And then when we had the COVID period and we actually had some price increases in dwelling price here in Perth, we had a huge number of investors say this is our moment to exit and get out of this bad investment. So we had 20,000 investors leave over that two-year COVID period. There are so many factors here for affordable housing and they're all extremely intertwined.
00:06:08:15 - 00:06:33:02
Adam Crowe
I think one of the key aspects that you just highlighted is that new housing development is almost 100% reliant on the private market, so driven by profit and therefore favourable market conditions. So if we turn back to, say, the social housing deficit that we have in this country, more specifically in WA, is we just have a deteriorating social housing stock.
00:06:33:02 - 00:06:54:15
Adam Crowe
Yet the need for social housing is massive. We're at 33,000 plus people on the WA social housing waitlist, so that includes public housing and community housing. And some people are waiting up to ten years for a home. I think the average wait time is 2 to 5 years, depending on the size of the household applying for the social housing dwellings.
00:06:54:15 - 00:07:20:00
Adam Crowe
So we've got this massive deficit of social housing stock not being delivered and that feeds into the broader supply constraints that we're seeing across the housing system. So if there's not enough social housing supply and we've got massive amounts, we've got large waitlists of people in those income brackets, typically low to lower income brackets, they're going to need to find housing within the private rental market.
00:07:20:02 - 00:07:41:17
Adam Crowe
And then if we just skip back to what we were talking about, the difficulty getting into home ownership and the length, it's taking a lot longer to get into home ownership because we were talking about the deposit gap. It takes a lot longer to be able to save a deposit. That means low-income earners who are potentially eligible for social housing but can't access it because there’s no supply.
00:07:41:19 - 00:08:11:20
Adam Crowe
They're competing for housing within the private rental market with maybe medium to moderate to medium income earners who 20 years ago would have already transitioned into homeownership. So we've got a larger cohort of people competing for a limited supply of housing in the private rental market, which we've seen in the data presented in the report that we've just seen, the private rental sector expand significantly across Australia in the past 20 years.
00:08:11:22 - 00:08:32:16
Adam Crowe
In WA, we're seeing one in three households are now qualifying as what we call long-term renters. So staying in the rental sector for more than ten years, which is never the way that the private rental sector has been designed in this country in terms of how we regulate it, in terms of the rights that are kind of ascribed to anyone within the private rental system.
00:08:32:22 - 00:08:54:14
Adam Crowe
And so we've got a lot of like long-term lifelong private renters, which we haven't really seen in this country, and we don't necessarily have the mechanisms in place to offer the same level of security that you would get in the home ownership or in a social housing setting. So I think they circle back to some of the larger kind of conversations that we're having around what are some of the key challenges to creating affordable housing. We need social housing, we need major investment in social housing. And I think there are some other issues that could be resolved as well in terms of the way we get new supply online, which we might talk about later on in the interview.
00:09:16:06 - 00:09:43:06
David Karsten
I was just going to jump in there and just ask.. The status quo right now is not the Australian dream of a couple of generations ago, that's for sure. Seems like a very straightforward question. But societally speaking, why is affordable housing so important?
Adam Crowe
Why is it so important? Well, access to safe, secure, affordable place to live. It's a human necessity. It's the foundation for all people to succeed in life, in whatever way you might perceive that to be.
00:09:43:08 - 00:10:16:11
Adam Crowe
And then a persistent lack of affordable and accessible housing, it is a societal problem. It's a household issue, but it is a societal problem. It causes like namely, it causes housing stress, housing stress, lower income housing households are spending more than 30% of income on housing. It is often of poor quality and it just puts constraints on every other aspect of life being unable to afford household items, schooling, education, food.
00:10:16:13 - 00:10:44:03
David Karsten
So this is a generational impact potentially, isn't it?
Adam Crowe
Absolutely. Yeah. Ryan, have you done work on the generational impact side of the housing system?
Ryan Brierty
No, but I'm looking at the effect of intergenerational wealth transfers and it's something that's really standing out to me is this whole idea of how generationally people get locked out of home ownership. And like I said those who are fortunate enough to have parents who are wealthy enough and generally are homeowners themselves.
00:10:44:05 - 00:11:06:05
Ryan Brierty
This gets transferred onto the children and and as Adam points out, you know, longer term renting is becoming more common or lifelong renters. And so are we having a situation where if your parents are lifelong renters, you're born to be a lifelong renter yourself because the affordability and the deposit gaps becomes too hard for people to get into home ownership.
00:11:06:07 - 00:11:32:02
Ryan Brierty
It's a big problem.
David Karsten
Ryan, you've been looking at the data and putting together a report with Adam and co. How does the situation in WA actually compare to other states?
Ryan Brierty
The private rental market is we have a lower vacancy rate than the other states and I believe a large part of that is due to investors wanting to exit the market because it has been financially unrewarding.
00:11:32:04 - 00:11:55:06
Ryan Brierty
As Adam rightly says, that's one of the problems we have here with having a free market private rental system. And I think his comments are really valid, that our private rental market was never really set up to operate the way it's trying to operate now, and particularly for Perth, where we have such highs and lows in population growth, it makes it harder.
00:11:55:10 - 00:12:17:24
Ryan Brierty
So yeah, I see a situation where, you know, for Perth to have these inflows and outflows of people, it affects the profitability of investments. And so if you get people exiting the market and it's taken up by first home buyers, the first home buyers entering the markets, great, but it certainly doesn't help renters.
David Karsten
And let's think about the landlords just for a second.
00:12:18:01 - 00:12:45:16
David Karsten
They are also dealing with, in some cases, mortgage stress. They have obligations to meet their mortgage. Where are they going to get the extra funding to meet that obligation? Well, there really is only one answer, isn't it? And that is to press downward and put pressure on their tenant.
Ryan Brierty
Yeah look, rents may have increased by 13%, but for a landlord to have a mortgage, their mortgage repayments have gone up a lot more than the 13%.
00:12:45:18 - 00:13:10:21
Ryan Brierty
Landlords basically don't look at the yield or the rent as the driving factor behind the investment. It's the long-term capital gain, which is what most mum and dad investors are looking for, something that's going to assist for extra funding in retirement and those sort of factors. Just anecdotally, I mean, I talked to so many people around 2016-17, investors.
00:13:10:23 - 00:13:28:06
Ryan Brierty
What happened then also was not only did rents drop off and the value of their properties drop off, they wanted to sell and get out of it, but they were going to actually take a loss. And the banks at the time said, well, we're not even prepared to give you a private loan to pay the difference to get out of this.
00:13:28:11 - 00:13:55:00
Ryan Brierty
So I had people who were working two jobs just to pay the mortgage for the investment property, which is supposed to be this financial windfall or vessel. So it doesn't always pay off or work out. And so I sometimes feel that, Adam will quickly point out to me that, you know, WA has extremely favourable rental laws which favour landlords, but it's not always the gravy train people like to look at it.
00:13:55:02 - 00:14:28:21
David Karsten
Well, it seems like it's very difficult for everybody concerned unless you own a home outright. But let's start talking about some potential solutions, Adam. What are the key priorities for the State Government to ensure a greater supply of affordable housing?
Adam Crowe
There are many approaches governments can take. We list some of them in the report. But I think I just think it's important to note that there are many different approaches that can be taken and depending on the approaches that are taken, others may be required to kind of take into consideration those flow-on effects.
00:14:28:23 - 00:14:57:07
Adam Crowe
But number one is there needs to be a significant investment to improve both the quantity, but also the quality of the social housing, social and affordable housing stock. We calculated that there needs to be a minimum of 900 new social homes delivered annually just to maintain the current stock level. So ideally, you'd need maybe a thousand a year and it can't just be a short-term three-year injection of a thousand new homes a year.
00:14:57:07 - 00:15:25:22
Adam Crowe
And then that's it, which is what we often say it needs to be a sustained 50-year plan of a thousand homes every year. And that is going to have a big impact on the broader supply issues that we've discussed, for example, because it would reduce some of the pressure on the private rental market by enabling those on the waitlist to be able to move into a social home as opposed to competing in the private market.
David Karsten
Without getting too far into the wage element and taking you too far off track.
00:15:25:24 - 00:16:06:03
David Karsten
Why do we find ourselves in this situation in the first place? Why have successive governments not kept up with the demand that is quite clearly there?
Adam Crowe
It's a brilliant question and I mean, I think we could maybe talk about this for hours, but I think it would have a lot to do with the way that we think about housing in this country and also the shift that occurred in the 1980s as part of the, what we call the neo liberal term, which was a divesting of public funding from the direct supply of housing and more reliance on the private market thinking.
00:16:06:03 - 00:16:31:16
Adam Crowe
Privatisation would be the key for solving the inefficiencies of a public-run housing system. There is a statistic, and I don't have it off the top of my head, but I think that we put more money into the housing market today than we did 30, 40 years ago before this neoliberal term. The only difference is the public funding goes into the demand side of the housing market.
00:16:31:18 - 00:16:59:23
Adam Crowe
So, for example, first home buyer grants massive tax concessions through negative gearing, capital gains tax concessions. But we're not putting it into the direct provision of housing supply. Whereas prior to this neoliberal term in the 1980s, we had a massive public housing infrastructure programs, and us, and a lot of high-income countries had similar programs and we weren't seeing the housing crises that we're seeing today.
00:17:00:00 - 00:17:25:09
Ryan Brierty
One other thing that's also interesting is if we need to build a thousand social dwellings a year, we need to build 20 a week and we don’t have to have a construction industry that's able to keep up with the current workload. Wait times have just pushed out and out, now to me is just absolutely fascinating that we need to bring more trades and more skilled people in and we've got to build houses.
00:17:25:10 - 00:17:52:09
Ryan Brierty
We've got nowhere to house the people that we're going to bring in. So it's difficult because we know what we need, but delivering it is another story altogether.
Adam Crowe
And so the next priority in terms of a government intervention that I'll list does have a direct linkage to what we're talking about here in the current need for construction workers, the pressures on the construction sector.
00:17:52:11 - 00:18:24:14
Adam Crowe
And so it would be that any demand-side government incentives, they need to be targeted. So they can't just be like what we did. I'll give the perfect example is during COVID, Australian government and state and territory governments obviously didn't know what was going to happen throughout the progression of the pandemic. And they operated, they made some decisions based on the best information at the time and one of the largest stimulus packages that we've seen in at least the last decade was the homebuilding stimulus package.
00:18:24:14 - 00:18:48:18
Adam Crowe
So the Federal Government released homebuilder and a lot of state and territory governments provided complementary programs. I think in WA you could get up to $50,000. I think in some areas you might have been able to get up to $75,000, but this was an untargeted scheme. Anyone could go for this home build either to build a new house or to substantially renovate an existing house.
00:18:48:20 - 00:19:15:24
Adam Crowe
And it was taken up widely. And a lot of the issues that we're seeing today are contributed to what we see as a, there's a term for it, it has a vacuum effect where these demand side stimulus, such as homebuilder, it brings forward a lot of demand from people who would have been buying or building in the next 2 to 3 years, incentivises them to bring forward their decision to this very short space of time.
00:19:16:05 - 00:19:37:12
Adam Crowe
And now we've got a huge backlog of housing that need completions. But then in addition to that, we just kind of had the perfect storm with COVID, where international supply chains were crushed. So that just placed additional pressures on the construction sector, just using that as an example. And we have seen that vacuum effect in previous stimulus effect.
00:19:37:17 - 00:20:02:09
Adam Crowe
Stimulus packages delivered in the past is that any demand side stimulus, it needs to be or incentive, should I say it needs to be targeted. So, for example, shared equity schemes for low to moderate income earners, shared equity where it might be partnering with a government say through Key Start, and South Australia had a similar type of scheme where the government might take ownership of 20% of a dwelling.
00:20:02:09 - 00:20:20:06
Adam Crowe
So it reduces the amount that you would need to get into that, into home ownership, which as we just linking back to what we just spoke about at the top of the conversation gives you that security that you need.
David Karsten
And properly means tested as well. That would certainly go a long way in terms of targeting.
Adam Crowe
Exactly.
00:20:20:12 - 00:20:44:05
David Karsten
Yeah. Yeah. I mean just opening up that previous homebuilder scheme to all and sundry is why we’re here..
Adam Crowe
It's a contributing factor.
Ryan Brierty
But, but in fairness though, to the government, I mean at the time, I mean COVID when it was hitting, I mean, yeah, everyone expected the world to fall off the edge of the cliff sort of thing.
00:20:44:07 - 00:21:08:24
Ryan Brierty
And so it was definitely a knee-jerk reaction. And building stimulus is used predominantly and in a lot of countries to stimulate with negative economic growth. So it's not surprising that they turned to it. And I think if they could have foreseen the end effect of it all, I think they would probably look at the decision again.
00:21:09:01 - 00:21:52:05
Adam Crowe
Interestingly, as governments, the federal government and state governments were making their decisions about how they wanted to implement a stimulus program into the economy in 2020. I was privileged enough, along with another colleague here at Curtin University, Professor Steven Rowley, to be part of a large national study looking at how best to stimulate the economy and our findings was that to replicate that of the Rudd Government during the financial crisis of 2008, 9, 10, was a massive social housing infrastructure program because we do know that there is a multiplier effect in terms of of stimulating the construction industry.
00:21:52:05 - 00:22:15:13
Adam Crowe
It has a multiplier effect in terms of delivering economic benefits throughout the entire wider economy of wider society. And the mid 2000 social housing stimulus program did just that. It put construction workers to work. It delivered the housing that we needed in a very targeted way. In this case, for..
Ryan Brierty
We had the school, the school building program and as well.
00:22:15:13 - 00:22:51:07
Adam Crowe
Yeah, there was numerous kind of programs attached to that..
Ryan Brierty
and all based around construction.
Adam Crowe
So most critical commentators in 2020 were advocating for social housing. So a supply side stimulus package by the federal government and state governments decided to focus on the demand side stimulus program. So we could have dealt with that in different ways and we wouldn't have been, we wouldn't be experiencing this vacuum effect that we're now experiencing where we've got like a huge number of homes that need to be completed with a lack of construction workers.
00:22:51:09 - 00:23:14:09
Adam Crowe
But if you look at the pipeline for the future, the new commencements have dropped off a cliff because we've put everything forward.
David Karsten
So, Ryan, while we are sitting here with the comfort of 2020 hindsight, Adam, you're saying there was precedent and perhaps the government of the time didn't pull the right levers. And this is where we find ourselves today.
00:23:14:11 - 00:23:42:16
Adam Crowe
I acknowledge it was a very difficult situation, with so many unknowns. But there was a lot of evidence that was more favourable of a supply side stimulus compared to a demand side stimulus, but it would probably depend on your politics and ideology of the housing system.
David Karsten
Did we run through all of your recommendations?
Adam Crowe
A couple of others is that we need to support the provision of new infrastructure and development.
00:23:42:18 - 00:24:10:06
Adam Crowe
So we need a more efficient development approval system to reduce costs and timeframes, and we need to release infill sites at a faster rate. So that has a lot to do with some changes, some regulatory changes that will give developers, home builders a greater flexibility in being able to bring housing online in different areas. And a diversity of housing is one thing that we need.
00:24:10:12 - 00:24:46:18
Adam Crowe
So not just detached dwellings 60 kilometres from the Perth city, but a diversity of housing stock throughout the entire city with a focus on infill development as opposed to greenfield out of suburb development. And then I would also argue we need balanced residential tenancy reform. We did see some changes a couple of weeks ago to West Australia's Residential Tenancy Act, but I would argue, and a lot of the evidence would suggest that we do need to go much further.
00:24:46:20 - 00:25:17:08
Adam Crowe
Australian tenants have fewer rights than renters in almost every other OECD country and WA has some of the worst tenants’ rights in Australia, so we have a long way to go in order to improve the experience of being a renter in Western Australia, especially given the fact that options for other forms of tenure are limited and we know that people are going to be spending time in the rental sector for a lot longer, perhaps their entire life.
00:25:17:08 - 00:25:40:05
Adam Crowe
So they need, number one, more security and more flexibility to be able to make a landlord's property, a home.
David Karsten
Some compelling recommendations there. But for the moment, we will take a quick break and be right back after this message.
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00:26:26:10 - 00:27:04:11
David Karsten
Well, Adam, this is the second report on housing affordability released by the Curtin Bankwest Economics Centre. Can you share more about the role of the centre and your involvement in its work? And how does that work tie in with your research for AHURI?
Adam Crowe
Yeah, absolutely. My contribution to the housing affordability report, it's really quite an extension of the type of work I do for AHURI but just with a WA focus. As a housing researcher, my work is centred around creating a more fair and equitable housing system.
00:27:04:13 - 00:27:38:18
Adam Crowe
The research that I do for AHURI, it's very policy facing and focuses on various aspects of the housing system, where the challenges have been recognised by policymakers and the wider community. I've been privileged, had the privilege to be involved in a lot of projects, looking at alternative housing experiences, options for older, lower-income Australians, housing for people with a disability among quite a few other projects centred around housing affordability, particularly within the private rental sector.
00:27:38:20 - 00:28:01:24
Adam Crowe
So yeah, just getting back to the question of how that ties in with the centre, with BCEC just that experience that I've gained through doing that housing research with AHURI, it just tied in nicely to the nature of this housing affordability report on Western Australia.
David Karsten
It remains to be seen whether or not the recommendations in the report will be taken up.
00:28:02:01 - 00:28:32:21
David Karsten
But as it stands now with this snapshot that you've been examining, what can we expect the future of housing in Australia to actually look like?
Ryan Brierty
Well, just looking at Perth, we've sort of touched on this before, this idea of we keep building detached houses and we keep now making the blocks smaller and smaller. Perth now has the smallest average greenfield block size of any capital city, which sounds almost like it doesn't make sense because you think we so spread out, you think there'd be bigger.
00:28:32:21 - 00:28:52:13
Ryan Brierty
But we seem to want to spread out further and not build. And I think the infill is just a great example. And getting back to it, I think there needs to be a big rethink, especially on the part of certain councils I know they have this idea that they want to sort of protect the identity of the suburbs.
00:28:52:17 - 00:29:11:10
Ryan Brierty
And then of course you also have the idea of the NIMBY, not in my backyard, where nobody wants something that's a bigger complex built next to them in a suburban-type setting. But at some stage we're going to have to really get away with at the moment, you know, 90 over 90% of all our new builds, are detached dwellings.
00:29:11:15 - 00:29:41:13
Ryan Brierty
We're going to have to get away from that. I think part of it is definitely what we're supplying, but also I think part of it is what people have a preference for and it's like almost like this mentality in Perth where this is how we live sort of thing. And I think until we sort of start to get more people into higher density housing and plan that housing with the right sort of infrastructure, and in the right environment, with the right sort of public open space around it, we just can't keep spreading up and down the coast.
00:29:41:13 - 00:30:03:06
Ryan Brierty
It has to change at some stage and there has to be an appetite for it from council for new home buyers. I mean..
David Karsten
Sorry, I was just going to jump in there, Ryan. Is that a potential target for incentivisation that maybe Adam was pointing towards before?
Ryan Brierty
I'd say for sure, yeah.
David Karsten
Higher infill, high density housing and changing our expectations going forward.
00:30:03:09 - 00:30:26:20
David Karsten
Is that something we need to strive for really? Is this generational change in expectation about what we have a right to in terms of our housing? We might not necessarily be able to have what our parents had. It is a different set of circumstances now.
Ryan Brierty
I think that's absolutely true. You know, we seem to have this, where even though we only have on average a little over two and a half people or 2.3 people in a home, I’m just trying to remember.
00:30:26:22 - 00:30:47:07
Ryan Brierty
But we build homes with four bedrooms. Yeah, on tiny blocks. I'm not sure why we have this lack of diversity in housing here in Perth. It can't be just this is what we build, this is what we supply and that's what people buy. If people didn't want it, they wouldn't buy it. And maybe it's just generational or it will slowly change with time.
00:30:47:09 - 00:31:06:09
Ryan Brierty
Adam and I were talking about this before. He's lived overseas a lot and they have a completely different attitude to the diversity of housing available. And we're sort of trying to sort of nut out why is that that's in place in one country, but not here. Like I said, is it what we supply or is it what we demand?
00:31:06:14 - 00:31:31:07
David Karsten
Well, Adam raised the point of a housing market that was very much geared and always has been to the Australian dream of home ownership at the expense, I guess, of more ideal rental circumstances, like you say, in other parts of the world, rentals are often a lifetime commitment and it is a very different way of thinking. Home ownership isn't necessarily on the cards or a priority.
00:31:31:09 - 00:31:55:09
David Karsten
It is a lifelong commitment to renting one apartment or one detached unit. It's a different way of thinking and living.
Ryan Brierty
And part of that problem is the way the private rental market has been set up. I mean, for most people, I'm assuming to buy an investment property, they probably are going to be in their mid-forties looking to sell at 60 or staying close to retirement.
00:31:55:11 - 00:32:14:05
Ryan Brierty
So they keep it for a 15 year period. Now, at some stage they're going to sell the apartment, so the people who buy it may not want to rent it out, might not buy it as an investment my buy it to live in. But also I can't sort of get my head around. Why we continually have six and 12-month lease periods.
00:32:14:07 - 00:32:46:04
Ryan Brierty
I don't know whether it's something that property managers want to encourage because it's it works for them financially.
Adam Crowe
I'm not sure. I can give you an example of how it does look elsewhere. I lived in Germany for ten years and I had a lifelong lease. A lifetime lease is what it's often called. And that involved, as I said, a lifetime rent contract with a property management company during the first two years.
00:32:46:04 - 00:33:06:24
Adam Crowe
That's kind of like a probationary type period where if you're not happy with the place, you can cancel after two or if the landlord is unhappy with you for some reason that gives them a bit, they've got a bit more leeway there too to end the agreement. But then after that two-year period, it is very similar to signing a mortgage agreement, so to speak.
00:33:06:24 - 00:33:25:10
Adam Crowe
It's up to you to take responsibility to take care of that place. The landlord has a responsibility, the owner has a responsibility to keep it well maintained. During that time you can make minor modifications as you choose. You can paint the walls, you can put pictures up, you can have pets that can't be discriminated against by a landlord.
00:33:25:12 - 00:33:51:15
Adam Crowe
There's also rent stabilisation in place where rents can exceed a certain kind of index. In Berlin, where I was, they couldn't exceed more than 5% every year and a new rent contract can't exceed more than 10% of an entire district average. And it's just a way to keep rent stabilised, which in the however many decades it's been in place has worked during booms and busts.
00:33:51:15 - 00:34:10:18
Adam Crowe
So in the, in harder times, it hasn't been so impactful for the investor. But when it’s a tight housing market as we like to call it, it isn't as impactful for the tenant because their rents are somewhat stabilised and they're not dependent on the flows of the market.
00:34:10:20 - 00:34:39:13
Adam Crowe
But that's just an example of how a housing system with stronger tenant rights, rent stabilisation can create a much more equitable housing system and therefore equitable society.
Ryan Brierty
I think that's brilliant because if you can, like you say, you can even out the boom and the bust, which, you know, occurs here with Perth, with the population changes, then we probably wouldn't have had quite the exodus of investors that we've had and we probably wouldn't have quite the rental crisis that we have.
00:34:39:18 - 00:35:06:21
Ryan Brierty
It does need a total rethink.
David Karsten
So for you, Ryan and Adam, the future of housing in Australia doesn't look great if we stay the course that we are on now.
Adam Crowe
I think that's a fair assessment and I'm going to say something provocative where if we do want to change the course of our housing future, before we get into the detail and the nitty gritty, we need to have a serious national conversation about how we view housing in this country.
00:35:06:21 - 00:35:47:00
Adam Crowe
Do we want to prioritise housing as a human need and social good, or continue treating it as a wealth creation vehicle? Housing is political and the shape of the housing system is always the outcome of negotiation and struggles between different social groups. And currently, in its current form, housing has become a debt-fuelled financialised, speculative asset. House prices and rents have completely decoupled from household incomes, and we need to resolve this conflict between housing as a home and as real estate before we can really start ironing out any of the nitty gritty policies and practice that might be implemented.
00:35:47:02 - 00:36:14:21
Adam Crowe
Because I think until we do that, we're just applying Band-Aid solutions to a broader kind of systemic societal issue.
Ryan Brierty
And just to add on that home ownership in Australia is regarded as the fourth pillar of retirement income. The difference between housing costs in retirement for a homeowner, I think it's about (ABS) $50 a week. If you're mortgaged, it's $450 a week, and if you're renting, it's $390 a week.
00:36:14:23 - 00:36:43:12
Ryan Brierty
That difference of $50 to $390 for people in retirement, $350 a week, it's a massive amount of money. So while our retirement and retirement incomes and how people retire, are financially secure, is also based around home ownership, the people who don't get into home ownership are obviously at a distinct disadvantage. And as I said before, generationally, their kids then become at a distinct disadvantage.
00:36:43:14 - 00:37:06:19
Ryan Brierty
And the situation, well, that the gap widens.
David Karsten
Well gents, ahead of a national conversation that so obviously needs to happen, that would hopefully lead to some significant policy change. There are people struggling right now. What can they do in terms of these soaring housing costs? What sort of resources would you recommend that they access just to deal with the now?
00:37:06:21 - 00:37:41:05
Adam Crowe
It's a good question. There are many resources available and they are all dependent on your current situation. The Federal Government's MoneySmart program is a great resource and then the WA government also offer financial advice and assistance programs for housing. Again, depending on your situation and often your income. For tenants, anyone struggling with issues, they might be with your landlord, property manager, or you just might be seeking advice and want to know your rights, Green Circle Community Legal is a great community led non-profit tenancy advice agency here in Western Australia. For anyone at risk of or experiencing homelessness, contact EntryPoint or any homelessness support services such as St Barts, St Pats RUAH, Uniting. There are programs and opportunities available to you. The government also has a range of different helplines depending on your experience. These 24 hour helplines are a lot more kind of crisis oriented, so anyone perhaps experiencing family or domestic violence can call any of the 24-hour helplines that the WA Government offer on their website.
David Karsten
We'll certainly provide links to all of those services and resources in our shownotes. But gentlemen, for now, a very insightful chat today on the state of affairs in terms of Australia and Western Australia's housing in particular. It will be interesting to see what happens over the next 12 to 18 months and hopefully we do see some change, some positive change. Thank you so much to both of you, Adam and Ryan, for coming in today.
Adam Crowe
Thank you so much for having us. Really appreciate the conversation.
David Karsten
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00:39:00:11 - 00:39:11:22
David Karsten
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