The well-being of low-income Australian households is being seriously undermined by the increasing cost of housing and electricity. Many such households are suffering from both housing stress and energy poverty.
Housing stress occurs when low-income households (the bottom 40% of households) use about a third of their income to pay for accommodation. Energy poverty, we suggest, occurs when low-income households spend 10% or more of after-tax income on household energy bills, in addition to rent or mortgage payments.
No Australian studies have examined the link between housing stress and energy poverty, and its effect on well being. But findings from our current research suggest that they often go hand-in-hand, and financial hardship is an ever present reality in the households concerned.
The extent of housing stress
The data on housing stress alone is well developed. The COAG Reform Council’s annual report on the state of housing in Australia, paints a dismal picture. In 2009-2010, 42% of low-income households in the private rental market were suffering from housing stress, up from 37% in 2007-08.
More than half of private renters in the lowest 10% of households by income were in housing stress during this period. The same report concluded that in 2009-10, 37% of low-income households with a mortgage were also suffering from housing stress.
The extent of energy poverty
The proportion of low-income households suffering from energy poverty is less clear. What is evident is that increases in electricity prices have far outstripped inflation and wage increases.
An Australia-wide snapshot of average electricity price increases over the past five years shows that New South Wales household electricity prices rose 80%, Queensland, South Australia and Tasmania by 60%, and in Western Australia by 57%. Over the same period the Consumer Price Index rose by 14.5%, and average weekly earnings by over a quarter.
So now an increasing number of low-income households are suffering from energy poverty. Australian Bureau of Statistics data show that in 2009-2010, the lowest 20% of Australian households had an average weekly income of $314. Their average expenditure on household energy was 7% of disposable income – three times more than the wealthiest households. These figures don’t take account of the more recent substantial electricity price increases.
Indeed, our research signals that much higher proportions are now being paid. This partly confirms the NSW Independent Pricing and Regulatory Tribunal’s recent estimate that 5% of Sydney households, and 8% of households in country New South Wales were paying more than 10% of disposable income on electricity bills.
In Victoria, electricity and gas bills have been found to be the greatest cause of rental arrears (63% of cases). And the ABS found nearly 40% of the two lowest household income groups were unable to pay electricity, gas or telephone bills on time during 2010.
The toll on well-being
There’s growing evidence that the combination of housing and energy stress can have serious impacts on health. Since mid-2000, the not-for-profit sector has provided snapshots of such difficulties as low-income households cut back on essentials in order to pay for electricity.
The Salvation Army recently found that in regional New South Wales, just over half the people are going without meals to pay for electricity. A third of these people could not afford to heat their homes.
In 2010, the Wesley Mission concluded that more than two-thirds of financially stressed households were making sacrifices to meet electricity price increases, and 10% were unable to meet the cost.
Research by one of the authors on older private renters under housing stress found the impact was often devastating; interviewees told of how they were unable to feed themselves adequately or replace essential items.
Social isolation was also a common problem. After paying for accommodation, electricity and telephone, there was no money left to engage in the world. As one interviewee said, “Well you sort of think what you can do with $2.50 [the cost of a public transport day pass]. That’s a loaf of bread type of thing.”
Besides the physical implications of inadequate nutrition, the psychological implications of housing stress and energy poverty can be profound. Many of the interviewees were plagued by constant anxiety and depression was common. The not-for-profit sector is also reporting that these impacts of housing stress and energy poverty are becoming more widespread.
These are “real” live consequences of public policies on Australia’s 3.5 million low-income households. And they are, for the large part, being ignored by the political debate.
Lydia Isokangas
Student in Finland
Its sad that in Australia people go without essentials so that they can pay for power bills that are partially excessive due to the relatively poor energy efficiency of most of Australia's housing stock. It is difficult to live in a house that is freezing cold in winter and a hot-house in summer, especially if you are ill. I spent half of my childhood in such a house and it was awful, especially since my parents couldn't afford heating (or cooling).
I'm currently living in Finland where houses…
Read moreLorna Jarrett
PhD candidate, science education; Physics teacher
"Houses in most of Australia should not require any power to keep them comfortable".
Absolutely true, absolutely achievable - and light-years beyond the comprehension of most policy-makers!
We really can't afford to carry on living in the oil-boom 1950s...
Mark Goyne
Lawyer
I think as a side issue a study could be done on what stresses impact on people being jammed into high-rise apartments as the new way of living. One is now seeing conflicts between apartment-dwellers over allowing cats/dogs, young families wanting to hang out washing on balconies, some parents want to install security grills on balconies, people complaining of slipstream smoking, and the list goes on. Noise complaints etc. It would be interesting to compare the number and content of police incident reports for a comparable socio-economic area of a new suburb with high-density apartments and a detached housing area.
As more people are jammed into these high-density apartments I think there will be more social etc problems. However, the authorities ignore these effects for obvious reasons.
Lorna Jarrett
PhD candidate, science education; Physics teacher
Don't panic Mark, go visit Europe where people have lived high-density for centuries. Just because it's not what you grew up with doesn't mean it's dystopia.
Lorna Jarrett
PhD candidate, science education; Physics teacher
It's know that a large part of the electricity cost increases are due to demand from air conditioners - so domestic A/C users (who tend to be weathier) are being subsidised by non A/C users (Greenies with well-insulated houses and the poor).
Isn't it time we rectified this regressive taxation? Surely it wouldn't be that hard to put a levy on domestic A/C units? After all, being built-in, they're easy to identify. Users of portable units (easy to hide) tend to be renters of badly-insulated properties, so they could be exempted.
Stephen Maher
Investment Banker
I thought part of the problem was the regulatory pricing model. Fixing a rate of return on the regulatory asset base encourages over investment in infrastructure. And without a commensurate increase in consumption base, prices charged to the existing consumer base have to rise to accommodate the regulated rate of return.
Gregor Napier Cutlack
Builder/Farmer
I think one of the ways to alliviate this growing burden on our community is low cost, energy efficient dwellings. The vast majority of low income rental properties only exaserbate this growing dilemma.
Read moreUnfortunately cheap housing is just that.
Builders, local/state government and tenency advocate organisations must become partners to design, construct then lease, with the option of ownership, to low income tenants.
There are many wonderful examples of this situation around the world.
Local…
David Bennett
Architect
Yes the quality of the houses are a big issue with energy costs, however the built environments contribution to the affordability issue is MUCH larger than this. Affordability studies then to focus on first-cost house prices. Thankfully, articles such as this one shed light on the impacts of ongoing operational costs of living as well, when considering true affordability.
For individuals forced to choose to go without food for the sake of a utility bill is truly shocking. Petrol is a form of…
Read moreSuzy Gneist
logged in via Facebook
In Europe, denser housing is usually offset by green areas (i.e. two apartment buildings share a garden space and rec facilities between buildings) and also connected to regular public transport systems. In this way it encourages community building, neighbours meet, children play in the green spaces provided. Taking this a step further, we could design denser housing within permaculture principles and allow for community gardens, orchard trees between buildings, community meeting spaces... This allows the community to know about and help those less fortunate. It helps prevent isolation and provides self-help areas for those in need of extra food or transport. Solutions already exist, the only issue seems to me that we only maximise on financial profit and do not allow for maximum social profit to play a role in design.
R. Ambrose Raven
none
"ignored by the political debate" is being kind.
In truth, Big Property and the politicians they own want unaffordable housing. From the point of view of the 1% (including but not limited to the banksters), unaffordability is ideal because it indicates that they are extorting the maximum economic rent from mortgagees and renters.
Consequent social costs are indeed large and indeed increasing.
A much much better – and cheaper – approach is to abolish negative gearing then use the funds freed…
Read moreJane O'Sullivan
Agricultural Scientist at University of Queensland
A valuable study - thank you Alan and Lynne.
Read moreThe discussion so far seems to be targeting symptoms and not causes. It is no co-incidence that the surge in house prices and rents coincided with the sudden doubling of our population growth rate. The property industry is certainly in no doubt about it, regardless of what they say - they finance all the political lobbying and propaganda 'think-tanks' that promote higher immigration rates.
We are shamefully moving from a nation with one of the highest…
Gerard Dean
Managing Director
I note that nobody has mentioned that energy poverty will get a lot worse if the Australia moves toward more expensive renewable energy production.
Perhaps that is why Prime Minister Gillard just reneged on her promise to close the dirty, coal fired Hazelwood power station in Victoria. It was slated to close to reduce carbon emissions, however the reality dawned that Hazelwood generated a large percentage of Victoria's power, and if closed, would cause blackouts and power price rises.
Thank you
Gerard Dean
Lorna Jarrett
PhD candidate, science education; Physics teacher
Funny you should say that Gerard, because in my universe, renewable energy has considerable potential to make electricity cheaper for low-income households.
For example, the Government could subsidise installation of PV on the roofs of housing-commission houses and rented accommodation in low-income areas. This would slash electricity bills for those renters. Similarly, installation of solar hot water systems typically reduces household power bills by 30%.
PV is particularly useful as power is generated during the day when most power is used, and when the rich (and those who'd rather spend their money on electricity than insulation) are turning their A/C on. Costs of PV have also plummeted in recent years.
Another example is community-owned wind farms. Of course, we'd have to see the reversal of Victorian legislation in order for this to happen - but in more enlightened countries, low income communities are benefiting from these schemes.
Jane O'Sullivan
Agricultural Scientist at University of Queensland
Dear Gerard,
Read moreNobody was proposing switching off Hazelwood overnight and causing black-outs.
The price of most non-renewable resources will tend to rise from here on (except when it dips due to the economic recession caused by the high prices). The cost of renewable energy is descending. So it would be a false economy indeed to stick with 'conventional' coal power until the recession caused by resource scarcity makes it too hard to find the up-front investment needed for renewables. And that's…
David Bennett
Architect
The proportion cost of electricity of total household income for a housing-stressed person is higher than someone who is more affluent. But so it is for that persons food, mobility (transport) and so on. Is the ability to easily and cheaply access shops, jobs, and services a choice or a right?