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Housing is just one of the essentials in household budgets and it’s when there’s no way to manage all these costs that financial stress really sets in. Emma Baker, Author provided

Housing affordability stress affects one in nine households, but which ones are really struggling?

Meeting the cost of buying a home or renting privately is difficult for many in Australia, and sadly impossible for some. Governments are concerned about the housing affordability “crisis” to varying extents, but it’s probably fair to say that we have not seen many effective solutions so far. That’s a result of the complexity of both understanding and solving the problem.

Anglicare’s Rental Affordability Snapshot has, for nearly a decade, painted a worrying picture of almost all of our major cities. Again this year only a tiny proportion of rental properties on the market are affordable for people receiving government support.

But analyses by economists, geographers, the building industry, think tanks, housing researchers and governments themselves define the problem of affordability differently. (And they disagree on the solutions, often relying on flawed assumptions.)

Read more: Affordable housing policy failure still being fuelled by flawed analysis

What do we mean by unaffordable?

We aim to contribute to the conversation by challenging how we think about and what we mean by “unaffordable housing”.

The way you measure housing (un)affordability matters – a lot. It affects how big the problem is estimated to be, who is identified as affected, where they live, what interventions might help, and how much these will cost.

In addition, it is tricky to generate simple, usable statistics. This is because Australian households have such varied housing experiences (and costs). Sometimes we forget renters. Sometimes we don’t distinguish between unaffordable housing costs for low-income and high-income households. And, importantly, sometimes we confuse the risk of housing affordability problems with the experience of them.

Read more: Facts sink glib housing supply mantra – the focus must be on affordable rental

Here is an example. The most commonly used measure of housing affordability in both policy and research settings is the relatively simple measure of “housing affordability stress”. We classify people as having housing stress if they are in the bottom 40% for household incomes and paying more than 30% of their income in housing costs.

This allows us to identify low-income households that are paying high housing costs. (It’s generally assumed that people with higher incomes can meet their basic housing needs.) Using this measure, it is estimated that roughly 11% of Australian households have unaffordable housing costs.

Affordability stress isn’t just a matter of having to juggle income and housing costs, but whether a household can afford other essentials. ThiagoSantos/Shutterstock

But housing costs are just one part of a household’s weekly spending. In recent work, we were interested to see if we could identify who is actually experiencing financial hardship because of high housing costs by looking at their capacity to meet other essential non-housing costs. A substantial meal at least once a day, medical and dental treatment when needed, and warm clothes when it’s cold – these are things that most Australians regard as essential. When people cannot afford these things, we describe them as being materially deprived (you can read more about deprivation here).

Within the 11% of the households classified as having unaffordable housing costs, only a small proportion (just under 3% of households) are also materially deprived. When we take a closer look at who is in this smaller group, they are distinct in that they have lower incomes, poorer health, are more financially strained, live in the rental sector, and move house more often.

Some households may be able to cope with high housing costs by “shuffling” other parts of their life. They may, for example, take on more hours at work, draw on savings, or reduce discretionary spending.

Expensive housing becomes a problem when households are unable to make these adjustments. This might be because of illness, for example, or a relationship breakdown, or long-term precarious employment.

Read more: Housing affordability problems might not be all bad

At risk or in trouble: an important distinction

This simple analysis suggests that there is a probably a big difference between who is classified as having unaffordable housing costs and who is likely to be most affected by them. It also raises the question of whether trickle-down housing supply solutions will ever reach the people who are genuinely affected by housing affordability problems.

As a starting point, maybe we should give priority to those households that are facing high housing costs and multiple deprivations. This approach encourages a significant shift in where we perceive our housing affordability crisis to be – with less focus on broader market conditions and more on people’s lived experience.

Finally, reflecting on the Anglicare report, perhaps it points to another important conclusion. The fact that so few people on government support can afford decent housing suggests that the problem might not be a housing one, but a welfare one.

Read more: New budget standards show just how inadequate the Newstart Allowance has become

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