Rental stress for Hunter households is growing, a recent examination of housing affordability by the Hunter Research Foundation (HRF) Centre has shown. Hunter house prices have grown strongly over the past five years. That forms a ‘barrier to entry’ for those looking to own a home. To assess this challenge, the HRF Centre formulated a First Home Buyer affordability index, which looks at income, house prices, borrowing costs and government concessions. This index was at its highest level (most unaffordable) in June 2017. It shows a dramatic worsening of affordability from the early 2000s. Despite a brief and sharp improvement shortly after the GFC, the index has returned to elevated levels for most of this decade.
The poor affordability of housing has led to a rise in the number of households renting. Combining this trend with limited housing stock and rising rents has meant, in 2016, a higher proportion of Australian households were in rental stress than mortgage stress. Housing stress is defined by the Australian Bureau of Statistics as a household spending 30 per cent or more of their average weekly income on rent or a mortgage. Households paying 30 per cent of income on rent have a score of 100 on the Rental Affordability Index (RAI) published by SGS Economics and Planning. With a RAI of 110, regional NSW remains the least affordable of non-metro areas studied in all states. Across all Hunter local government areas (LGAs) we estimate the number of households in rental stress rose by 4900 between 2011 and 2016 (up 24 per cent). Growth in the share of households in rental stress across Hunter LGAs has been stronger than the national trend between 2011 and 2016. More than 8500 Newcastle households were in rental stress in 2016, a 22 per cent rise on the number in 2011. In Muswellbrook LGA the number of households in rental stress increased by 37 per cent, by 34 per cent in Cessnock and in Maitland by 45 per cent between 2011 and 2016.
Figures for housing stress would likely be higher across the nation and the region, if the income measure used accounted for the recent growth in the cost of essentials. Electricity, transport and health are just some of the household costs that have risen at a faster rate than wages in recent years.
Increases in rental stress, evidence of worsening rental affordability, puts extra pressure on demand for social housing. There are about 4500 social housing dwellings in Newcastle, Compass Housing’s Greg Budworth told the Hunter economic breakfast in February. About 1900 households were on the waiting list, he said. An average wait of five to 10 years means that these families are forced to compete in the regional rental market.
House price and rental price growth are contributing to marked changes in the make-up of Hunter towns and communities. For instance, Newcastle LGA is seeing increased spatial sorting along income lines. Suburbs in and around inner Newcastle, and the rapidly gentrifying inner-west, have had a growth in median income that has greatly outstripped the rate of growth in average weekly earnings for NSW. Higher income residents are displacing lower income residents. Lower income residents are moving to the city’s more affordable outer suburbs.
The need for affordable housing solutions to maintain socio-economic diversity in our communities remains pressing, so that Newcastle and the Hunter can retain appealing aspects of their character and integrity as they grow and change.