Michael Matusik - thegoodwills.com

Rental crisis raises risk of homelessness

rental-crisis-homelessness — A roof over your head (eventually). Image by www.pixabay.com,

This topic was sparked by news from a near-neighbour who had received the dreaded ‘landlord requires vacant possession’ letter.

All tenants go into a lease today knowing that the landlord can decide to sell the property, at which point they will be evicted. A lot of landlords have been doing that over the last two years, taking a profit as property prices spiralled.

The rental vacancy figures in this town and just about everywhere else would suggest that once a rental property is sold, it disappears from the rental pool – at least for a while. The national rental vacancy is 1.2% – at a time when analysis of Census housing data suggests that 700,000 private dwellings are locked up and uninhabited. More on that later.

We all know people who are renting and finding it increasingly difficult to feed their families. In recent months, there have been many stories in the media about families struggling to find a place to live. Those who find themselves at the end of a lease with no new home in the pipeline are at risk of becoming homeless.

Even when we are told the reasons for the shortage of housing, solutions are less obvious. Mostly due to self-belief and a strong self-image, some people caught between a lapsing rental and a tight vacancy rate will find their way round it.

It isn’t hard to find caravan parks, farm-stays and outback tourism ventures that need residential caretakers. The successful candidates get to park their vans for free and quite possibly pick up a small stipend as well.

People in these circumstances (a) do not regard themselves as homeless and (b) they can enjoy the luxuries afforded by a 22 ft caravan and an annexe.

June quarter data from CoreLogic shows that Australia’s rental market continues to tighten as low supply levels cause national vacancy rates to dive. Rents continued to rise across all capital cities and property types over the past three months.

Dwelling rents in the June quarter were 9.1% higher across the capital cities and up 10.8% in regional areas, compared to June 2021.

CoreLogic report author Kaytlin Ezzy said the recent upwards trend in rents has occurred mostly in the absence of overseas migration.

“This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008, when rental demand was supported by record levels of international migration,” Ms Ezzy said.

Vacancy rates across national dwellings fell to a record low of 1.2%, down from 2.2% this time last year.

In March, CoreLogic contributed to a report in The Guardian that found rents in Queensland had risen by as much as $200 a week over the previous two years.

The report found that steep rent rises in parts of Queensland forced people into caravans, sheds and poverty – even before widespread flooding displaced thousands more people.

While the ABS has released 2021 Census housing data, it will be “early to mid-2023” until we see the homelessness data. The most recent official data was collected in 2016 and released a year later. The homeless tally then was 116,427.

The Australian Institute of Health and Welfare (AIHW) estimates that in 2020–21, around 278,300 people received assistance from Specialised Homelessness Services (SHS). Around 111,100 clients were homeless when they first began support.

There are different categories of homelessness, apart from those who literally have nowhere to go and end up sleeping rough or in a charitable shelter. Then there are people living in sheds, garages and other unconventional buildings, couch surfing (staying with friends), hostels and unsuitable temporary accommodation.

Since late 2019, the onset of the Covid pandemic, the escalating price of real estate and an ever-increasing scarcity of rental properties has unquestionably added more individuals and families to the homeless tally. There is an increasing cohort of ‘hidden homeless’, that is people who are either not eligible to apply for support or feel they do not need it.

In Australia, some of these people head for the great outdoors. Accommodation demand driven by ‘Grey Nomads’ has produced hundreds of free camps and low-priced camp-grounds run by local show societies. The free roadside reserves, which may nor may not have a toilet/and or shower, usually have rules about how long you can stay. In Tasmania, many free camps allow you to stay for up to a month.

.Everyone’s circumstances are different, but we have met many people who had sold their house and bought a road rig. Many of the so-called Grey Nomads are retired tradies and public servants who can afford a $200,000 self-contained rig and go on the road for months at a time.

But if you travel the country and stay in free camps, you are just as likely to see a couple living in a 30-year-old caravan towed by an equally ancient car.

The big problem waiting for Australia’s new Prime Minister to tackle (after he has settled down our Pacific neighbours), is the housing crisis.

Believe me – it is a crisis. There are simply not enough houses to go around. This is particularly so in Queensland, where interstate migration has put the housing sector under massive strain.

There are reasons for the dire shortage of housing and they include delays in building new homes amid adverse weather in 2022. Then there are homes destroyed by floods or bushfires.

But as residential property analyst Michael Matusik discovered, the housing shortage is in part due to some 700,000 private dwellings that are “deliberately left vacant”.

Matusik reached this conclusion after analysing 2021 Census housing data, which showed there were one million unoccupied dwellings in Australia (about 10% of the country’s private residential accommodation).

The ABS defines unoccupied dwellings as: holiday homes (for owner’s use or rented out); investment properties without a tenant; newly built but vacant dwellings; habitable dwellings being renovated and/or vacant dwellings for sale or lease.

Matusik wrestled with those categories and calculated that after discounting the latter, 700,000 unoccupied dwellings were investment properties that were locked up rather than tenanted.

“Many of the unoccupied dwellings are in capital cities, especially Sydney and Melbourne where more apartments are in the dwelling mix,” Matusik wrote in his regular subscriber bulletin, Matusik Missive. “In these cities the proportion of overseas buyers, especially from Asia, and particularly from China, is the highest in the country.

“It is somewhat safe to say that something like 70% of the unoccupied dwellings across Australia are deliberately locked up.

“Assuming past immigration levels return, then there is a need to build some 150,000 new dwellings across Australia each year.

“If we could unlock these 700,000 empty homes, we would not need to build a new home for 4.5 years.”

While admitting this is ‘fantasy land’, Matusik says that any move to open up these dwellings would go a long way to improving short-term dwelling supply.

As we approach National Homelessness Week (August 1-7), some agencies will no doubt be calling for an earlier release of Census data on the homeless.

I asked the peak body, Homelessness Australia, for a comment; but remembered it was de-funded by the Federal Government in 2014. When one of their volunteers gets back to me, I’ll include their comment.

For now I’ll say that however bad the news is, it is better that we know sooner than later.

Affordable housing – a key election issue

affordable-housing-election — A roof over your head – image by Capri23 at Pixabay.com

Wherever you go in Australia to visit friends and family, the conversation very soon turns to the scarcity and high cost of rental housing. The topic will then quickly shift to the ever-rising cost of houses and why parents worry about their adult kids taking on seven-figure mortgages. As residential property analyst Michael Matusik recently said, it comes down to the Bank of Mum and Dad.

Few cities or towns have escaped the 20% rise in residential real estate prices (for the year to September) or the inevitable rental hikes that followed. Stories that circulate about landlords taking advantage and tenants deciding they’d be better off sleeping in their cars are not uncommon. Check in with any emergency housing agency and they will tell you things are as tough as they have ever been.

AMP Capital chief economist Shane Oliver says that while housing affordability has always been an issue in Australia, it has moved from a periodic cyclical concern to a chronic problem.

“The 20% rise in prices over the last year has put the spotlight on the issue again. With the surge in house prices since the 1990s has come a surge in debt which brings with it the risk of financial instability should something go wrong in the ability of borrowers to service that debt.”

Oliver said the gains have been driven by record low mortgage rates, buyer incentives, a tight jobs market, a desire for more home space as a result of the pandemic and working from home, numerous government home buyer incentives, the “fear of missing out” and lower than normal listings. This has pushed average prices to record highs and real house prices to 23% above their long-term trend.

Oliver says the average capital city dwelling price rose 200% over the past 20 years, compared to an 82% rise in wages. The disparity has become more telling in the last 10 years with dwelling prices increasing by 58% and wages rising by only 26%.

The popular wisdom, if your parents taught you such things, was to spend no more than a quarter of your gross household income on housing. Over the decades, this figure has risen to 33% and in the major cities has peaked at 50%.

As we are now in pre-election mode, it’s appropriate to mention the Affordable Housing Party, a single-issue party which is on a membership drive to avert the risk of de-registration. Led by Andrew Potts, the party had its first tilt at Federal politics in 2017, fielding a candidate in the Bennelong By-Election.

The party’s policies include phasing out negative gearing, ending the capital gains discount on investment properties, stopping foreign investment in Australian property, taxing investment properties which are left empty and cracking down on full-time AirBnB operators.

Radical? Yes, but the problem needs some radical thinking before we end up with 200,000 people couch surfing and sleeping in their cars.

The AHP’s research on the housing sector focuses on negative gearing, which means the cost of owning an asset exceeds profits, resulting in investors claiming this loss to reduce other taxable income.

As the research suggests, one ought not to expect the Federal Government (or any government), to shut the scheme down. As of April 2017, Federal MPs and Senators owned a total of 289 investment properties.

This could be a good time to bust a few myths about negative gearing, Tax Office statistics from 2017 show that 64% of the 2.2 million people who own investment housing have an annual income of less than $80,000. This seems to scuttle the argument that only the wealthy benefit from investment housing. Less than 10% of Australia’s 2.2 million property investors earn more than $180,000 a year. Likewise, 71% of investors own only one home, with 19% owning two and 10% owning three or more houses.

Labor Leader Anthony Albanese upset some of the affordable housing campaigners in July when he abandoned pledges to impose restrictions on negative gearing. The opposition went to the 2016 and 2019 elections promising to halve the 50% deduction on capital gains and limit negative gearing to new properties only.

National Shelter chief executive Adrian Pisarski said by ditching its commitment to reforming negative gearing, Labor had “abandoned” would-be home-owners and low-income households wanting to buy homes.

“It took 15 years of campaigning by many to get the ALP to find a spine on CGT and negative gearing and commit to helping reduce house price inflation,” Mr Pisarski told the SMH at the time. “This is a sad day for affordable housing.”

In May Mr Albanese launched the Opposition’s $10 billion Housing Australia Future Fund. The fund would build social and affordable housing and create thousands of jobs now and in the long term, he said.

Annual investment returns from the Housing Australia Future Fund will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to pay for social and affordable housing projects.

Over the first five years, the investment returns would allow the building of 20,000 social housing properties, 4,000 of which would be allocated for women and children fleeing domestic and family violence and older women facing homelessness.

Residential property analyst Michael Matusik has a few ideas to fix housing affordability. He says part of the problem is the focus on new builds rather than the existing market.

Matusik-style reforms would include removing negative gearing (a policy set when interest rates were sky high) and charging stamp duties at a flat $2,000 per transaction.

Matusik suggests a 20% tax on all property transactions – including owner stock if sold within, say, three years. This would stop ‘flipping’ (buying a house, renovating it and selling again within a short period of time) which is a major driver of prices. The government should limit foreign buyers to new dwellings and they must also have a 50% Australian business partner who pays 20% tax. These new rules would also include measures to stop developers land-banking.

“If they don’t start building the project within five years, they lose development approval. After 10 years, if there is no action the site is sold underneath them. In short, you cannot buy a home (new or existing) unless you have an Australian passport and pay 20% tax. No Passport no buy.”

As for new housing, Matusik says all housing related incentives should be removed because they distort the housing/building cycle. He also suggests that greenfield developments be required to provide minimum levels of community infrastructure set as targets. No doubt he will extrapolate on these ideas in a future Matusik Missive.

More radical ideas from Gwyn Hooper, writing for a Byron Bay newspaper (the median house price in Byron is $2.8 million (units $1m):

Under Hooper’s affordable development plan, the Federal and State governments would provide finance and free land. Local Government’s role would be to manage the buildings and tenants and waive its usual development fees.

“The tenants would have a secure tenancy, pay an affordable rent (based on income), and would importantly be able to live and bring up their families without financial stress – an issue that can cause family breakdowns that only compound these issues.”

As these examples suggest, this issue needs to be de-politicised and brought out into the sunlight with an ‘open to new ideas’ sign attached.

Written in the comfort of my freehold home, ameliorating some of my baby boomer guilt, I think.

Last week: People who lived in the UK for more than six months between 1980 and 1996 are prohibited from donating blood because of Mad Cow disease.

Who the Hell Approved That?

“I used to like the city better, thirty forty years ago’ South Brisbane circa 1973, before the Cultural Centre, Expo 88 and proliferating apartments.

The Cheeseparer family from Victoria, fed up with the overpopulated rat race, spent the school holidays cruising the south east Queensland coast, looking for a more ambient place to live than the far-flung commuter suburbs of greater Melbourne.

Margolia and Basil Jnr are sick of Melbourne’s unpredictable weather, the traffic, the pollution, the high cost of living and the four-hour daily commutes (including dropping the kids off at school and picking them up from daycare). They also want to be closer to the Cheeseparer oldies, Basil and Sybil (previously cited in this forum), who have retired to a 77^th floor apartment on the Gold Coast (which has a spacious guest room with four bunks and a sofa bed in the lounge).

So they set off on a road trip, boring the four Cheeseparer kids witless with their obsessive pursuit of a green change.

Somewhere between the Sunshine Coast and Brisbane, Dylan, 11, and a bit of a smartarse, looked out the window at a new estate. He provided the family with a pithy description: “a sea of roofs with nary a tree to be seen, tucked not so discreetly behind an acoustic fence running along the motorway”.

“Who the hell approved that?” he added.

“You can’t say hell – it’s a bad word,” said April, 6.

Margolia said: “Lots of religious people believe there is a place called Hell, so it is a place name, not a curse.

“But I was using it as a curse,” said Dylan.

“I know, let’s play a game”, Dylan continued. “First one to say something clever and cynical about any new housing estates we see gets a point. Winner gets more Face Time”.

“This is dumb,” came the voice of Max Cheeseparer, 15, banished to the Prado’s luggage compartment with Edie the Golden Retriever for saying negative things like “this is dumb”.

“Good tsunami will see that lot out,” muttered Eric, 13, not only bored but observant, as the Cheeseparer’s Prado cruised past a new coastal estate separated from the highway by a levy.

“Paper bag”, Dylan retorted.

“Yep, looks like someone drained a Teatree swamp,” said Basil Jnr.

“Not fair,” said April. “Adults cannot play.”

Well actually, adults should be playing this game when house hunting in the sprawling conurbation between Noosa and Coolangatta which makes up the greater metropolis of Bris Vegas. In the proliferating new estates, so often set next to freeways, generic housing design prevails, each home dominated by a two car garage and sited on allotments as small as 400sqm , depending which local government is setting the rules. The theory behind smaller lots is that it makes housing more affordable.

Who the Hell Approved That allocates points for the inventiveness of commentary, e.g. “Nice green buffer, mate” when clearly the trees have gone to Japan to make paper. A bonus point is awarded to the first to invoke The Castle’s famous quote: “Tell them they’re dreaming”. The latter usually applies upon seeing billboards announcing “house and land packages from $659,000”.

Be assured this is a game you can play anywhere in Australia and not just in the big cities of Melbourne, Sydney and Brisbane. One of the things you notice when following the grey nomad trail is just how few country towns have been left untouched by the cookie cutter form of new housing development built on the outskirts Many of these houses are sold off the plan with rental guarantees; bought by out-of-town investors. In the mania of the moment, no-one looks ahead 24 months and wonders “now what?”

There is a vast difference in vision between those steeped in the concept of sustainability and protecting the environment and the State government’s mantra ‘Jobs and Growth’.

The 2017 SEQ Plan forecasts an additional two million people by 2025 (bringing the region’s population to 5.5 million). Queensland’s target annual population growth (fertility+interstate migration), hoped for 3% per annum.

The State still boasts an average 2.2% over 10 years, although in recent years the population growth numbers have fallen below 2%. Perhaps the interstate migrants, in their desire to flee the rate race, have realised it is just as ratty across the border.

Residential real estate analyst Michael Matusik commented on figures released by the government which estimate that the Gold Coast, Ipswich and Logan are expected to accommodate 73% of the new housing development across south east Queensland. The Sunshine Coast and Brisbane City Council areas are forecast to hold an additional 10% each. The three municipalities are expected to generate an additional 298,000 dwellings.

Matusik noted that 82% of the new housing on the Gold Coast and 57% in Ipswich will be higher density (apartments), which is ‘‘much higher than current market demand’’.

The growth mantra has spoiled the character and amenity of countless suburbs in Brisbane. I lived there for 17 years, leaving for a smaller town in 2005 with no desire to return. I certainly have no capacity to buy there again, with a median price of $680,000.

The rot started with local governments deciding to relax planning rules so people with a house on a quarter acre allotment (once common), could sub-divide the block and put a second house on it (with an easement for access). This approach has degenerated into what is generically called ‘infill’, which in some inner city Brisbane suburbs mean allotments as small as 300sqm. These tiny house allotments are sought after, given that they represent a foothold in an otherwise unaffordable location (anywhere you have ‘city glimpses’).

In the 2017 report, Shaping SEQ, Deputy Premier Jackie Trad enshrines the vision that requires a population growth target.

“It is not difficult to see why the population of South East Queensland is expected to grow by almost 2 million people over the next 25 years. We have an enviable lifestyle, great schools and universities, and a strong, diverse economy expected to create almost one million jobs over the next 25 years. Our future is bright”.

This is not the only reason we moved to a country town two hours’ drive from Brisbane, but it was one of the motivators.

A reader who had been following our downsizing exercise with great interest wrote to relate her own experience in growth-mad Brisbane. Her aim was to sell the big family home in an outlying suburb and move closer to the city. But now she is spooked by falling sales volumes.

My friend also observes that prices are ‘predatory’ for inner Brisbane, with buyers made to feel ashamed if they are not up for the $750k starting point. So this empty nester, realising how little housing is designed for the over-50s downsizer market, has withdrawn from what she suspects is a static market, waiting for something to happen.

Meanwhile, the tree-changers are continuing the elusive search for a small town that has the infrastructure, ambience, affordability and the potential to commute to jobs in the city as needed. In theory, the brave new world of tele-commuting should make this lifestyle viable for people whose work revolves around consulting, writing, giving people advice and preparing documents.

A housing policy designed to facilitate and enhance this increasing desire to escape the rat race could in turn re-populate and rejuvenate small towns which might otherwise die. How about it, Anna?