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Social Housing is struggling, this is why

Why is Australia experiencing a social housing crisis and what can property managers, investors and real estate professionals do to ease the problem?

While emergency housing is usually secured and unaffected by market fluctuations, affordable housing solutions for the lower tiers of ‘middle income’ are scarce and getting scarcer in most parts of Australia. 

This bracket is not populated by people on welfare but with essential workers such as teachers, health workers and emergency workers. These individuals are not seeing wage rises in line with inflation (or not seeing wage rises at all) and are stuck with long commutes or substandard housing, particularly in rural areas where there is very little available. 

Rents are jumping from $400 per week as high as $700 per week and prices are following the same trend. It’s not only harder to rent, it is harder to buy a property for less than $1 million.

Over the last twelve months, this is how much the average rent rose by in major cities and regional pockets between March 2021 and March 20221: 

  • Sydney 9.1% (from $550 to $600)

  • Melbourne 3.4% (from $435 to $450)

  • Brisbane 14.9% (from $435 to $500)

  • Adelaide 9.4% (from $425 to $465)

  • Canberra 16.7% (from $600 to $700)

As shared by Domain in March, in Melbourne, “The increase in median unit rents was the steepest quarterly rise in eight years, up $15 per week to a median of $390, with the biggest rise recorded in the inner-city region.”

To add to this, CoreLogic recently shared news of vacancy rate for units in Melbourne falling to 1.9% in April, from 5.7% a year prior. This has been caused by international students, travellers and workers beginning to return to Australia, plus younger workers getting back into hospitality jobs and having the funds to leave home again. However, despite job availability being on the rise, other research has found the average 18-year-old retail worker in every capital city spent way above 30 per cent of their income on renting one room, which is an indicator of rental stress. 

Tackling the crisis

Now the ALP is in power, it has promised to build 30,000 new social and affordable housing properties in its first five years. This includes: 

  • 20,000 social housing properties – 4,000 of which will be allocated for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness.

  • 10,000 affordable homes for the frontline workers like police, nurses and cleaners who kept us safe during the pandemic. This will mean they can live closer to where they work, and it will mean better services for everyday Australians.

In addition to this, in Victoria, $5 billion is being invested in the ‘Big Housing Build’, which has promised to “increase the supply of available social housing by more than 10%”. Of this money, 20 percent has been allocated to regional areas. In the metro area, projects are under construction in Richmond, Prahran, Brunswick East and Hampton, to name a few. 

What can property professionals and investors do?

As a real estate agent, your goal is to help your property owner clients to optimise the money they make, not reduce it. However, there is the catch-22 of having a property available for lease but not being able to attract renters. Prices do have a cap before the home will end up sitting empty so you need to be realistic with your clients. 

If you have any property developer clients, you may be able to discuss boarding houses as a strategy, which offers affordable housing but still provides strong returns. This set up offers a cross between apartments and a share house. Residents have their own studio with a kitchenette and ensuite but some living areas are communal. There is less call for strata fees and this kind of development does have the potential to be cash flow positive from day one but it has to be handled by a skilled property manager.  

You could also potentially speak with clients who have larger properties about adding a granny flat or ‘tiny home’ to the backyard. Leasing it out can provide a solution for someone who needs a less costly living arrangement.

As Director of Research for CoreLogic Tim Lawless explained earlier this year, “Australia’s rental market is mostly reliant on private sector investors to provide rental housing.” Given that there is growing demand for affordable housing and reasonable rent, this is something you can potentially put to your investors as they research strategies to grow their wealth through property. Perhaps two cheaper homes overseen by the one property manager will provide longer term opportunities for returns than a single, highly priced abode.

1 https://www.smh.com.au/property/news/boxed-in-sydneysiders-hit-with-fastest-growing-house-rents-in-13-years-20220412-p5ad16.html