Empty homes should house those who need accommodation:

By Catherine Cashmore

Monday, 09 January 2012

It's almost impossible to accurately estimate the number of homeless in Australia. According to the 2006 census there were 105,000 – that's 5,100 more than recorded in the in the 2001 census, which counted 99,900 without a permanent abode.  Of course there are many reasons individuals find themselves without shelter.  Some come from abusive families, many being women and children, and some are what are commonly known as “couch surfers” – sleeping a night here and there.

However, as the price of housing increases, not to mention the shortage of affordable rental accommodation, we can expect an increasing number to join the queue. It's inevitable, because although housing affordability has improved slightly throughout 2011 with marginal falls across our capital cities, subsequent interest rate cuts, with more predicted later this year, will slowly swing the balance of power back into the hands of the vendor as part of the typical cyclical nature of the “property clock”.

The primary reason we have such a shortage of affordable housing is down to limited supply in the places people want and more importantly, need to live – the city.  More than 65% of Australia's population lives in and around our major capitals. Australia is a mere teenager compared with Europe, which has evolved with a network of smaller towns and cities to soak up a comparatively even spread of businesses and thus job opportunities. Due to a consistent underestimate of our growing population from those who plan for growth, we haven't prepared effectively for the population surge.

For example, unlike in other countries, most of the job centres are centralised in and around the capitals. On the outskirts of the city where land is in abundance, the cost of housing is pushed up by limited land releases and hefty development overlays, which are designed to compensate for the current lack of facilities such as schools, shops, parks, and transport – which are needed to create a much-needed sense of community for those moving into the new estates. As a consequence housing in the areas stretching beyond the train lines fails to attract the demand needed to produce an adequate turnover of stock or attract the surplus of buyers.

Consequently inner-city areas are growing in density with a dramatic increase in high-rise accommodation often going against complaints from councils and residents who protest in vain as their once leafy suburban localities start to evolve into something akin to Manhattan – they no longer have a choice.

Those that commute daily into the CBDs have to leave extra time to battle traffic, or accept standing room only on the local train/tram network.  Many home buyers have accepted the traditional Aussie house with a backyard for games of cricket and a family barbecue has been replaced with either a flat or small subdivision and courtyard at most. For those who want a larger property the compromise is usually a move into an outer-suburban estate and accept being far from friends, family, and work – plus slower capital growth. Most first-home buyers stuck on the rental ladder are only able to afford to enter the housing market if they have either help from family/friends to raise a deposit, or meet someone with whom to combine wages and savings.

Rents have increased more than 4% this year in some areas, and it's unlikely that this will ease as the trend towards saving rather than spending continues to place a strain on affordability. And furthermore, it's been predicted that by 2020 we'll have a shortfall of 105,000 much-needed social housing homes – homes to house the neediest in our society.

Therefore it may surprise some to hear of the massive numbers of vacant residential stock we have in Australia. In the 2006 census about 10% of the current housing stock was recorded as vacant. Due to difficulties in collecting the data, such as assessing which properties are “reserved” as holiday homes, temporary rental accommodation or are simply in the process of renovation, it's hard to correctly assess the numbers – however it’s fair to assess a significant minority have been abandoned altogether and are therefore magnets for vandalism and short term squatters – most residents can point to at least one vacant property in their streets.

Considering the stresses caused by a shortage of available accommodation outlined above, I doubt anyone would argue that wherever possible, vacant accommodation should always be used to house those who need it most.

Neither is the problem limited to Australia. In the UK there are 930,000 empty homes, 350,000 of which have been vacant for six months or more.  Therefore, there's been a massive innovation to bring derelict homes that have been inherited, or acquired – but due to financial constraints sit vacant and unused – back to liveable condition.  In some cases where families are unable or unwilling to renovate, grants have been offered by various government schemes to assist the process, and in some circumstances, properties have been re-acquired for the purpose of social housing.

More concerning however is a growing trend – particularly among Chinese investors – to acquire housing as a safe place to bank funds with no intention of ever marketing for tenancy. It's a practice common in Chinawhere the population have been used to a lengthy housing boom, and until recently, no taxes on property.  For these investors, there’s little benefit in struggling to find a good tenant, it’s more important to keep the property in tip-top condition for when they decide to sell. Neither do they limit their acquisitions to China, the trend is also popular in the US and Australia, where flats and luxury houses sit vacant for extended periods of time. Australian houses are “affordable” in comparison to those in the major Chinese capitals.  In China property rights don’t allow ownership of the actual land, and therefore owning a genuine piece of Aussie dirt where their money can be safely stored away from government hands is an attractive investment model.

It’s true we have strict rules regarding foreign ownership of established residential property – however it’s also sadly true that loopholes in the system are easy to navigate and the number of foreign investors entering the market is a mystery to all who attempt to find out – an issue aptly highlighted in Chris Vedelago’s recent article. Furthermore, there are few restrictions on purchasing new homes and many are just happy to soak up the abundance of freshly built high-rise accommodation that is commonly sold with promises of rental guarantees and above-market rates regardless of whether the unit sits vacant during or even after the guarantee has expired.

We should encourage investment in residential property, providing the consequence is an increase in available rental supply that can keep vacancy levels more in balance with affordability.  However, too many investors are using our precious limited housing supply merely as a bank account with no intention of navigating the difficulties associated with finding an appropriate long-term occupant.  There should be restrictions on this practice and also more energy focused on initiatives to make use of disused or neglected homes.

Identifying where the derelict homes are would be the first step – thereafter perhaps government initiatives could be proposed to set a plan in place to encourage practical moves toward getting the home occupied. After all, it’s far more cost-effective (and environmentally friendly) than building from scratch. I would go so far as to suggest there should be a named person on every council working on the issues. Property can be an excellent investment, however its primary purpose should never be neglected and therefore there should be a requirement on every home owner, wherever possible, to ensure the houses do not remain vacant without valid reason, for extended periods of time.

Yes, we have a homeless issue in Australia; however, we have arguably enough empty properties to provide housing for all. Let’s start making use of the thousands of homes that are left empty and abandoned and make 2012 a year of new positive initiatives for housing.