There’s an old Jewish proverb, which – as a rough translation – says: “People come to poverty in two ways: accumulating debts and paying them off.” Perhaps our politicians should take note, because it’s clear we’re becoming a society split down the center of “those who have” and “those who have not”. You don’t need the brain of a statistician to work out why the polls are so low.  It’s not just about lowering hospital waiting lists and reducing ever rising electricity bills, which are always on the agenda for any state or federal government in power. Neither is it about handouts to “appease” changes in policy such as the carbon tax, or other “nanny” initiatives.  No – it’s as simple as an effective policy to provide shelter for those unable to commit 50% or more of their wages to accommodate for their needs – let alone that of a growing family.

I admit to being a bit of an ABC junkie, always tuned into one of the various news stations.  I listen to MPs’ voices coming over the airwaves daily, reminding me of Australia’s “sunny” outlook in the light of Europe’s economic woes. I hear our Prime Minister remind me that by 2013 we’ll have a surplus and I read reports of the flood of “economic” migrants flocking to our shores to take advantage of our low unemployment status.  This is all fair enough and on the face of it, not untrue.  However, while there’s no shortage of “those who can” in the divide of the “wealthy” and the “struggling” – there’s an increasing shortage of “those who can’t”.

Most recently I read of an English northerner, a hard-working former paper-mill operator by trade, who refused to go on the dole in the UK to provide for the needs of his family of dependents (all 13 of them).  Frustrated with the lack of opportunity in the UK, he’s taken to the seas and like a pioneer – determined to make a new life for his family – has moved to Queensland.  Staying with relatives, he believes our “positive portfolio” will provide opportunity here, which he’d be unable to furnish elsewhere – and he’s probably right.  However, what he may not have factored in is the cost of housing.  With 12 children among his dependents, finding a house to comfortably accommodate his needs won’t be easy – or cheap. Especially if he wants to be within cooee of transport, schools, and shopping facilities.

But it’s not just about purchasing; the rental market in every capital city is stressed to the max. You may pull me up here and emphasise certain media reports quoting figures “indicating” that Melbourne’s vacancy rate has “softened” under the boom of construction.  If so, it’s worth remembering most of this new construction is in the form of high-rise accommodation, which offers neither affordable rent nor (for those on an average wage) a quality lifestyle.  Investors, looking for good yields, have purchased most of the smaller apartments and you’d be hard pressed to get a studio flat with no parking facilities for less than $300 per week – hardly affordable for those on an average wage.

While writing this, I have just paused to have a conversation with a young girl about to vacate from her current accommodation due to the current owners wanting to move in.  We spoke briefly about an established two-bedroom apartment that has just been let.  Such was the demand for this relatively small unit, numerous applications had been fielded, offering some $50 per week above the advertised yield (which isn’t by any means an unusual occurrence for apartments in boutique blocks of this type).  It doesn’t just happen in affluent locations, it happens in the poorer areas also. Suburbs in the outer-western Melbourne regions where the market’s arguably more affordable also fall under high demand for an increasing number unable to save for their own homes.

During the conversation we touched on the subject of the current “abundance” of high-rise apartments currently sitting vacant in the CBD (SQM has the vacancy rate sitting at 4.6%); however her comments were along the lines of “small, expensive and anything but appealing”.

I was then told how she always offers three months rental in advance (not including the bond, which would be an additional cost).  However, even this is often not enough to beat the competition.  For those unable to provide such incentives, it makes you wonder how low-wage recipients and the unemployed cope with finding appropriate shelter. Perth’s vacancy rate has now dropped below 1%, Sydney 1.5%, Adelaide 1.3%, Canberra 0.7%, Darwin 0.7% and Brisbane 1.6% (all figures courtesy of SQM). Possibly the only capital offering a marginally easier terrain is Hobart, with a vacancy rate of 2.4% – however, it’s sparse comfort.

Tenants who are knocked off the rental ladder (a frighteningly increasing statistic nationwide) confront a truly dire situation.  In 2010 – even after a tightening of the rules of who could, and couldn’t, apply, there were 248,419 people on the waiting list for government-assisted accommodation. The recent McKell institute’s ‘Homes for All’ report cited the increased and very real need for public housing.  The latest ‘State of Supply’ report highlighted similar issues.

A recent and damning audit commissioned by the Victorian government‘Access to Public housing’ reads like a company about to go into administration.  Apparently, Victoria has “a $17.8 billion property portfolio, housing 127,357 Victorians”; however, there is a massive42% gap between income and rental expenses.  Furthermore, thedeficit is set to “more than double from $56.4 million in 2011, to $115.1 million in 2015.” Victoria’s apparently “facing a cash crisis with all cash reserves expected to be exhausted during the 2012–13 financial year based on current budget estimates”!  The report can’t even pinpoint where it all became “unsustainable” – “because the division has funded deficits by deferring acquisitions and maintenance and using cash received in advance for long-term programs, along with unspent cash from capital programs.” Recent news confirming the waiting list for public housing in Victoria has fallen by 1,582 is no light on the horizon in the face of such a dire situation, especially considering there are in excess of 38,500 still stuck in “limbo”.

To be fair on the current Victorian government, this is the most detailed report I can find on the subject in the Auditor’s archives.  It’s therefore evident the crisis spanned back well into the previous government’s term and was never adequately addressed or assessed. In light of this, it’s positive that such a review was indeed commissioned, however it’s yet to be seen if the “insurmountable” problem is able to be resolved in the near or long term.

They are all facts and figures that make up part of one of many public reports – reports that have been addressed previously – reports that cost taxpayer money – reports that result in little if any change no matter who’s in power.

Of most concern is the national review on how housing affordability has been managed.  On the Australian National Audit Office’s website you can source a damming overview into the administration and implementation of the federal government’s “Housing Affordability Fund (HAF)”.  The objective of this fund was to increase the supply of new homes whilst also reducing their cost, with the key focus being on the “reduction of housing development costs associated with infrastructure projects”.  This is an issue that sorely needs addressing, yet the report is an embarrassment to read. The funding was to be in the form of $500 million over a five-year period from 2008-09 to 2012-13, with a further $12 million allocated for administration costs. Qualification for the funds was assessed on a strict “needs” basis looking at the number constructed, against the projected savings to the home buyer.  In other words, the funds would not be rationed equally across all states.

All was going OK, until a shortfall in spending to the tune of $12 million was brought to light.  There followed an administration nightmare, with funds allocated to projects that fell clearly outside of the assessment criteria.  Projects that should have been funded weren’t, and those that failed the assessment guidelines and should have been rejected were approved.  Furthermore, it was clear that funded projects did not make evident the amount of savings passed onto the buyer, and neither were the results of those funded fully assessed on completion.  All in all, considering the result to date has only assisted 749 home buyers for an outlay of $12 million in administration costs and a promised $500 million for the projects, it’s clear better strategies could and should have been implemented.

Comparing property markets across the world is difficult due to the way statistics are collated, with some markets substantially less transparent than others.  However, in the International Housing Affordability Annual Survey, the only market that eclipses Australia in terms of income-to-housing cost is Hong Kong.  The survey rates each country by dividing the median house price by the annual median pretax wage.  Australia has a score of 6.7; however, Hong Kong has a score of 12.6.  While there’s plenty of healthy debate over how the figures are calculated, showing that it’s not quite as black and white as it seems, there’s no doubt Hong Kong stands out and it’s therefore worth looking how affordability has affected its most needy – especially considering we’re well on our way to a similar level of disparity.

The country is one of the most densely populated in the world – and with such a finite source of land, it’s no wonder the existing real estate holds its price. Hong Kong has no option but to build upwards – high-rise living is therefore widely accepted, and apartments are small by our standards.  However, since 1953 when the first public housing scheme was initiated, the number of people living in government-assisted accommodation has now reached 50% of the total population. The split between those who can and those who can’t purchase has led to a range of initiatives aimed at providing adequate shelter for not only the poorest, but for increasing numbers of low- and even middle-income recipients not qualifying for public housing, but still sandwiched out of ownership.

Schemes now include public rental housing estates, home ownership scheme estates, tenants purchase scheme, flat-for-sale schemes – the list goes on. None of the above mentioned has been a “cure” for which statistics of “homeless” have now been replaced with those “caged” in high-rise accommodation.  Accommodation where the standard of living is no better than battery farmed chickens in a coop.  However, action has been taken and to date, it seems to far exceed Australia’s efforts.

Here we are fast losing the battle altogether, however unlike Hong Kong we have one of the least densely populated countries in the world with an abundance of land – land we haven’t properly used! Furthermore there are a growing number who, like those in Hong Kong, are “sandwiched” – unable to qualify for housing assistance (for which application rules have been tightened) and yet can’t afford adequate rental accommodation close to the transport facilities they need for employment.  Yet we’re told daily how prosperous Australia is in comparison to other nations as if everyone is ‘enjoying’ the ride.

Do we really want to end up like Hong Kong with 50% of the population needing government-assisted housing simply because successive governments haven’t gone far enough to action effectively the recommendations of their various multimillion-dollar funded reports?  Planning rules must be relaxed in outer-suburban areas.  There needs to be a fresh look at the requirements to build “green”, which I’ve previously spoken about here.  Provision of facilities, making regional locations feasible for home buyers working in central towns and cities, need to be timetabled and implemented (another issue I’ve addressed – along with others – on numerous occasions).

We don’t need an “HAF” that helps fewer than 1,000 recipients for an outlay costing hundreds of millions. Nor should we be giving out “nanny” incentives, which place inflationary pressure on existing real estate such as the FHOG (first-home owners’ grant). Instead, we should remove stamp duty on new dwellings and consider a change in policy on negative gearing and other such recommendations cited in the Henry Tax review.

We may be rolling along on a mining boom, which looks great on paper.  Nevertheless, like the “unsinkable” Titanic on calm waters, no one seems to be flagging the great iceberg ahead.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.