‘Time bomb’: Housing problem costing Australia hundreds of millions every year

A neglected problem at the core of Australia’s property market is causing increasingly disastrous consequences, new research shows.

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A dearth of social and affordable housing in Australia is costing communities tens of millions of dollars per year, and placing a “time bomb” at the heart of our economy.

That is according to new analysis from Dr Andy Nygaard, an Associate Professor at Swinburne University of Technology’s Centre for Urban Transitions.

Dr Nygaard’s research suggests insufficient investment in social and affordable housing is now costing the national economy a whopping $676.5 million in foregone social and economic benefits each year.

And that cost is set to keep growing, to as much as $1.286 billion by 2036.

The thrust of the analysis is that a lack of affordable housing doesn’t just hurt the people who can’t buy or rent homes. It harms society as a whole.

For example, a lack of housing leads to more homelessness. And more homelessness creates a higher burden on the public health system.

Another example: if a victim of domestic violence has nowhere to go, he or she is more likely to remain trapped, unable to escape an abuser. This adds to the burden on the justice system.

A property for sale in Sydney. Picture: Gaye Gerard/NCA NewsWire

Dr Nygaard sought to quantify the price these problems carry for Australian communities.

“These costs cannot be ignored,” he said.

“The social and economic problems associated with our affordable housing shortage will only increase over the next decade if we keep doing what we have been doing – very little.

“In the absence of additional investment, communities are going to see considerable strain on homeless shelters, police, hospitals and other public services.

“Households will have less to spend on children’s wellbeing and education. Employers may also feel the cost of increased absenteeism.”

To arrive at his conclusions, Dr Nygaard took a suite of factors into account, including: the public sector health costs associated with homelessness, stress and depression; the health and justice system costs caused by domestic violence; reduced disposable income; and the private sector costs associated with stress and depression.

His modelling identifies which communities are currently paying the worst price.

At the top of the list is Sydney’s inner south west, with a cost of $28.2 million in 2020, which could grow as high as $52.5 million in 2036.

The Gold Coast is in second with a figure of $27.9 million, growing to $45.6 million, followed by inner Melbourne with $22.9 million, rising to $51.2 million.

Rounding out the top ten are Parramatta, Tweed, west Melbourne, the city and inner south of Sydney, the Sunshine Coast, southeast Melbourne and the outback in the Northern Territory.

The ten areas with the highest costs associated with a lack of affordable housing, as identified by Dr Nygaard.

Kate Colvin is the national spokeswoman for Everybody’s Home, a campaign whose goal is to “fix the housing crisis”. It was launched back in 2018 by a coalition of housing, homelessness and welfare organisations.

Ms Colvin said Dr Nygaard’s research showed a lack of investment in affordable housing was “pushing Australians into acute stress and dysfunction”.

“The real world impact is extra trips to hospital emergency wards, more psychological counselling, lower school achievement, lower incomes, women and children unable to escape from family violence, and more stress on our police and courts,” she said.

“Our current housing policies are utterly perverse, and we are all paying for it.”

Ms Colvin argued Australia’s policies were “so lopsided” that “we are making our people sick or requiring them to live with violence”.

“Each year, for example, an estimated 7690 women return to (domestic violence) perpetrators because they have nowhere to go, and an estimated 9120 women become homeless,” she said.

“This is a social and economic time bomb that will only be defused by investing in adequate social and affordable housing.

“At least 40 per cent of the population is unlikely to ever have the financial firepower to own a home. Amid skyrocketing rents, the best solution is to provide more options for people on low and modest incomes.”

In last week’s federal budget, the government announced it would expand the scope of existing programs designed to help Australians buy their first home.

Those programs fall under the umbrella of the Home Guarantee Scheme, which dramatically lowers the deposit required to buy a home to just 5 per cent instead of the usual 20 per cent. Thousands more places will be available under the scheme each year.

“Helping more Australians to own a home is part of our plan for a stronger future,” Treasurer Josh Frydenberg said in his budget night speech.

Treasurer Josh Frydenberg. Picture; Brendan Beckett/NCA NewsWire

The government also points to its First Home Super Saver Scheme, which allows people to salary sacrifice thousands of dollars of pre-tax income into their superannuation accounts and use that money to buy their first home.

The morning after the budget, Prime Minister Scott Morrison was directly asked why it included no more support for renters.

“This is about Australians getting into homes,” said Mr Morrison, adding that “the people buying houses are renters”.

“The best way to support people renting a house is to help them buy a house.”

Dr Cassandra Goldie, CEO of the Australian Council of Social Service, said that strategy was “completely out of touch with the reality for people on low and modest incomes”.

She said many people renting had barely any savings, and certainly not enough to afford even a 5 per cent home deposit.

“Renters should not be a second-class citizen in Australia. We’ve got to make renting a decent, respectable, long-term housing option for people,” Dr Goldie told Network Ten.

“We’ve got people who are facing homelessness and hunger because they’re trying to keep a roof over their head. And they are so far away from buying a home at the moment.”

Ms Colvin pointed out that whoever wins government at the looming federal election, the issue will remain.

“Regardless of who forms the next government, this problem is not going away. The longer it is left to fester, the worse it will get,” she said.