Housing affordability takes a hit - regionally and globally

A new report from the ACOSS/UNSW Sydney Poverty and Inequality Partnership shows that regional rents are now 18% higher than 2 years ago, at the start of the COVID 19 pandemic. Given that wages have only risen by 6%, the report concludes that regional rental housing affordability has significantly worsened during the public health crisis.

Every Australian capital city and regional area has seen rent rises during this crisis period far in excess of wage increases or CPI-linked payment adjustment, with the exception of Sydney and Melbourne.

State-level figures show that the situation for regional renters in Tasmania and Western Australia is particularly difficult because of even larger housing cost increases.

The report, COVID 19: Housing market impacts and housing policy responses – an international review compared the experiences of Australia and seven other case study countries – Canada, Germany, Ireland, New Zealand, Spain, the UK and the US. It found that all followed similar paths in the early stages of the COVID-19 pandemic by providing emergency income support, along with more direct housing and homelessness interventions.

These temporary actions helped to avoid the housing market disorder, mass insecurity and homelessness which were widely anticipated everywhere at the start of the crisis and meant that vulnerable tenants and homeless people were protected.

However, once the initial moratoriums on rent increases and evictions were lifted, the report also shows that nearly all the countries reviewed experienced rapidly accelerating rent inflation – at rates higher than anything experienced over the previous decade.  In Australia, the UK and US, 2021 rent inflation reached levels unseen since the 2008 Global Financial Crisis or GFC.

The report highlights that, with house prices also having risen sharply during the crisis in most of the researched countries, housing affordability pressures are now generally even more acute in 2022 than when COVID first hit. And this after a decade when Australia, like most of the other countries covered, had already seen intensifying rental housing stress.

According to ACOSS CEO, Dr Cassandra Goldie:

“Soaring regional rents are compounding financial stress for many people on low incomes or receiving income support payments. Regional rents are rising at rates far above the national average yet are only indexed to capital city rents. This means regional renters on social security will be facing cost of living hikes well above their CPI-linked benefit increase.

“With private rentals already in short supply before the recent devastating floods, soaring rents, and a severe shortage of social housing options, we’re in the middle of a renting crisis in many parts of regional Australia. In flood-affected areas, it’s clear the rental market cannot house the families on low and middle incomes who have been made homeless temporarily - the real concern is that this then becomes permanent.

“We need immediate Federal Government action to help house people made homeless in flood-affected communities. But COVID and the floods are only aggravating a national rental problem that has been building for years. After a decade of Commonwealth neglect on social housing we badly need a major national building program that starts to remedy this, with a sizeable part of the investment going to the regional centres facing the greatest stress.”

Report lead author Professor Hal Pawson said:

“Just as in most other countries in our study, Australia’s emergency income protection and also housing policy measures triggered by the pandemic went well beyond what anyone would have previously imagined. Just for a brief moment we had a tantalising glimpse of cities with street homelessness greatly reduced and a rental housing market where evictions were drastically cut. But since the experience has prompted virtually no permanent reforms of social security or rental housing regulation, governments appear to have resisted learning lessons from the episode.”

Emma Greenhalgh, Chief Executive Officer of National Shelter, said:

“This report demonstrates the missed opportunities of the past two years to capitalise on the initial positive responses by governments to address housing and homelessness issues during COVID, and create a housing legacy from the pandemic by investing in social and affordable housing. We are in a national housing emergency that has been a long time in the making, compounded by COVID and climate disasters. There is a lack of urgency by the Federal Government to this crisis. The development of a national housing strategy to respond to this crisis is critical.”

Mission Australia CEO Sharon Callister said:

“This report confirms that, just like other countries, it has never been so difficult to find an affordable home to rent in Australia – particularly in our regional areas. The end of the temporary increases to income support and the rapidly increasing affordability pressures are putting people at greater risk of homelessness. We continue to see people in low-paid, insecure and casual work living precariously and unable to afford the basic necessities, especially housing.

“Mission Australia calls on the Federal Government to lead a national plan to end homelessness. We urgently need to move Australia onto a credible path to end homelessness and provide everyone with a safe and affordable home through significant investment in social and affordable housing.”

Read the full report at: https://bit.ly/3qcpk97

Find out more about the poverty and inequality partnership at http://povertyandinequality.acoss.org.au

Key Findings

  • By late 2021, rents were at historically high rates in Australia, the UK, Canada, Ireland, New Zealand and the US.
  • Between early 2020 & late 2021, house prices rose in all 8 countries researched for this report – Australia, Canada, Germany, Ireland, New Zealand, the UK and the US.
  • There has been no price decline since COVID struck, unlike the GFCwhich triggered major and prolonged downturns in Ireland, Spain and the US.
  • By Q3 2021, annual nominal house price inflation had reached 22% in Australia and New Zealand, 18% in Canada and USA, 12% in the UK and 11% in Ireland.
  • By end 2021, annual rental increases were higher than 8% in Australia, the UK, Ireland, New Zealand and the US – in most of these countries the fastest rate of rent inflation since 2008.
  • In 5 out of the 6 countries covered in this report for which national statistics are available, nominal rent increases exceeded wage increases in the 2-year period to late 2021, therefore damaging rental affordability.
  • In 2020 and 2021, property prices and rents increased faster for detached houses than for apartments, and for regional rather than urban areas, probably reflecting the rapid rise of remote work that enables workers to move away from urban areas.
  • The other 2 countries researched for this report saw different outcomes. In  Germany, house prices were similar to pre-pandemic, while in Spain price growth remained subdued. Similarly, the rental market in Germany was relatively unaffected by the pandemic, while in Spain rents continued to decline in nominal terms.
  • This is because Germany has an unusually resilient economic and housing system due to conservative mortgage lending and a strong social safety net. In Spain, however, the housing and rental market suffered from heavy damage sustained by the dominant tourism industry
  • All 8 countries researched took far-reaching measures to maintain incomes and economies during the first 2 years of the pandemic, including through increased social security, introducing new temporary assistance payments, through furlough or wage subsidies, and financial sector support from major banks.
  • Most of the countries researched also took measures to safeguard housing systems & prevent homelessness, such as deferred mortgage payments, rental eviction moratoriums and emergency accommodation for people experiencing homelessness.
  • Some countries such as Australia and the UK offered direct government-funded housing market stimulus, which was misdirected as this compounded record low interest rates in inflating demand, meaning that many people were locked out by resulting house price inflation,

Key graphs

SOURCE: Domain.com.au, specially commissioned analysis

SOURCE: Domain.com.au, specially commissioned analysis


New ACOSS and UNSW Sydney Report shows how poverty and inequality were dramatically reduced in 2020, but have increased ever since

A new report from the ACOSS/UNSW Sydney Poverty and Inequality Partnership shows that during the first ‘Alpha’ wave of the COVID-19 pandemic in 2020, Australia halved poverty and significantly reduced income inequality, thanks to a raft of Commonwealth Government crisis support payments introduced to help people survive the first lockdown.

It also highlights that over the course of 2021, and throughout the spread of the ‘Delta’ variant, the Federal Government rapidly reversed this extraordinary progress by cutting financial aid and denying it to most people on the lowest incomes.

The latest report from ACOSS and UNSW, Covid, inequality and poverty in 2020 & 2021: How poverty and inequality were reduced in the COVID recession and increased during the recovery examines how people at different income levels fared during those two phases of the COVID-19 Pandemic.

During the first ‘Alpha’ wave of the pandemic, the Coronavirus Supplement and JobKeeper support payments played a crucial role in reducing both income inequality and poverty during the deepest recession in 90 years. Despite an effective unemployment rate of 17% at the time, many people on the lowest incomes could afford to pay their rent and household bills and feed themselves properly for the first time in years.

When lockdowns eased in late 2020, the Government was quick to wind back financial supports. By April 2021 both the Coronavirus Supplement and JobKeeper payments were gone, leaving a yawning gap in pandemic income supports for about a million people still unemployed, when Delta struck later that year.

80% of people on the lowest income support payment were excluded from the COVID Disaster Payment, introduced in September 2021. Subsequently the number of people in poverty rose by around 20% and a bias in jobs growth towards high paid jobs and a rapid rise in investment incomes lifted income inequality.

A few weeks after lockdowns ended, those still out of paid work lost their COVID Disaster Payment and joined the l.7 million people already struggling to get by on the $45 a day unemployment Jobseeker payment. Financial stress came roaring back as did increased reliance on emergency relief.

ACOSS CEO Dr. Cassandra Goldie said:

“The COVID-19 pandemic has taught us that poverty and inequality are not an inevitable state of being. They grow because government policies allow them to, and in many cases, directly increase them.

‘’The income supports introduced during the first COVID wave reduced poverty by half and greatly reduced inequality of incomes. We also showed that good social policy, tackling poverty, is good economics. By targeting income support to those with the least, the vital help was rapidly spent on essentials, helping to keep others in jobs.

“We now know what governments are capable of when they set their minds to it. Instead of taking the opportunity to end poverty in Australia and build our resilience to cope with future crises, the Government reversed the gains made during the first year of the pandemic and failed to adequately plan to mitigate the ongoing health risks.

“Australia’s income support system should sustain people in tough times and help them find suitable employment. At just $45 a day, the unemployment JobSeeker Payment is not up to the task and the Government acknowledged this by almost doubling it. People out of paid work, or without the paid working hours they need, should not have to spend every waking moment worrying about how they will feed themselves and pay the rent.

“Whoever wins the next election will know exactly what levers they need to pull if they wish to end Australian poverty and support jobs. But will they?

“Our response to COVID-19 showed we can end poverty. And when we do, it’s good for all of us. We need candidates, in the lead up to this federal election, to commit to lifting the rate of Jobseeker to at least $69 a day, so that people have the confidence of knowing that they can cover the basics while they are retraining and looking for paid work. Together with investing in social housing, these are the two big levers that could change the face of Australia for good and for the good of us all.

Scientia Professor Carla Treloar, Director of the Social Policy Research (SPRC) and the Centre for Social Research in Health (CSRH) at UNSW, said:

“This research shows that the COVID support payments changed lives. The Government’s decision to take away the Coronavirus supplement and JobKeeper without an adequate substitute, and later on to exclude people on the lowest income-support payments from the COVID disaster payment and prematurely end that payment, locked more people into poverty.

‘’Despite remarkable early progress in reducing poverty and income inequality during the COVID recession, they are both likely to be higher now than before the pandemic. That’s the legacy of the policy response to the COVID pandemic.”


Key Findings:  

2020: Alpha wave of COVID and recession: 

  • Between March and December 2020, the average incomes of the lowest 20% income group rose by 8% ($56pw). Those in the next 20% saw their incomes rise by 11% ($144pw). In contrast the average incomes of the highest 20% fell by 4% ($230pw).
  • Between 2019 and the middle of 2020, the percentage of people in poverty fell from 11.8% to 9.9% despite the recession. It would have been twice as high (22.7%) without the COVID income supports.
  • Among people in households on the JobSeeker Payment, poverty fell by four-fifths, from 76% in 2019 to 15% in June 2020. Among sole parent families (both adults and children) poverty was reduced by almost half, from 34% to 19%.
  • The income support safety net for those on the lowest incomes was buoyed by the $275pw Coronavirus Supplement, 70% of which went to the lowest 40% households by income.
  • The JobKeeper wage subsidy of up to $750pw helped sustain the incomes of middle income-earners at risk of losing wages during lockdowns, as 70% of those payments went to the middle 60% of households by income.

2021: Economic recovery and Delta wave of COVID 

  • In January 2021 the Coronavirus Supplement was cut to $75pw in January 2021, poverty rose to 14%, well above pre-recession levels. The income of a single adult on JobSeeker Payment fell to approximately 15% below the poverty line.
  • By April 2021 when the supplement was removed completely, and despite an ongoing increase of $25pw to the lowest income support payments, the new rate of JobSeeker payment fell to approximately 30% below the poverty line and a third of recipients reported increasing difficulty trying to make ends meet.
  • By September 2021, COVID-19 Disaster Payments were introduced in response to lockdowns during the Delta wave of the pandemic. This was only paid to people who directly lost paid working hours in a lockdown, and was quickly withdrawn when a lockdown ended.
  • Over 80% of people on the lowest income support payments were denied the COVID Disaster Payment, despite the ongoing impact of the pandemic on their employment prospects.
  • The JobSeeker Payment was just $391pw and Youth Allowance was just $331pw, well below the poverty line at that time. Around 1.7 million people (around 25% more than before the pandemic in September 2019) relied on these and other income supports set well below poverty levels.
  • At the same time, many people on high incomes saw their incomes surge. From August 2020 to August 2021 the number of high-paying jobs rose 251,000 compared to growth in low-paid jobs of 76,000. Investment incomes surged through 2020-21, comprising one quarter of all household income growth in that year. Around two thirds of investment income goes to the highest 20% of households by income.

Read the full report at: https://bit.ly/3LWJtJn


Change in number of workers employed by occupation (000s)

This graph shows that, from August 2020 to August 2021 (centre bars):
* The number of people employed in lower-paid occupations rose by 71,000;
* The number in middle-paid occupations fell by 5,000;
* The number in higher-paid occupations rose by 251,000.


Percentage of people receiving JobKeeper and COVID Supplements by household income groups

This figure shows shows how COVID income support payments were distributed among households ranked by income in 2020.
JobKeeper Payment mainly lifted the incomes of middle income-households at risk of losing their jobs, and Coronavirus Supplement lifted the incomes of low-income households on income support payments.
Towards the end of the recession in September 2020:
* Around three quarters (76%) of JobKeeper Payments went to the middle 60%;
* A similar proportion of the Coronavirus Supplement (70%) went to the lowest 40%.
* The highest 20% received just 19% of the value of JobKeeper Payment and 6% of that of Coronavirus Supplement.


Impact of past recessions on household after-tax incomes

This figure shows changes in household after-tax incomes brought about by the recessions of the early 1980s and 1990s (left and right-hand clusters).


Changes in average before-tax income of households ranked by private income March-December 2020

This graph shows that, from March 2020 to December 2020:
* The average incomes of the lowest 20% income group (who mainly relied on pensions) rose by 8% ($56pw);
* Those of the next 20% (mainly low-paid workers and families on income support) rose by 11% ($144pw);
* The average incomes of the middle 20% rose by 3% ($53pw) and those of the next 20% rose by 2% ($67pw);
* In contrast, the average incomes of the highest 20% fell by 4% ($230pw).


Change in household income (as a % of after-tax income in June 2019)

Source: Australian Bureau of Statistics, Australian National Accounts.
Note: Shows growth in different components of household income from June 2019 (before COVID) to June 2020 (recession), and from June 2020 to June 2021 (recovery), as a percentage of average after-tax household income in June 2019. Income tax is expressed in negative values (so a positive value means a reduction in tax). Note that the value of some components fell. Yellow = an increase would be expected to reduce inequality (more so if darker); Blue = an increase would be expected to increase inequality (more so if darker). Grey = an increase has an indeterminant impact on inequality.

This graph compares changes in the main components of household incomes in the financial year of the recession (from June quarter 2019 to June quarter 2020), and the first year of recovery (from June 2020 to June 2021). Changes in the overall value of each income component through each of these years are expressed as a proportion of total household after-tax incomes before the recession in June 2019.

Both the recession and the recovery had large and uneven impacts on different income components. Through the year up to and including the recession (from June 2019 to June 2020 – left column):
* Changes in wages (supported by JobKeeper) increased incomes by 0.5% (in proportion to previous overall after-tax income), earnings from self-employment (also supported by JobKeeper) rose by 2.5%, while investment income fell by 3.1%. Income from social security (including * Coronavirus Supplement) rose by 5.1%, while income tax increases (due to tax ‘bracket creep’) reduced incomes by 0.4%.

Based on the typical distribution of each of these components among income groups, we would expect these changes to reduce income inequality. This is supported by the evidence presented earlier.


Internet searches for food assistance from October 2019 to September 2021

This graph shows trends in internet searches for food relief from before the COVID recession in October 2019 to September 2021:

It shows similar peaks in searches for food relief at the start of the national lockdown in March 2020 and those in Sydney, Melbourne and Canberra in August 2021, which were experiencing lockdowns at the time.

Significantly, demand fell between March and July 2020 as COVID income supports were introduced, and gradually rose through 2021 after they were removed.