Essays on housing affordability: the who, what, where and for how long

If housing costs increase faster than incomes, households may be subject to affordability stress, which may put homeownership out of reach, or raise household debts levels to the extent that trade-offs of spending on essential non-housing goods and services must be made. Housing affordability is an important element of economic and social wellbeing that has long been part of policy agenda of Australian governments. In this thesis, the concept of housing affordability is redefined, based on the use of a residual approach. This focuses on the residual income that remains after housing needs are met, which is then compared to a poverty line or budget standard. The alternative approach, based on the ratio of household income spent on housing, is used most commonly in studies of housing affordability, but is applied uniformly across housing situations (renters and homeowners), locations and household types and is less precise in identifying those that are experiencing problems with income and/or housing costs. Four new models are developed to identify the types and situations of households that are subject to affordability stress, where in metropolitan areas they tend to live, and how long the experience of affordability stress last. Using data from the Australian Bureau of Statistics Income and Housing Surveys, Household, Income and Labour Dynamics in Australia (HILDA), and ‘after housing’ budget standards, the ordered probit method is applied to identify variables that predict housing stress, including types of housing arrangements and ownership, age, family composition, and level and sources of income. The influence of location and the built environment on whether a household is in housing affordability stress is assessed through a model that includes transport and distance variables for New South Wales and Victoria. In Sydney, affordability stress increases at greater distances from the city centre and inner suburbs, but in Melbourne, distance from the city centre is related to falling housing costs. The difference between the two cities is attributed to their built environment, which evolved historically in a path-dependent way. The duration of the experience of housing stress is assessed using survival analysis. The results show that renters and single households, especially single males, aged under 65 are particularly vulnerable to long periods of affordability stress, especially when they experience life events that result in reduced levels of residual income.