Consistent Housing Needs Analysis

This section provides guidance on where to obtain relevant and appropriate housing needs analysis information

All local areas have different housing problems and opportunities. However, consistent methods for analysing need enable cross-boundary comparison and may help to validate any specific planning requirements for affordable housing.

The suggested steps in undertaking a housing needs analysis proceed from the collection of demographic data and information about industry and economic trends; an analysis of housing supply characteristics, including tenure and residential development activity, market opportunities; to an overall assessment of housing needs (including levels of existing or potential housing stress). The final step is to move from this analysis to a set of strategies for action. The emphasis is on affordability, although the method supports a broader housing needs market demand and supply analysis.

For more information about undertaking housing needs analyses and the nature of housing markets see the Local Government Housing Kit, from Housing NSW’s Centre for Affordable Housing: www.housing.nsw.gov.au/Centre+For+Affordable+Housing/
NSW+Local+Government+Housing+Kit/

Supporting data for housing need and market analysis

Data for housing need and market analyses relate to four key areas:

• Demography (population and household characteristics)
• Economy (industry, income and occupation trends) 
• Supply (dwelling types and tenures, new development approvals)
• Market (rent and sale prices and availability).

Most of the demand-based data is based on the Census, and so only updated when new Census data are available (every five years). Other data may be updated more regularly but may not be consistently available across all states.

When analysing housing market data it is important to include comparison areas, usually similar local government areas, as well as a metropolitan or regional area as a whole. See the Municipal Association of Victoria (MAV) Toolkit for Local Government Housing Policies, Strategies and Actions (1999) or the NSW Local Housing Kit for examples of how data should be presented and analysed in relation to comparison areas.

Data sources for local housing market analyses (Table 6 in PDF)

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Demography

Population and household structures influence the profile of housing need and demand. It is important to consider the size, age, gender and ethnic structure of the population as well as the type of household.

Trends in overall population size provide an important backdrop for the demographic factors influencing the market. An important trend in recent times has been toward smaller household sizes as a result of people’s preference for living on their own, increased life expectancies, and a decline in fertility rates. This means that housing demand and the need for affordable housing may increase even when there is no population growth in an area.

Sources of data

The preferred population estimate is the estimated resident population (ERP). This is the official Australian Bureau of Statistics (ABS) estimate of the populations in the LGA.

In non-metropolitan LGA’s with large indigenous populations it is important to examine the relevant profies that provides detailed demographic data for the indigenous community. These profiles are available for a range of geographical levels including:

• Indigenous areas (which are discrete indigenous communities);
• Remote areas;
• Local Government Areas (LGA’s)

Household formation

Increasing household formation rates mean that there will be a steady demand for dwellings (as the number of households grows) even in areas where there will be no overall population growth. 

Sources of data

Time Series Profile from the ABS provides a useful source of data on demographic trends, including household formation rates

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Age structure

The age structure of the population influences migration trends, household formation and housing need. There are important age ‘cohort’ effects in relation to tenure preference and housing demand as well as vulnerability and the likelihood of housing need. An analysis should examine the proportion of the population in different age cohorts to identify which household types have grown or declined. The following characteristics are associated with different age cohorts:

• 15–24 years or ‘young households’ are characterised by shared rental tenure. Many people in this age group will be quite mobile while seeking education and career opportunities, which can result in higher concentrations of this age group in areas with a concentration of education facilities. In the transition from the family home to independent housing many in this age cohort experience housing stress;
• 25–44 years or ‘middle households’ with children are often in the process of purchasing homes and generally have the largest average household size;
• 45–64 years or ‘mature families’ tend to have smaller household sizes as children leave home. The majority of households in this cohort are owners or purchasers;
• 65+ years or ‘late households’ usually only have one or two persons and a high degree of outright home ownership, but often limited income streams. (Centre for Affordable Housing, Local Govt. Housing Kit). 

Sources of data

• ABS Census data
• ABS Estimated Resident Population data

Migration and recent movers

Another useful demographic concept is the level of net migration between census periods. Net migration measures the change in the population of an area between census periods after allowing for natural increase (that is, births minus deaths). This number is a better indicator of the demographic health of an area than raw population change figures. Where in migration is significant it is useful to focus on the characteristics of recent movers since these will influence the housing need profile within the area.

Sources of data

• ABS Census (for net migration)
• ABS Census—special run needed to analyse the characteristics of recent movers. This data is available for South Australia via the Family and Community Services affordable housing database.

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Special needs groups

There are a number of groups in the population who have special needs that must be addressed to house them appropriately. This group might include people with a disability, the frail aged, homeless people with support needs, and culturally and linguistically diverse people. These needs vary and include affordability, accessibility and structural issues with regard to amenity and design.

Ethnicity also has a strong influence on the mix and location of housing need and demand. Different ethnic groups have different age structures, household formation rates and fertility rates, and varying tenure, housing type and location preferences.

Sources of data

• ABS Census
• Consultation with relevant organizations involved with these groups (community services sections of local council maintains contact lists of potential contacts)

Economy

Data on the economic context reflects the ability of households to afford housing, and shows household incomes in relation to issues of economic structure and employment trends in the local area.

Incomes

Data on household incomes (rather than individual persons) are the most relevant to housing market studies. As noted above, when determining affordable housing needs in relation to income, the following indicators apply:

• the median household income (that is, the household income at which half the households have more income and half the households have less income);
• the proportion of very low income households, which are defined as households with less than 50 per cent of the median income;
• the proportion of low income households, which are defined as households with income between 50 per cent and 80 per cent of the median income;
• the proportion of moderate income households, which are defined as households with between 80 per cent and 120 per cent of the median income; and
• the proportion of households in the highest income category.

Sources of data

• ABS Census, can be approximated by using CPI Index (on a state/territory basis)

Industry and economic trends

The industrial structure of a region or sub-region provides an indication of likely housing demand trends. In particular, it is important to differentiate between cyclical unemployment that results from fluctuations in the business cycle, and structural unemployment that results from the permanent decline of a particular industry. For example, cyclical unemployment often occurs in the construction or tourism sectors, while structural unemployment results from the decline in the manufacturing sector.

There has also been a significant shift in employment patterns from full time employment to part time and casual employment. This trend has affected the ability of some households to obtain loans for home ownership because of uncertainty about their future income.

Sources of data

• Current estimates of unemployment rates by local government area are available from the Commonwealth Department of Employment and Workplace Relations, which produces quarterly estimates of unemployment rates for individual local government areas. Available online at: www.workplace.gov.au/workplace/Publications/LabourMarketAnalysis/SmallAreaLabourMarkets-Australia.htm
• ABS Census data is available for occupations and employment rates.

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Supply

It is important to understand the characteristics of existing stock in relation to overall population characteristics and trends, as well as to identify potential sources of lower cost housing supply and changes over time. The ABS Census records dwellings as detached, semi detached, flats, units or apartments, or other dwellings, including shop-top housing, caravans, houseboats, improvise homes and so on.

Dwellings are further classified in the Census as occupied or unoccupied. ‘Unoccupied Private Dwellings’ are structures built specifically for living purposes that are habitable, but unoccupied on Census night. Vacant houses, holiday homes, huts and cabins (other than seasonal workers’ quarters) are counted as unoccupied dwellings. In analysing housing supply it is particularly important to take account of vacancies in areas with high rates of seasonal visitors. Also included are newly completed dwellings not yet occupied, dwellings that are vacant because they are due for demolition or repair, and dwellings to let.

In addition to data on dwelling structures, it is useful to note the dwelling size of each of the main dwelling types as measured by the number of bedrooms.

Sources of data

ABS Census Time series profiles (T14 and T15) show the number and proportion of different dwelling types over the last three census periods
Data on dwelling size is available from the Expanded Community Profiles produced by the ABS. Available by following the links from: www.abs.gov.au/websitedbs/d3310114.nsf/Home/census

Tenure

Tenure is an important indicator of the availability or proportion of social housing as well as the balance between rental housing stock, stock that is owned and being purchased within a particular area or region. The ABS also presents this information in time series (over three Census periods) to show tenure and landlord type changes over time, by numbers of occupied dwellings and people occupying the dwellings.

Sources of data

• ABS Census, especially Time Series Profile (T19)
  

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Low priced rental stock

Data on changes in public housing is often available from public housing agencies during inter census periods. A broad measure of changes in the availability of private low priced stock is available from published census time series tables.

Changes in the availability of low-cost rental stock within a particular area can be analysed with reference to CPI increases enabling a comparison of availability over time.

If information on bond lodgments is available in your state you are able to track trends in rental supply between census periods.

Sources of data

• ABS Census Time Series Profile (T20) shows the number of properties in nominal rent categories for 1991, 1996 and 2001.
• Bond lodgment data may be available from rental bond boards or equivalent in each state.
• Data on changes in public housing may be available from public housing agencies during inter census periods.

Residential development

Tracking trends in residential development provides a way of monitoring housing demand and future supply. A good source of data is residential building approval data. These are compiled from permits issued by: local government authorities and other principal certifying authorities; contracts let or day labour work authorised by Commonwealth, state, semi-government and local government authorities; and major building approvals in areas not subject to normal administrative approval, e.g. building on remote mine sites.

In addition to the building data it might also be useful to examine the trends in development applications in a local area. Relevant trends include the total number of applications for residential development, the number of dwellings contained in each application, the dwelling types (including bedroom configuration) and the names of the developers (where appropriate).

Sources of data

• Building approval data are collected by the ABS and are contained in the document entitled Building Approvals, Australia
• Development application data is maintained by local councils but it may be necessary to introduce procedures to collect information needed to monitor residential development and supply.

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Land supply

Shortages of land for new residential development can have a significant impact on the availability and pricing of dwellings in an area. In new land release areas the availability of un-serviced and serviced lots will be relevant, while in established areas redevelopment sites may also represent significant opportunities for new housing.

In metropolitan areas, it is important to consider the availability of land on a regional basis. Most state government planning agencies compile data on the availability of new residential land for development in metropolitan regions.

Sources of data

• State government metropolitan land development programs compile statistics on land release and development trends
• In many states, regional plans indicate areas where future urban growth, or more intense development, including housing, will occur
• Local land use plans contain information on land zoned for residential development or earmarked for future urban development

Market—identifying local opportunities

While undertaking the local housing market study, it is useful to compile a list of housing opportunities. This might be a list of vacant sites in public ownership, public housing sites that are undeveloped, or opportunities to change the planning controls to enable residential development (for instance, ‘rezoning’). These opportunities would then be taken up when preparing a local housing strategy for action or when reviewing local planning controls.

When identifying local opportunities it helps to examine the role and motivations of those active in the development and management of housing supply.

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Builders/developers

Developers have a major bearing on the type and quantity of housing that comes onto a local market. It is useful to understand the factors that stimulate or inhibit their activities in an area, particularly developers who concentrate on the affordable end of the market.

An important first task is to simply develop a profile of who are the active developers/builders in the local market by interrogating the development application register at your Council. Talking to a sample of these developers can provide valuable insight into supply trends in your area.

Sources of data

• Development application registers maintained by local councils contain information about active developers and builders in the local area
• Industry associations like the Urban Development Institute of Australia, the Master Builders Association, and the Housing Industry Association provide broader information about the development industry

Private landlords

The actions of landlords have a crucial impact on housing opportunities for low-income households in an area. There are a number of options for obtaining information on the motivations and intentions of landlords. They range from a traditional survey approach, to the monitoring of a small number of what are considered representative landlords. It will be important to include landlords that control threatened stock such as boarding houses and residential parks.

Sources of data

•  Information on landlords operating locally can be obtained from the Council's Rate Database
• Another possible source of information could be registered estate agents in your local area. The Real Estate Institute of Australia maintains listings of local agents

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Public and community housing providers

State housing authorities are traditionally the major supplier of accommodation of affordable housing to those who have difficulty sustaining accommodation in the private market. It is important to establish their plans in the market. A local area plan may be available for your area from your state housing authority—contact their local office.

Community housing is a growing component of housing assistance. Community housing is housing that is managed by not-for-profit housing organisations, including housing associations, housing cooperatives, and other non-government and church organisations. Dwellings may be leased from the state housing authority, private landlords and other government agencies; or in some cases, owned by the organisations themselves. Most dwellings provide medium to long-term residence although some are used for short-term crisis accommodation.

Sources of data

• State housing authorities may provide information or plans outlining their plans for local or regional areas.
• Local or regional community housing associations may provide information regarding their future activities.

Assessing housing trends and identifying housing stress

The interaction between the supply of housing and the demand for housing generates outcomes in the housing market. The use of the LGA as a study area can provide a misleading picture when the overall operation of the market is examined. The market may appear to be in ‘balance’, but this could simply be because prices may have forced people out of the area. In other words, the housing problems may have simply been exported into an adjoining locality. Depending on how you have defined your housing market, it may be important to consider the local area in a broader geographical context.

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Key market indicators: house prices

Local house prices provide an estimate of the amount of housing supply relative to demand in a particular area. Prices only reflect the amount of ‘active’ stock – housing stock for sale or available to rent. House price data do provide a basis for measuring the extent of housing that is affordable within a particular area.

There are a number of data sources on house prices although these differ across the Australian states and territories. Whatever data source is used, the median sales price is the most useful data item—it marks a point at which equal numbers of properties are below and above the median value. Unlike means or averages, medians are not significantly affected by unusually high or low values.

Sources of data

Data sources differ across the Australian states and territories.

• In NSW, data on house prices and rents is available in the NSW Rent and Sales Report compiled by the NSW Department of Housing, and accessible through the NSW Housing Kit.
• In South Australia, house price data is available through the Department for Families and Affordable Housing Innovations Program key data sets
• Rental bond data is available in NSW via the NSW Local Government Housing Kit.

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Key market indicators: rents

Rental data is another important indicator of housing affordability. The key rental indicators are actual rents, percentage changes and vacancy rates. Stable rents indicate reasonable balance between supply and demand for rental dwellings in the area. When analysing rents it is important to remember that rents may have a seasonal pattern (for example, they may increase during holiday periods).

When median rents are used to examine trends in a local housing market, care must be taken in interpreting the rental data. For instance, it is quite common for a number of negative quarterly changes in median rents to occur following large increases in the previous quarter. These variations are related to the method of data collection, which measures rents by taking a sample that is not random—it records the data only for bonds lodged during the quarter. The properties for which bonds are lodged in a particular quarter may be atypically low or atypically high. In these cases, when the next quarter is compared, median rents may subsequently decrease or increase significantly.

Another good measure of the state of the private rental market is the vacancy rate. An industry rule of thumb is that a three per cent vacancy rate represents a balance between supply and demand for rental housing. Less than three percent represents a shortage and will lead to upward pressure on rents. However, consistent data on vacancy rates is difficult to obtain. A possible surrogate variable is the ratio of new bond lodgments divided by total bond lodgments.

Sources of data

• In South Australia, affordable rent indicators are based on calculations by the Department of Families and Communities
• In NSW, data on rents is available in the NSW Rent and Sales Report compiled by the NSW Department of Housing, and accessible through the NSW Housing Kit

Assessing housing stress

The concept of housing stress refers to the impact for low and moderate-income households of high housing costs.  It recognises that relatively high housing costs can mean that low income households are unable to meet essential needs such as transport, health and dental services, or food.  High housing costs may also mean that low-income households are unable to meet unexpected expenses and are so at risk of falling behind in their housing payments, placing them at risk of homelessness.

In Australia, housing stress is usually defined in one of the following two ways:

1. Households in the bottom 40 per cent of income distribution paying more than 30 per cent of their gross household income on housing costs; or
2. The (larger) group of households who have gross incomes below 120 per cent of the median household income and paying more than 30 per cent of their household income on housing costs.

These definitions provide a helpful tool for measurement but are not sensitive to differences in household composition.  For instance, single person households or single parent families typically rely on one income and so have lower capacity to meet housing payments.  Larger households have more after housing expenses (for food, transportation, medical services) and also need larger dwellings, so may experience greater housing stress. 

Age cohorts  also affect likelihood of housing stress, with young adults (18–24) being most vulnerable to housing stress, while older people (over 65) generally have lower levels of housing stress, because of the higher rates of home ownership among this group.

Even when there is an apparent match between the supply of lower-cost housing across an area and the number of lower income households, if this housing is occupied by higher-income households, high levels of housing stress will remain.

Sources of data

• The South Australian Department of Families and Communities provides housing stress data at the local government level
• In NSW, calculations of housing stress at the local government level are available through the NSW Housing Kit
• See also the Australian Housing and Urban Research Institute report: ‘Housing Affordability: A 21st Century Problem’, by Judith Yates and Vivienne Milligan (2007) for more information on understanding housing affordability and stress in the Australian context (www.ahuri.edu.au)

Monitoring and updating your analysis

After completing an initial housing needs analysis, it is important to keep this information updated. Many external sources of data are updated on an annual basis. Councils may also maintain their own sources of data that can contribute to monitoring housing needs within their area. For example, some inner city councils regularly conduct a survey of boarding houses in their areas (e.g. North Sydney Council). A housing question could be included in omnibus surveys undertaken by councils.

It is also important is to keep talking to the major players and stakeholders in the local housing market to keep track of changes in the housing market. For example:

• real estate agents will help identify marked changes in housing prices/rents and any changes in the vacancy rates
• community groups, especially housing organisations, will be able to provide commentary on demand and supply trends in the area
• Indigenous housing organisations and Aboriginal Land Councils will be aware of changes affecting their communities
• interagency groups, often hosted by councils, will be a good source of information on people in housing need
• regional organisations of councils can often provide updates of housing market trends in their regions
• local or regional public housing staff may be able to provide information on broad trends in housing demand and supply in their region.

Data that should be updated on an annual basis include:

• population trends (based on the ABS Estimated Resident Population data and or state planning agency forecasts)
• employment trends (provided by the Department of Employment and Workforce Relations)
• house price/rents (in jurisdictions where this data is available)
• dwelling approvals by region or local government area (ABS)
• information on residential development approvals by type and configuration maintained by local council
• levels of new public or community housing development
• loss of low-cost housing stock, like boarding houses or caravan parks
• outcomes of any specific affordable housing mechanisms contained in the planning framework (as outlined in the following section).

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