The act defines “affordable housing” as being “appropriate” for the needs of very low,low and moderate-income households. Regulations for eligibility set the maximum annual income for a family with children at $150,030.
Under a separate government benchmark,to qualify as “affordable”,the rent for a home must be set at 10 per cent below the area’s median market rate and absorb no more than 30 per cent of a household’s median income.
But detailed analysis forThe Age by property experts CoreLogic shows that a single adult with an income of $59,540 – the mid-point of the government’s “moderate” income band – would currently have to pay more than 30 per cent of their income in rent for an “affordable” home across Melbourne’s 31 municipalities.
In many of those municipalities – including Bayside,Boroondara,Darebin,Glen Eira,Manningham,Port Phillip,Stonnington and Yarra – at least half of disposable income would be needed for rental costs,even when discounted by 10 per cent.
That suggests massive government subsidies or trade-offs for extra height or density would be needed to make housing affordable for lower-income households.
For families with children on a “moderate” income of $125,031,the situation was less dire,with housing costs exceeding 30 per cent in seven out of 31 municipalities. But for low-income households,rental costs were prohibitively expensive across most of Melbourne.
Experts have questioned the effectiveness of developer incentives to boost the supply of affordable homes given soaring building costs,rising interest rates and land values.
CoreLogic head of research Eliza Owen said it was increasingly difficult for the private sector to include affordable homes in their housing projects.
“Because of rising land values,high-interest rates,tight labour markets and increased material costs,the delivery of affordable housing can become less and less feasible,so you really do need government investment to support a counter-cyclical development of housing,” she said.
Pomeroy said merely asking the private sector to build more affordable housing will not work,especially for people on lower incomes.
“The biggest supply gap we have is in social housing,” she said. “Direct government investment in social housing is what made housing affordable in the post-war era,and it’s direct investment in not-for-profit housing that we should turn to now.”
Developers say simply imploring their industry to build more will not work in the current economic climate,where many apartment projects are not feasible even without a proportion of affordable homes.
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“We’ve never seen a market like this or conditions like this with global supply chain problems,costs going up,values going down,interest rates going up,and everything is hitting the market at the same time,” said Mary Poulakos,senior development manager at Citta Property Group.
“Projects are not stacking up at full market value,” she said. “How the hell do you get affordability to work in that context?”
The state government did not directly answer questions about whether its upcoming housing package would include a new benchmark for affordability.
Last week,real estate research group PropTrack released its Housing Affordability Index,which showed that affordability across Australia is at its lowest level in decades,especially in NSW,Tasmania and Victoria.
It found that Victorian housing affordability had worsened markedly over the past 12-18 months.
”The sharp increase in mortgage rates since early 2022 means a household earning a median income can now afford fewer than one in 10 homes if they were to spend 25 per cent of their income on mortgage repayments,” the report said.
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