The research, ‘Urban productivity and affordable rental housing supply in Australian cities and regions’, undertaken for the Australian Housing and Urban Research Institute (AHURI) by researchers from the University of Sydney, Swinburne University and RMIT, examines the urban productivity implications from changes to the supply of affordable rental housing.
The research investigated Sydney and Melbourne as major city case studies and two growing satellite cities, Wollongong to Sydney’s south east and Geelong, south west of Melbourne. It also looked at national changes in the supply of private rental dwellings affordable to lower income groups, identifying critical shortages.
“In Australian cities, higher paying jobs in knowledge and service industries are historically located in central areas, which in turn are well served by public transport,” says the report’s lead author, Professor Nicole Gurran, Sydney School of Architecture, Design and Planning.
“Housing located close to urban employment centres is more expensive, meaning lower paid renters may face housing affordability burdens or long commutes from less expensive areas. Others may face barriers to entering the workforce, because of where they can afford to live.”
The Inquiry evidence shows that increasing the supply of housing affordable to lower income earners, and particularly rental housing, is an important strategy to support economic growth in areas of high employment opportunity, such as our capital cities.
"It is also essential to increase affordable rental supply in areas of new growth, supporting businesses and services which depend on attracting and retaining staff.”
Together, Sydney and Melbourne house more than 10 million people and generated more than 75 per cent of the nation’s GDP growth in 2018–19. Both cities feature an almost inverse relationship between employment density and affordable rental housing supply.
Over two decades, the nation’s shortage of affordable dwellings in the private rental sector available for lower income households has grown to 173,000, with the most extreme shortage in Sydney (60,000 dwellings), where 71 per cent of all lower income private rental households pay unaffordable rent.
“The shortage is most acute in inner and middle ring areas which offer higher accessibility to greater concentrations of employment opportunities,” says Professor Gurran. There are also acute regional shortages, in major employment areas such as the Gold Coast and Sunshine Coast in South East Queensland, and Newcastle and Wollongong in NSW.
“Consequently, low income renters are either enduring affordability stress, commuting burdens, or both in order to access employment opportunities.”
Across all Australian metropolitan regions, the percentage of lower income households paying unaffordable rents increased from 29 per cent to 46 per cent over a 10-year period examined in the study.
According to the research, these findings have serious implications for urban productivity. Lower income households may not be able to sustain housing affordability stress in the long term, leading to higher levels of staff turnover and recruitment challenges for firms.
In addition, the Inquiry found reduced levels of labour force participation amongst lower income renters living in outer suburban locations of both Sydney and Melbourne, potentially reflecting accessibility barriers to employment. Lower rates of labour market participation reduce the labour market pool, again, potentially reducing urban productivity.
The study was conducted prior to the COVID-19 Pandemic. However, the findings point to ongoing challenges for lower income workers, many of whom have been unable to ‘work from home’ during the Pandemic because of the nature of their job. “Even if we see some decentralisation of employment opportunities in the future, it will be important to provide affordable rental housing opportunities for existing lower income workers and those seeking to relocate.” Professor Gurran says.