Selasa, 31 Maret 2009

The State of Supply

A couple of weeks ago, the National Housing Supply Council published its inaugural 'State of Supply Report', to scarcely a murmur in the media.

I see that it has got a mention now, in a Sydney Morning Herald report of a reassuring speech by the Reserve Bank's Deputy Governor to a bunch of property developers. As an analysis of factors bearing on house prices the speech is, with due respect to the Deputy Governor, pretty slight, and he didn't actually mention housing supply at all – that was the Herald helping him out with the familiar argument that Australia has a shortage of housing, so prices won't fall here.

Let's have a look at what the National Housing Supply Council actually said.

One of the things it reported on was the gap between underlying demand for housing and the supply of housing. The Council put this at 85 000 dwellings across Australia in 2008 – that is, a shortage of 85 000 dwellings (it's this figure that the Herald refers to). The Council arrived at this figure by a fairly simple calculation. It's based on:

  • dwellings required to house homeless persons sleeping rough: about 9 000; plus
  • dwellings required to house homeless persons staying with family and friends: about 35 000; plus
  • dwellings required to house homeless persons in marginal caravan park accommodation: about 13 000; plus
  • dwellings required for a rental vacancy rate of 3 per cent. The Council considers that this is the rate needed for efficient operation of the rental market. There's about 1.8 million renting households in Australia, and about 29 000 vacant rental dwellings, so to get to 3 per cent we need another 26 000 dwellings.
So, added up, and rounded up, that's 85 000 dwellings needed.

But then there's all those existing dwellings that are currently unoccupied. These dwellings are not factored into the above calculation, and represent a reservoir of housing stock sitting just outside the housing market. And there's lots of them – in fact, at the 2006 Census, there were 830 000 unoccupied dwellings.

That's 830 000. Unoccupied. Dwellings.

As the Council notes, no one really knows why all these dwellings are unoccupied. Some would be holiday houses, some would be waiting for sale or letting, some would be undergoing renovation or demolition – again, no one knows the proportions.

Some of these dwellings would not be in a state to be occupied tomorrow, and some of them will never be. But if only a tenth of them were to leak out of the reservoir and into the housing market, you could house the homeless and get a workable rental vacancy rate.

The Council indicates that it will conduct further research into these unoccupied dwellings. We'll await it with interest.

All this is to show that the 'housing shortage' is no simple shortage. We do suffer from a shortage of affordable housing, and especially affordable rental housing. The trouble is not an absolute lack of houses, but a housing system that produces dwellings that don't satisfy housing needs – in particular, it produces too few low-rent dwellings, and too many holiday houses and empty 'investment' properties.

More what the Council's report says about this in the next post.