Explainer: What is the link between the cost of housing and homelessness

By guest blogger Greg Ford, Research, Service Development & Advocacy, Launch Housing

Homelessness is caused by a range of factors, including the lack of affordable housing. This explainer looks at the link between changes to Melbourne’s housing market and homelessness.

1. Over the past decade, Melbourne’s house prices have risen at three times the rate of inflation

  • This chart uses an index, starting at 100, to measure changes in Melbourne’s house prices (red line) and inflation (yellow line.)
  • Since 2006, median house prices have risen by 76%, while inflation has risen by 25%.

Source: RBA, 6416.0 – Residential Property Price Index, March 2016, Table 1;
RBA, 6410.0 – Consumer Price Index, Australia, March 2016, Tables 1 and 2.

2. During the same time, Melbourne’s rents have risen at twice the rate of inflation

  • The median weekly rent for a two bedroom flat and three bedroom house rose by 65% and 61% respectively. Over the same period, inflation grew by just 28%.
  • Centrelink payments – such as Newstart and Commonwealth Rental Assistance – are tied to inflation. This means their value, relative to the cost of housing has halved over this time.

Source: DHSS, Current Rental Report – Quarterly median rents;
ABS 6410.0 Consumer Price Index, Australia.
3. Affordable lettings have fallen

  • The rise in Melbourne’s rental prices has led to a sharp fall in the number of properties that are affordable for low income households.
  • The proportion of affordable rental properties (all bedrooms) has fallen from 27.67% of all properties in 2006 to just 8.6% in by the end of 2015.
  • The most recent figures (March 2016) show there are only 29 one-bedroom properties that are affordable for low income households across all of metropolitan Melbourne.

Source: DHSS ‘Affordable lettings by LGA March quarter 2016

4. Demand for social housing is greater than supply

  • Higher property prices and declining rental affordability lead to higher demand for social housing.
  • 32,250 people were on Victoria’s public housing waiting list in June 2016. This includes 10,026 applicants on the early housing waiting list.
  • Social housing only accounts for 3.4% of total housing stock in Victoria. An additional 36,286 dwellings are needed for social housing to account for 5% of total housing.

5. Homelessness is increasing

  • The 2011 Census found that 22,789 Victorians were homeless, a 30.9% increase from the 2006 Census. The rise in Victoria was much greater than the national average, where homelessness grew by 17% from 2006 to 2011.
  • The City of Melbourne’s recently completed ‘StreetCount’ found there were 247 people sleeping rough in and around Melbourne’s CBD in June this year. This represents a 74% increase from the previous count, conducted in 2014.