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4102.0 - Australian Social Trends, 2000  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 04/07/2000   
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Contents >> Housing >> Housing Costs: Housing costs

Housing Costs: Housing costs

In 1997-98 there were 702,400 low income households with housing costs of more than 30% of their gross income. These represented 10% of all Australian households.

Measuring Housing Costs
The main source of data for this review is the 1997-98 Survey of Income and Housing Costs.

Housing costs include loan interest and principal repayments (purchasers only), rates payments and, for renters, rent payments.

The tenure types for which data are given are:
  • Outright owner - a household where the reference person has no outstanding loan amount secured against the dwelling.
  • Owner with mortgage (purchaser) - a household where the reference person has an outstanding loan amount secured against the dwelling.
  • Renter, State Housing Authority (SHA) or public renter - a household which pays rent to a State or Territory housing authority or trust.
  • Renter, private landlord: - a household which pays rent to a landlord who is a real estate agent or a person not in the same household.

Other renters (2% of owner and renter households) are included only in totals. Households who live rent free are not included.

Gross income includes cash receipts that are of a regular and recurring nature, before tax or any other deductions are made. When calculating housing costs as a proportion of income, households with nil and negative income have been excluded.


Housing costs consume a sizeable proportion of household income for many households. In 1997-98, the mean weekly housing costs for all owner and renter households was $110. This represented 13% of their mean gross weekly income.


Not all households have the same expenses. Housing costs vary according to a number of factors such as tenure type (whether owners, purchasers or renters), income, life-cycle stage and location. Some of these factors are strongly interrelated, for example both income and tenure type are interrelated and both are closely linked to life-cycle stage.

MEAN WEEKLY HOUSING COSTS, 1997-98

MEAN WEEKLY HOUSING COSTS, 1997-98 - GRAPG


MEAN HOUSING COSTS AS A % OF GROSS INCOME, 1997-98

MEAN HOUSING COSTS AS A % OF GROSS INCOME, 1997-98 - GRAPH

    Source: Housing Occupancy and Costs Australia, 1997-98, (cat. no. 4130.0).


    Tenure type

    In 1997-98, 40% of Australia's 6.9 million owner and renter households owned their home outright. For these households, housing costs which only include payments of rates, were typically low. Their average weekly expenditure on housing costs was $21 (3% of their gross income).

    Other tenure types, particularly home owners paying off a mortgage (31% of all households) and those renting from a private landlord (21%) had much higher housing costs. Those purchasing their home had average weekly housing costs of $205, compared to $157 for those renting privately. Public renters (6% of all households) had lower housing costs ($63 per week) reflecting the provision of low cost housing to assist households with lower incomes.

    Despite the differences in average costs, the proportion of income spent on housing was similar for public and private renters (17% and 20% respectively) and for those purchasing their home (18%). Clearly income level, tenure type and housing costs are interrelated in a particular way. The patterns suggest that households (excluding outright owners) tend to choose a tenure type according to their income, such that the proportion of their income spent on housing is close to societal norms (with private renters paying slightly more on average and public renters paying slightly less).

    Although the actual dollar costs have changed, statistics from Housing Surveys conducted during the 1980s show that the patterns observed in 1997-98 have been relatively stable over time. For example, in 1982 home buyers spent 17% of their income and public and private renters spent 16% and 18%, respectively, of their income on housing.1

    Income
    Overriding the patterns just observed is the fact that households with higher incomes, who can afford to spend more on their housing, generally do so. In 1997-98 households in the lowest income quintile spent an average of $53 per week on housing costs. This increased to $170 for households in the top quintile. In contrast, expenditure on housing costs as a proportion of income was inversely related to income. Households in the lowest income quintile spent an average of 28% of their income on housing, compared to 9% among those in the highest quintile. Explaining these patterns is helped by looking at the associations between income, housing tenure and life-cycle stage.

    MEAN WEEKLY HOUSING COSTS BY INCOME QUINTILE, 1997-98

    MEAN WEEKLY HOUSING COSTS BY INCOME QUINTILE, 1997-98 - GRAPH


    MEAN HOUSING COSTS AS A % OF INCOME BY INCOME QUINTILE, 1997-98


    MEAN HOUSING COSTS AS A % OF INCOME BY INCOME QUINTILE, 1997-98 - GRAPH

      Source: Housing Occupancy and Costs Australia, 1997-98, (cat. no. 4130.0).


      Life cycle

      As both housing needs and preferences, and household incomes, change with the formation and dissolution of families over the life cycle, it can be seen that housing costs are related to the household's current life-cycle stage. Lower housing costs later in the life cycle reflect the proportion of households who are outright home owners. Outright ownership increases steadily with age and peaks at 90% of couples aged 65 and over. In general, the proportion of income spent on housing decreases as households move through progressive life-cycle stages.

      In 1997-98, young singles (those aged under 35 years) had relatively low average household incomes and had relatively low housing costs (an average of $133 per week). Young singles also spent the greatest proportion of their income on housing of any life cycle group (25% compared to an average of 13% for all households).

      When couples form a stable relationship they are more likely to purchase a home and their housing costs rise accordingly. This reflects the greater incomes and space requirements of couple households. Average costs for couples with children were lower than for young childless couples, despite their greater space requirements, partly because many couples commence purchasing their home before having children. However as couples and their children grow older, shown by the age of the eldest child, costs typically decrease.

      After children leave home and as retirement approaches, housing costs tend to decrease further. This is largely because many couples have paid off their mortgage, or perhaps moved into cheaper dwellings. Retirement aged couples (65 years and over) spent an average of $25 per week on housing, just 5% of their income. Average costs for lone persons in the same age group were almost the same in dollar terms.

      LIFE-CYCLE GROUPS, 1997-98

      Outright owners
      Mean weekly housing costs
      Mean weekly income
      Income spent on housing
      Selected life-cycle groups
      %
      $
      $
      %

      Lone person, under 35
      *6
      133
      527
      25
      Couple only, reference person under 35(a)
      *4
      212
      1,130
      19
      Couple with dependent children only
        Eldest child under 5
      14
      182
      989
      18
        Eldest child 5-14
      20
      163
      1,040
      16
        Eldest child 15-24
      43
      122
      1,256
      10
      Lone parent with dependent children
      15
      107
      515
      21
      Couple with dependent and non-dependant children only
      41
      132
      1,492
      9
      Couple with non-dependant children only
      64
      71
      1,452
      5
      Couple only, reference person 55-64(a)
      77
      49
      718
      7
      Couple only, reference person 65 and over(a)
      90
      25
      461
      5
      Lone person, 65 and over
      75
      26
      254
      10
      All households(b)
      40
      110
      863
      13

      (a) The person used as the reference point for household relationships and whose demographic characteristics (such as age) are used for household level information. In couple households, this is either the husband or wife.
      (b) Also includes life-cycle groups not defined above.

      Source: Housing Occupancy and Costs Australia, 1997-98, (cat. no. 4130.0).


      Location

      In 1997-98, mean weekly housing costs were typically higher in capital cities than in other areas within each State. Of the State capitals, costs were highest in Sydney, at $138 per week, Brisbane ($122) and Melbourne ($117). Hobart was the cheapest, with mean housing costs of $83 per week. Outside the capital cities, Queensland had the highest average housing costs ($101 per week). This could be associated with housing costs in areas such as the Gold Coast. The lowest housing costs were in the balance of South Australia, where the average costs were just $64 per week.

      The differences in housing costs between capital cities and other areas can be partly attributed to higher incomes (see Australian Social Trends 2000, Interstate income inequality) and higher dwelling values (see Australian Social Trends 1998, Wealth in the family home) in capital cities. In addition, outright ownership is more prevalent outside the capital cities.2
      Despite considerable variations in housing costs, the average proportion of income spent on housing varied little, being about 12-13%, regardless of the location, although this was slightly lower outside the capital cities in Western Australia and Tasmania.

      MEAN HOUSING COSTS BY STATE BY CAPITAL CITY AND BALANCE OF STATE, 1997-98

      Mean weekly housing costs
      Mean housing costs as proportion of income


      Capital city
      Balance of State
      Total
      Capital city
      Balance of State
      Total
      State
      $
      $
      $
      %
      %
      %

      New South Wales
      138
      91
      120
      13
      13
      13
      Victoria
      117
      83
      107
      13
      12
      12
      Queensland
      122
      101
      110
      13
      13
      13
      South Australia
      98
      64
      88
      13
      13
      13
      Western Australia
      106
      98
      104
      12
      11
      12
      Tasmania
      83
      68
      74
      12
      10
      11
      Total
      (a)122
      90
      (a)110
      (a)13
      13
      (a)13

      (a) Includes all households in Northern Territory and Australian Capital Territory.

      Source: Housing Occupancy and Costs Australia, 1997-98, (cat. no. 4130.0); unpublished data, 1997-1998 Survey of Income and Housing Costs.


      Housing-related income stress

      Many households suffer housing-related income stress, which results from the combination of having a low income and spending a high proportion on housing. There is no standard measure for identifying households with housing-related income stress, however a measure often used is that of households in the bottom two income quintiles who spend more than 30% of their income on housing costs.3

      In 1997-98, there were 702,400 low income households that spent more than 30% of their income on housing (10% of all households). Included in the 702,400 households who experienced housing-related income stress were 266,500 households who spent more than half their income on housing costs.

      Some household types were more likely to experience housing-related income stress than others. Lone parents were at greatest risk, with 31% of these households experiencing such stress, closely followed by private renters (30%). Other households at high risk included young households in which the reference person was under 25 (24%) and lone persons (17%). Households receiving a government pension or benefit as their main income were also more likely to experience such stress (21%), reflecting the relatively low incomes of this group.

      While households in capital cities accounted for 57% of those with housing-related income stress, households outside the capital cities were over represented among those under stress: these households made up 37% of all households compared with 43% of those experiencing housing-related income stress. Their lower incomes might help account for their increased likelihood of experiencing such stress (12% compared to 9% of those in capital cities).

      HOUSEHOLDS WITH HOUSING-RELATED INCOME STRESS, 1997-98

      Households with housing-related income stress(a)
      All households
      Proportion with stress(b)


      Selected characteristics
      '000
      %
      '000
      %
      %

      Household composition
        Lone person
      272.7
      38.8
      1,619.5
      23.6
      16.8
        Lone parents(c)
      123.8
      17.6
      405.3
      5.9
      30.5
        Couple with children(c)
      127.2
      18.1
      1,900.1
      27.7
      6.7
        Couple only
      100.8
      14.4
      1,607.7
      23.4
      6.3
        Other
      77.9
      11.1
      1,336.7
      19.5
      5.8
      Tenure type
        Renters, private landlord
      434.7
      61.9
      1,437.7
      20.9
      30.2
        Renters, SHA
      18.0
      2.6
      389.4
      5.7
      4.6
        Owner with a mortgage
      195.2
      27.8
      2,129.8
      31.0
      9.2
        Owner without a mortgage
      44.1
      6.3
      2,762.0
      40.2
      1.6
      Location
        Capital city
      398.5
      56.7
      4,353.3
      63.4
      9.2
        Balance of State
      303.9
      43.3
      2,516.0
      36.6
      12.1
      Age of reference person
        Under 25 years
      86.0
      12.2
      363.8
      5.3
      23.6
        25-64 years
      532.1
      75.8
      5,132.2
      74.7
      10.4
        Over 64 years
      84.3
      12.0
      1,373.3
      20.0
      6.1
      Principal source of income
        Government pensions
        and allowances
      400.3
      57.0
      1,934.1
      28.2
      20.7
      All households
      702.4
      100.0
      6,869.3
      100.0
      10.2

      (a) Households in the lowest two income quintiles who spent more than 30% of their gross weekly income on housing costs.
      (b) The proportion of all households with that characteristic who are at risk of housing related income stress.
      (c) Includes single-family households with at least one dependant child.

      Source: Housing Occupancy and Costs Australia, 1997-98, (cat. no. 4130.0); unpublished data, 1997-1998 Survey of Income and Housing Costs.


      Endnotes


      1 Australian Bureau of Statistics 1992, Social Indicators, Australia No. 5, cat. no. 4101.0, ABS, Canberra.

      2 Australian Bureau of Statistics, unpublished data, 1997-1998 Survey of Income and Housing Costs.

      3 National Housing Strategy 1991, The Affordability of Australian Housing, Issues paper no. 2, AGPS, Canberra.



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