The concept of housing utilisation derived for SIH is based upon a comparison of the number of bedrooms in a dwelling with a series of household demographics such as the number of usual residents, their relationship to one another, age and sex. There is no single standard of measure for housing utilisation. However the Canadian National Occupancy Standard derived for SIH is widely used internationally.
The Canadian National Occupancy Standard for housing appropriateness is sensitive to both household size and composition. The measure assesses the bedroom requirements of a household by specifying that:
- there should be no more than two persons per bedroom
- children less than 5 years of age of different sexes may reasonably share a bedroom
- children less than 18 years of age and of the same sex may reasonably share a bedroom
- single household members 18 years and over should have a separate bedroom, as should parents or couples
- a lone person household may reasonably occupy a bed sitter.
Households living in dwellings where this standard cannot be met are considered to be overcrowded.
HOUSING COSTS AND HOUSING STRESS
Housing costs are recurrent outlays by household members in providing for their shelter. The data collected on housing outlays in the SIH are limited to major cash outlays on housing, that is, mortgage repayments and property rates for owners, and rent.
Only payments which relate to the dwelling occupied by the household at time of interview, that is, a respondent's usual place of residence, are included. Housing costs only include mortgage/loan payments if the purpose of the loan at the time it was initially taken out was primarily to buy, build, add to or alter the occupied dwelling.
There are a number of limitations to the housing costs information obtained in the SIH, due to practical data collection considerations. These limitations should be especially borne in mind when comparing the housing costs of different tenure and landlord types, that is, when comparing the costs of owner occupiers with the costs of renting households, and when comparing the costs of households renting from state and territory housing authorities with the costs of other renters.
- Households are sometimes reimbursed some or all of their housing costs, but these reimbursements have not been separately collected in the SIH. Commonwealth Rent Assistance (CRA), paid by the Australian Government to qualifying recipients of income support payments and family tax benefit, is the most important type of reimbursement of relevance to these statistics. If rent assistance receipts were subtracted from gross housing costs, it has been estimated that the housing costs of households receiving rent assistance would be about 30% lower on average, and the housing costs of all households renting from landlords other than the state/territory authorities would be about 10% lower on average.
- Mortgage repayments made by owners with a mortgage include both the interest component and the principal or capital component. For many purposes it is more appropriate to consider repayments of principal as a form of saving rather than as a recurrent housing cost. It reflects the purchase of a housing asset by increasing the equity in the property held by the household and is an addition to the wealth of the occupants. The 2005-06 SIH indicated that about 35% of the housing costs of owners with a mortgage comprised repayments of the principal on loans. However, this split of loan repayments is not available from SIHs prior to 2003-04.
- A fuller measure of housing costs would include a range of outlays not collected in the SIH, but which are necessary to ensure that the dwelling can continue to provide an appropriate level of housing services. These include repairs, maintenance, body corporate fees and dwelling insurance, and are costs that tend to be incurred by owner occupier households but not by renting households. Previous HES data shows that if these costs were added to SIH housing costs estimates, the estimates of average housing costs would be more than doubled for owners without a mortgage and would increase by about 15% for owners with a mortgage.
Housing costs and household income
Housing costs can be a major component of total living costs. Therefore housing costs are often analysed as a proportion of total income, sometimes referred to as affordability ratios. However, comparisons between these measures are subject to the limitations of housing cost estimates obtained in the SIH that are described in the previous paragraph. Housing affordability ratios derived from SIH data are further impacted by the inclusion of CRA in the value of income collected. In earlier research CRA has been estimated, on average, to represent about 8% of the reported income of households receiving CRA and about 2% of the reported income of all households renting from landlords other than the state/territory authorities.
To illustrate the difficulties discussed above, consider two households that are renting their dwellings. Both receive government pensions of $400 per week. One rents from a public housing authority and pays rent of $100 per week. The other pays $135 rent per week to a private landlord and receives Commonwealth Rent Assistance of $35. In SIH, the housing costs of the latter household would be recorded as $135 and their income would be recorded as $435. The couple renting from the public housing authority has a housing costs/income ratio of 25%. The housing costs/income ratio for the latter household would be derived as 31%. If CRA receipts are excluded from housing costs and income the housing costs/income ratio for the latter couple is also 25%, highlighting that there is no substantive difference between the housing costs or income situation of the two couples. This anomaly is of particular concern when considering changes in affordability ratios over time, since there has been a shift from providing public housing to providing CRA as a means of supplying affordable housing to low income people.
While housing costs can be a major component of total living costs, the difference between the housing costs of a larger household and a smaller household would not be expected to be as great as the difference in many other costs, such as food or clothing. In other words, larger households can be expected to experience economies of scale in the supply of housing. This means that if a larger household and smaller household both have the same standard of living, it could be expected that on average the larger household will have a lower housing costs/income ratio. Therefore relatively high housing costs/income ratios are more of a concern with respect to larger households than smaller households. This should be borne in mind when comparing ratios across different household sizes.
In comparing households' housing costs with their income, it should be noted that households have a variety of housing preferences. Some people may choose to live in an area with high land values because it is close to their place of employment and therefore they have lower transport costs. Some people choose to incur relatively high housing costs because they prefer a relatively high standard of housing instead of other consumption possibilities. High mortgage repayments might reflect a choice to purchase a relatively expensive home, or pay off a mortgage relatively rapidly, as a form of investment.
Households with relatively low income and housing costs greater than a certain proportion of income, often 30%, are sometimes said to be in 'housing stress'. The ABS does not use that term in its published output from SIH to label all households meeting those criteria because of the lack of comparability of the housing affordability ratios across tenure and landlord types, and the difficulties of comparing across different household sizes, as described in the previous paragraphs.