This document was added or updated on 19/10/2015.
APPENDIX: HOUSING COST MEASURES
Housing costs are often the largest regular expense to be met out of a household's income. Housing cost measures are of key policy and research interest in assessing the affordability of different forms of housing and changes in affordability over time. The amount a household spends on housing costs directly influences the amount of income available to meet other requirements, for both consumption and saving.
The measures of housing costs included in this publication are outlays made by household members to provide for their own shelter. There are limitations when comparing housing costs across different tenure types, particularly between owner occupier households and renter households. Rent payments represent the consumption of a shelter service. Mortgage repayments, on the other hand, comprise both the consumption of a shelter service (represented by the interest component) and a savings element through the acquisition of an asset over time (represented by the repayment of principal).
The housing cost measure used in this publication includes rent payments, rate payments (general and water) and mortgage or unsecured loan payments (if the initial purpose of the loan was primarily to purchase, build, add to, or alter the dwelling). It does not include body corporate fees, repair and maintenance costs, nor take into account refunds from a business or person outside of the household.
Interest and principal components
Since 2003 the ABS SIH has collected information on the interest and principal components of loan repayments. 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. Because of this, some analysts may prefer to exclude the principal component of loan repayments from mortgage costs and affordability analysis.
The interest component of a loan is the ongoing cost for owners with a mortgage. In 2013–14 interest accounted for 62% of total mortgage repayments for owners with a mortgage. For first home buyers and recent changeover buyers with a mortgage (households that had purchased their home in the three years prior to interview), interest on the loan accounted for 70% of total mortgage repayments. This is because a greater proportion of the repayment is typically applied to interest at the beginning of a loan amortisation schedule, while a greater proportion is applied to principal at the end.
Proportion of loan used for housing purposes
The housing costs reported in this publication include mortgage repayments if the main purpose of the loan was to buy, build, add to or alter the occupied dwelling. For example, if a loan was taken out primarily to buy the dwelling, but part of it was used to purchase a car, the entire repayment amount is included in housing costs. Similarly, if a loan is taken out primarily for other purposes, but is partly used for housing purposes, the repayments are not included in housing costs. From the 2003–04 SIH, where a loan has multiple purposes, details of all purposes have been collected, so repayments can be allocated to each purpose, in accordance with the percentage split of the original loan amount by purpose, in a process referred to as pro-rating.
Body corporate fees, dwelling insurance, and repairs and maintenance
Measures of housing costs could also include other outlays which are necessary to ensure that the dwelling can continue to provide an appropriate level of housing services. These include expenditure on body corporate fees, dwelling insurance, and repairs and maintenance. These costs tend to be incurred by owner occupier households, but not directly by renting households.
Data from the 2013–14 SIH shows that if these housing costs were included in housing costs measures, the estimates of average housing costs would increase by $53 per week for owners without a mortgage, and also $53 per week for owners with a mortgage.
In 2013–14 SIH steps were taken to improve the estimates of dwelling insurance and repairs and maintenance costs through modelling. Prior to 2013–14 SIH these estimates were directly collected from households.
Refunds from businesses or persons outside the household
The housing costs reported in this publication are not adjusted for amounts refunded by a business or someone outside the household. The ABS commenced collecting the amount of these types of refunds in the SIH from 2003–04. This includes refunds on: rent payments, mortgage payments, rates payments, and body corporate payments.
The ABS has taken a number of steps to improve the coverage, quality and usefulness of data for analyses of the housing costs of renter households.
Housing costs for renter households in this publication comprise rent payments plus any rates payments that were paid by the household (general and water). The measure does not take into account any refunds from a business or person outside of the household, or any Commonwealth Rent Assistance (CRA) payments received.
In 2003–04 the ABS commenced collecting extra information on the housing costs of renters, including payments for water consumption and amounts refunded by a business or person outside the household.
Commonwealth Rent Assistance (CRA)
Some households renting in the private rental market are reimbursed some or all of their housing costs in the form of CRA. CRA is a non-taxable income supplement paid through Centrelink to qualifying recipients of income support payments and family tax benefit, and is paid in conjunction with these other benefits.
In this publication CRA payments are neither offset from the housing costs nor deducted from income of the principal tenant, that is CRA is treated as household income, much like other government pensions and benefits. As such, comparisons of housing costs and affordability between private renters receiving CRA and households receiving a direct form of housing subsidy, such as those renting from state and territory housing landlords, must be done with care.
In 2007–08, the ABS commenced collecting information on whether persons and income units are in receipt of CRA and the amount that they receive. In 2012, the ABS took steps to improve the quality of this data through modelling, based on eligibility criteria. If rent assistance receipts were subtracted from gross housing costs, it has been estimated in the 2013–14 SIH, that the housing costs of households receiving rent assistance would be 11% lower on average.
TOWARDS A MORE COMPREHENSIVE MEASURE
A more comprehensive measure of housing costs could take into account the issues discussed above. Housing costs could then be more meaningfully compared across all tenure and landlord types.
Table 4 presents an alternative measure of housing costs to that generally included in the Housing Occupancy and Costs publication (cat. no. 4130.0), which takes into account the issues discussed above. While these alternative housing cost measures cannot be comprehensively derived for previous cycles of the SIH due to the availability of all the relevant items, these items are expected to be available for future cycles of the SIH.
The alternative measure shows housing costs after adding body corporate payments, repairs, maintenance and dwelling insurance. It also includes housing related mortgage repayments on a pro-rata basis of interest only (that is, excluding principal). Amounts refunded by a business or someone outside of the household and CRA payments are deducted. If this alternative measure was used the estimate of average weekly housing costs included in this publication would:
- increase by $53 to $100 for owners without a mortgage
- decrease by $102 to $350 for owners with a mortgage
- decrease by $31 to $344 for private renters
- remain the same at $148 for public renters
- decrease by $28 to $255 for all households
A1 AN ALTERNATIVE MEASURE OF MEAN HOUSING COSTS, 2013–14 ($ per week)
Owner without a mortgage
Owner with a mortgage
Renter - Private landlord
Renter - State/territory housing authority
|Housing cost measure used throughout this publication |
|Rent payments |
|Mortgage payments |
|Rates payments (general and water) |
|Total mean weekly housing costs |
|Alternative housing costs measure |
|Rent payments with refunds and CRA deducted |
|Mortgage payments (interest only, with refunds deducted, pro-rated) |
|Rates payments (general and water) with refunds deducted |
|Body corporate payments with refunds deducted |
|Repairs and maintenance |
|Dwelling insurance |
|Total mean weekly housing costs using alternative measure |
|- nil or rounded to zero (including null cells) |
A2 ALL HOUSEHOLDS, Housing costs measures, mean weekly housing costs and housing costs as a proportion of gross household income
Mean housing costs per week
Housing costs as a proportion of gross household income(a)
Measure used in publication(b)
Measure used in publication(b)
|Tenure and landlord type |
|Owner without a mortgage |
|Owner with a mortgage |
|Renter - Private landlord|
|Renter - State/territory housing authority |
|Total renters(e) |
(a) Excludes households with nil or negative income
|(b) For more information see 'Housing costs' in the 'Glossary' section of this publication |
|(c) See table A1 above, for includes and excludes of the alternative housing costs measure |
|(d) Excludes households with nil or negative income after CRA is subtracted |
|(e) Includes other landlord type, which account for about 1% of all renters in 2013–14 |
|(f) Includes other tenure type, which account for about 2% of all households in 2013–14 |