Housing Affordability !

Unfortunately, Australia's housing price bubble is creating a vastly increasing pool of people who will never own their own home.  Not only will it be impossible for them to accumulate the deposit to hope to buy a house, the wage they earn will preclude them from being able to service the debt for regular mortgage payments.

There is a danger that we will make our cities  '"unaffordable " to those in low paid employment who provide the services that we take for granted.  In the past, those with low paid work tended to live in the cheaper outer suburbs and commute to work in the more affluent parts of the city, but housing prices across the entire housing spectrum have reached premium levels.

This is a world problem and we have turned to solutions appearing in other countries. In Britain the government has established what it calls the Housing Finance Corporation which subsidizes loan money to housing agencies.  It has committed  $ 6.5 billion in getting the low paid into home ownership.

Put simply, this plan offers a mortgage at an artificially low rate of interest, and extends the loan period well beyond the normal mortgage span.  It can not lower the price of houses so instead it makes the loan fit both the factors that bring repayments within reach for the low paid.

That would be fine if the government here had a large budget surplus to distribute, but it is battling to reduce a growing deficit and finding fresh money for this scheme will probably see grants for welfare housing decrease.  If that happens, the stock of affordable rental homes will retreat and the lowly paid will suffer a double whammy - priced out of the main housing market and unable to obtain affordable  rented accommodation in the city that offers work.

In the past, many lending authorities had a twenty year limit on home mortgages, but this has extended to bring loans into step with family finances.  It seems likely that these low income extended loans may quickly extend beyond the time reach of the original home purchaser and become a transaction that will be finalised by the children of that household.   A home may become something that is paid for over several generations.

Perhaps we are seeing a social change that will be as dramatic as the industrial revolution that created the "middle class " that became the cornerstone of our society.  It seems that those with tertiary qualifications are gaining ever expanding incomes while those in lower levels are experiencing both work shortages and stagnant pay levels.   We are seeing the emergence of a class divide that always existed, but was far less prominent just a decade or so ago.

Unfortunately, housing tends to illustrate this division.  No government has sufficient money to subsidize housing for all those clamoring for a roof over their heads and if this housing price bubble becomes unstoppable the gulf will widen.    We may be heading towards a society last seen before the invention of the steam engine !