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Affordable Housing

Affordable housing: it's very simple

What is affordable housing?

An affordable house will cost you less than 30% of your net wage. This is irrespective of whether you are paying off a mortgage or renting.

For example, let’s say you earn $52,000 per year (for the 2018/19 financial year) and you have a HECS/HELP debt.

Your net wage after tax, medicare and HELP repayments is approximately $801.79 per week.

What is 30% fo $801.79?

801.79 divided by 100, times 30 = 240.54

So, if you’re spending more than $240.54 per week on rent or a mortgage, it’s not affordable.

What is affordable rental housing?

Affordable rental housing is when your weekly rent is less than 30% of your after tax weekly income.

Is low income and affordable housing the same thing?

Affordable housing is about the proportion of your income which goes to housing.

Someone on a low income could be living in affordable or unaffordable housing. It depends on how much of their income goes toward housing.

If they are spending more than 30% of their after tax weekly income on housing, it’s not affordable.

If they are spending less than 30% of their after tax weekly income on housing, it is affordable.

Why is affordable housing important for every business in Australia (except banks & landlords)?

Imagine you own a business which sells products to consumers.

When someone walks into your shop, would you like them to have lots of money in their wallet to spend at your shop?

Or would you prefer them to have only a little bit of money in their wallet to spend?

Let’s look at what affordable housing means for your business.

In November 2018, there were 12,694,800 people employed in Australia.

In May 2018, the average weekly earnings for all employees was $1,206.90.

$1,206.90 times 52 equals $62,758.80.

Therefore, we could say there are approximately 12,694,800 workers in Australia earning $1,206.90 per week.

In reality, there will be a lot of workers earning more than $1,206.90 per week. There will also be a lot of workers earning less than $1,206.90 per week. But if we averaged them all out, it would be roughly the same as all workers earning $1,206.90 per week.

What is $1,206.90 per week after tax, medicare and HECS/HELP repayments?

The answer is $905.93.

What different does it make to you as a business owner, if the customers walking into your shop have affordable housing?

Scenario 1: Affordable housing

Let’s say everyone walking into your shop are spending 29% of their net wage on housing.

29% of $905.93 is:

905.93 divided by 100, times 29 = 262.72

And 905.93 – 262.72 = 643.21

Your customers are spending $262.72 per week on their housing costs, leaving $643.21 to spend on everything else.

Scenario 2: Unaffordable housing

Let’s say everyone walking into your shop are spending 35% of their net wage on housing.

35% of $905.93 is:

905.93 divided by 100, times 35 = 317.08
And 905.93 – 317.08 = 588.85

Your customers are spending $317.08 on their housing costs, leaving $588.85 to spend on everything else.

Which would you prefer?

Would you prefer the average customer coming into your shop to have $643.21 to spend or $588.85?

What’s the big picture?

What’s the income difference for Australians with affordable vs unaffordable housing?

Using the difference of 35% vs 29% spent on housing, the calculation is $643.21 minus $588.85 which equals $54.36.

How many workers are there in Australia? There are 12,694,800 workers in Australia (from above).

12,694,800 times $54.36 equals $690,089,328.

Six hundred and ninety million dollars per week.

If Australian workers spend 35% of their net income on housing, instead of 29%, businesses lose $690,089,328 in revenue every week.

Why is affordable housing important for Australian workers?

Workers depend on businesses being profitable.

Businesses depend on revenue from consumers and other businesses.

If consumers have more money to spend, businesses have more revenue.

If businesses have more revenue, it’s more likely they’ll need more workers.

More jobs equals more opportunities for Australians who do not currently have a job.

The benefits also flow through to existing workers. If the business you work for is doing well, there’ll be more opportunities in your business compared with one which isn’t doing well.

Exceptions:
An exception to the above is where the Australian Government preferences workers from other countries over our own via the 482 visa. They were doing this with the 457 visa and are now doing it with the 482 visa.

What is Public Housing NSW?

The NSW Government has an agency called Family & Community Services (FACS). FACS helps with homelesness, private rental assistance & aboriginal housing. Their website is here.

What is social housing Victoria?

The Victorian Department of Health and Human Services runs an organisation called HousingVic. HousingVic can sometimes provide help to people below certain income and asset limits.

The income limits are:

The asset limit is $32,276