Essential workers face ever greater challenges

Key findings:

·       The number of essential workers living within 15kms of Sydney and Melbourne CBDs is declining

·       there are now no Local Government Areas (LGAs) across Sydney or Melbourne with a median house price that is affordable to an early career essential worker

·       The number of affordable locations for essential workers has significantly contracted

·       Rates of home purchasing have declined and the number of essential workers in rental stress has increased

·       Affordability issues once contained to Sydney and Melbourne now extend to outer suburbs and coastal regional areas

Developed with HOPE Housing, a new report led by researchers at the University of Sydney’s School of Architecture, Design and Planning highlights the critical need for intervention and innovation across the Australian housing system to improve access for essential workers in areas where they need to live.

The findings show access to appropriate and affordable housing is a systemic and worsening problem in Sydney and Melbourne, now extending to what were once affordable suburbs and coastal regional areas. The new analysis by Dr Catherine Gilbert, Dr Zahra Nasreen and Professor Nicole Gurran builds on a 2021 AHURI report which found evidence of  essential workers in Sydney and Melbourne struggling to afford housing within a reasonable commute of their workplace.

Median purchase prices and rents largely unaffordable to essential workers

Analysis of purchase affordability based on indicative essential worker salaries shows that there are now no Local Government Areas (LGAs) across Sydney or Melbourne with a median house price that is affordable to an early career essential worker.

“Areas that once had affordable median prices in 2016, including the Central Coast, Newcastle and the Illawarra are now unaffordable, as are the South Coast and much of the North Coast,” Professor Nicole Gurran explained. “Low rental price growth in some metropolitan areas resulting from Covid-19 has not improved affordability for lower income essential workers.

“At the same time, affordability has worsened in outer suburbs and regional areas (which historically offered more affordable options).”

“Median rents remain unaffordable even for essential workers on moderate incomes in inner areas of Sydney and Melbourne, as well as across much of Sydney’s north,” added Dr Zahra Nasreen.

A growing spatial mismatch between work and home

Earlier research found essential workers in Sydney and Melbourne are more likely to live in outer suburbs and adjoining regional cites than others in the labour force. This is problematic given a significant proportion of essential worker jobs are located within inner areas of these two cities.

The new research shows this spatial divide is deepening. The relative concentration of essential workers living within 15kms of the Sydney and Melbourne CBDs has declined since 2011. Between 2016 and 2021, the greatest net losses of essential worker residents were from Eastern Suburbs (-11%), Parramatta (-9%) and Inner West (-8%) in Sydney, and Inner East (-11%) and Inner Melbourne (-9%) in Melbourne.

“We see that only 11% of police working in the City of Sydney, for example, also live there. Over 350 commute from the Blue Mountains and areas outside the metro region including the Central Coast, Illawarra, Southern Highlands and Newcastle. Over 600 police who work in inner Melbourne commute from Geelong and Mornington Peninsula,” said Dr Gilbert.

High instances of overcrowding and housing stress

Data from the most recent census reveals more than 36,000 essential workers across Greater Sydney, and 22,000 in Greater Melbourne, live in overcrowded homes, an increase of approximately 5,000 and 4,000 respectively since 2016.

Over 23,000 essential workers in Greater Sydney and approximately 20,000 in Greater Melbourne live in households experiencing mortgage stress. Among renters, the figures are 29,000 and 19,000 - 2,000 more in each city than in 2016.

Increased renting and reducing rates of home ownership

Since 2011, the proportion of essential workers in the private rental sector has increased, particularly among essential workers under age 40. Within approximately 15kms of the Sydney and Melbourne CBDs, most essential workers under age 40 now live in the private rental sector. This includes over 70% in City of Sydney, Sydney’s Eastern Suburbs and Inner Melbourne.

The research indicates home ownership is a strong aspiration for many essential workers, said Dr Gilbert, a desire driving workers to move or to take up a new occupation. Since 2011, the proportion of essential workers purchasing a home with a mortgage has declined. Significant declines are particularly apparent in expensive inner areas of Sydney and Melbourne, but also in historically more affordable areas that have more recently become unaffordable, including Sydney’s Parramatta (-12%) and Inner South West (-10%).

Interventions needed to increase the supply of affordable rental and purchase options

The research finds small interventions to increase the supply of affordable housing options across Australia’s cities and regions could make a significant difference for essential workers. For instance, governments could require developers to deliver some homes at a lower rental cost or purchase price for essential workers, particularly in locations surrounding major employers.

The research found a 20% discount to market rent is enough to meet the rental affordability gap facing moderate income essential workers in places that have recently become unaffordable, including many suburbs within 15-30kms of the Sydney CBD and some cities and coastal and regional towns. It would have the added benefit of secure and long-term leases. A larger discount would be needed, however, to address the rental affordability gap in the most expensive inner-city areas. Offering that supply through a shared equity scheme would extend purchase affordability. The research found that a 30% - 50% equity contribution could significantly extend home ownership opportunities for moderate income essential workers.