The Effect of Transport Costs on Housing-related Financial Stress in Australia

Abstract

Housing-related financial stress or housing stress is usually measured on the basis of income and direct housing costs such as mortgage repayments and rents. One cost that is not included in calculations of housing stress, but which may be important, is the difference made by transport costs. This paper shows how a measure of housing stress that incorporates transport costs can give a different picture of housing stress from a measure that ignores transport costs. The result shows that, in capital cities, bringing transport costs into a housing stress measure particularly affects households with children. It is also found that the impact of transport costs is even greater outside capital cities and that access to public transport may play a role in determining the spatial pattern of housing stress and hence the impact of transport cost on housing stress.

1. Introduction

The steady increase in the proportion of people in housing stress, along with a widening gap between house prices and income, has become an important policy concern in Australia in the recent past (Beer et al., 2007; Phillips, 2011). With constrained land supply in inner-city areas causing a tightening of housing supply, economic theory suggests that cities will expand farther away from the more expensive city centre to areas where the cost of purchasing or renting houses tends to be lower but transport costs are higher (Alonso, 1964; Beer et al., 2007; O’Sullivan, 2011). The spatial mismatch hypothesis also suggests that the suburbanisation of jobs and housing market segregation have created a surplus of workers relative to jobs in sub-metropolitan areas (Kain, 1992; and Ihlanfeldt and Sjoquist, 1998).

The relationship between transport costs and housing costs has long been recognised in the international literature (Church et al., 2000). For example, LeRoy and Sonstelie (1983) argue that the availability of affordable public transport has become the main reason that poorer households can stay in higher-cost housing. Other reasons include the existence of older houses and large apartments (Glaeser et al., 2008). Therefore, the cost of transport is one of the important factors that could affect the spatial distribution of housing disadvantage (Tivadar, 2010). Tivadar argues that the difference between how cities developed to the outskirts of the city in Europe and the US and transport costs have played an important role in determining why, in European cities, the rich are more likely to occupy the city centre while, in the US, the relatively richer people tend to move out from the city-centre area.

A study in Paris found that, while there was evidence that disadvantaged, car-dependent people were forced out of the inner city due to property prices, the impact of this on low-income car-dependent people was not as great, as they moved into areas with better public transport (Motte-Baumvol et al., 2010).

The inclusion of transport as part of the story surrounding disadvantage has been around for a while in Australia. Early work on this was by Morris (1981), Maher et al. (1992) and Maher (1994) and more recently by Currie (2007) and Dodson and Sipe (2006).

Morris (1981) recognised the link between increasing urban car dependence and new forms of social disadvantage. Morris identified that youth, the elderly, people with low incomes and the disabled cannot afford cars and have low access to public transport. Maher et al. (1992) looked at the trade-off between access to services and housing costs, and found that in Australia, many households accepted reduced accessibility to services including employment and, therefore, higher transport costs to achieve their goal of homeownership.

Maher (1994) also argued that disadvantaged areas are deficient in terms of requiring residents to use long public transport journeys to access the facilities and resources needed for a satisfactory life.

Work by Hurni (2007) looked at marginalised groups in western Sydney, in particular groups with high levels of social disadvantage across generations including young unemployed people and sole parents. Their work identified that the lack of access to transport affected access to education, employment opportunities and social networking. Similar, but more recent, work by Currie (2007) has highlighted that people who are elderly, with low incomes, poor health, poor skills or unemployed have limited access to transport.

Many Australian studies on housing stress in Australia have considered only the direct housing costs in identifying housing disadvantage (Randolph and Holloway, 2002; Phillips et al., 2006; Yates and Gabriel, 2006; Nepal et al., 2010). Recent studies have started to recognise the role of transport costs in housing affordability (Yates et al., 2006) and have attempted to incorporate transport costs into housing disadvantage measures. Examples include Dodson and Sipe’s (2006) VAMPIRE (vulnerability assessment for mortgage, petroleum and inflation risks and expenses) index and Buchanan et al.’s (2005) suggestion to measure transport stress based on a proportion of household income consumed by transport costs in addition to a housing stress measure.

Another recent trend in the literature has been to look at the issue of housing and transport disadvantage outside the major or capital cities. While Airola and Parker (1982) and Blunden et al. (1998) have shown how the ‘rural suburb’ has grown and attracted in-migration in the US and Europe, Mikelbank (2004) and Morgan and Satsangi (2011) reveal how the current stock of housing in these areas cannot keep up with the population growth and has increased the level of housing disadvantage.

In Australia, Frost and O’Hanlon (2009) point out that the sustainability of urban development has been maintained by migration towards the growing urban areas outside the capital cities. Stimson et al. (2001) have recognised that the growing rural areas based on manufacturing or retirement industries are very vulnerable to housing stress, while those that are based on mining show a trend towards housing hardship.

This paper aims to add to the Australian literature on the link between housing costs and transport costs by including transport costs into the housing stress calculation similar to the method suggested by Buchanan et al. (2005). Given that the literature has looked at the growth of areas outside capital cities, we will not only analyse the capital cities, but also look at the areas outside the capital cities, areas referred to in the Australian geographical classification (ABS, 2006) as ‘balance of state’.

This paper addresses two main research questions

Who is affected the most in terms of housing stress when transport costs are included in the measurement of housing stress?

Does the inclusion of transport costs in the calculation of housing stress have a different impact in capital cities and outside capital cities?

Following this introduction, the second section discusses the measure of housing stress and transport costs. The analysis in the third section of this paper starts by examining the issue of housing stress in capital cities and areas outside capital cities. This is followed by the analysis on the impact of the inclusion of transport costs in housing stress in the fourth section. Finally, we discuss the results and deliver our conclusion in the fifth section.

2. Variables and Data

As this study analyses the relationship between housing stress and transport costs, there are two variables that have to be defined: housing stress and transport costs.

Most of the data are obtained from the Australian Bureau of Statistics (ABS) Household Expenditure Survey (HES) 2003/04. The 2003/04 HES contains a sample of 6957 households, but we only used 6281 of them, as we excluded the Northern Territory and the Australian Capital Territory from the analysis since the sample for these two territories does not differentiate the capital city and ‘balance of state’ area. There are 68.8 per cent of observations in the 2003/04 HES that come from capital city areas and, weighted, these observations represent 62.7 per cent of Australian households.

2.1 Housing Stress

Housing stress refers to the financial burden for a household arising from high housing costs relative to their income. While the housing stress indicator has a number of variants, we used a variant known as the 30/40 rule. This variant has been used by Australian government agencies such as the National Housing Strategy (NHS, 1992) and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA, 2008). According to this measure, a household is defined to be in housing stress if it spends more than 30 per cent of its income on housing costs and is also in the bottom 40 per cent of the income distribution.

The 40 per cent income cut-off means that higher-income households who may voluntarily choose to devote a higher fraction of their income for a better dwelling or better location are excluded from being in housing stress. To identify people with household incomes in the bottom 40 per cent of the income distribution, we have used equivalised disposable household income that has been equivalised using the modified OECD equivalence scale (Buhmann et al., 1988).

Housing costs are defined as the regular expenses of a household for their accommodation. This refers to regular rent for renters but includes general rates, water rates as well as mortgage repayments for any loans taken primarily for housing purposes for owners with mortgages or home purchasers. As the housing costs are not equivalised, the income used for the 30 per cent rule is also not equivalised. It comes directly from their disposable household income, which is the part of income they could spend on housing costs.

2.2 Transport Costs

Transport costs refer to weekly household expenses on transport. In the HES, expenditure on transport contained 42 items. We can classify these items into fixed costs of transport and variable costs of transport. Fixed costs comprise expenses that do not vary depending on the travel frequency or distance, such as the purchase of a motor vehicle, compulsory registration, compulsory insurance and subscriptions to motor vehicle organisations. Variable costs include the expenses that vary on the basis of travel frequency and distance. These include fuel, lubricants and additives, parking fees, road tolls and public transport fares. This study excludes the use of fixed costs such as the purchase of a motor vehicle which could disguise the true extent of how the need to travel affects one’s financial stress as people with higher incomes would be more likely to spend money on a high-value vehicle which is not required for everyday commuting.

2.3 Spatial Data and Estimation

The data from HES 2003/04 are only divided geographically into state and area of state—i.e. capital city and ‘balance of state’. Nevertheless, the spatial pattern within these areas is needed as this work was initially motivated by the argument that people move from inner-city areas to the outer suburbs of cities to avoid high housing costs.

To derive the spatial distribution of housing stress based on disposable income and the 30/40 rule, this study uses a spatial microsimulation technique that follows closely that used by Nepal et al. (2010), Phillips et al. (2006) and Tanton et al. (2011). The technique combines census tables and survey micro data to generate a new set of synthetic micro data for small areas. The accuracy measure for this estimate, known as SEI and calculated similarly to R ² (Tanton et al., 2011), shows an SEI of around 86 per cent when compared with data from the Australian census.

3. The Pattern of Housing Stress

The analysis in this paper starts by examining the pattern of housing stress within cities to investigate the proposition that high housing costs in the inner-city areas forces lower-income people to the outskirts of cities. This will be followed by the analysis of the pattern and level of housing stress outside capital cities.

3.1 The Spatial Pattern of Housing Stress in Capital Cities

The previous discussion suggests that housing stress is an important issue both within capital cities as well as outside them. In this section, we will use the results from our spatial microsimulation model to examine this issue.

Figure 1 shows the spatial distribution of housing stress within Australia. The housing stress rate in this figure is classified based on a population-weighted quintile, with the darker tones showing higher rates of housing stress. It can be seen that, in general, housing stress tends to be higher in capital cities and lower in remote and regional areas. This reflects the high correlation between housing stress and housing costs (Yates et al., 2006).

Figure 1.

Estimated housing stress, Australia, 2006.

Figure 1 also shows that, apart from Sydney, there is a similar story in other capital cities. It shows that besides having an inner-city area with high housing stress, Brisbane, Melbourne, Adelaide and Perth have high housing stress areas on the outskirts of the capital cities. In Brisbane, besides the inner-city areas having high levels of housing stress, there are also high levels of housing stress in the outer south of the capital city as well as in the outer north of the city.

Melbourne shows a similar pattern, with inner Melbourne as the area with the highest rate of housing stress but also the north, the south-east, the west and the east of Melbourne all having relatively high rates of housing stress. This pattern can also be observed in Adelaide and Perth.

Figure 1 shows that the areas with the lowest levels of housing stress in these cities are outside the inner-city area, but not too far from the city centre. Baum et al. (2006), in an investigation using multidimensional disadvantage criteria that included income level, education level, government income support and family type, showed that these are areas where affluent households live. The levels of housing stress are high in the inner city due not only to high housing costs but also to high income inequality, the existence of public housing and renters who live temporarily in the inner city (Baum et al., 2006). Despite this, a higher proportion of households in housing stress is observed on the outskirts of capital cities possibly due to a higher level of disadvantage in the outskirts of the cities.

Outside the inner-city areas, Figure 1 shows that the highest housing stress is in the middle and outer suburban areas—areas where people who tend to work in manufacturing industry (so labourers and tradespeople) live and where high youth unemployment is observed. The analysis by Baum et al. (2006) shows that areas of high housing stress are located near these areas and these areas are where there are many families living with a mortgage. Although not as high as the previous two areas, high levels of housing stress can also be seen in Baum et al.’s localities of high employment rates combined with relatively low incomes.

In Sydney, households in high housing stress are concentrated in the west, not far from inner Sydney, while north Sydney has much lower housing stress despite facing the highest housing costs in Sydney. This concentration of high rates of housing stress in western Sydney coincides not only with the disadvantaged manufacturing industry areas in Sydney, but also with areas with a high proportion of families with a mortgage as shown by Baum et al. (2006). Given that these areas are also the main service areas for Sydney Railways, as shown by Vidyattama et al. (2010), this concentration confirms the arguments of LeRoy and Sonstelie (1983) and Glaeser et al. (2008) that the existence of public transport could encourage lower-income family households to live in these areas.

This analysis shows that, although the inner-city areas do have high levels of housing stress, the problem also stretches to the outskirts of the capital cities, possibly because more disadvantaged households are moving to these areas. This could create spatial mismatches between the areas of work and residence if these households still rely on job opportunities in the inner-city area, as can be seen in the US (Ihlanfeldt and Sjoquist, 1998) as well as in the UK (Houston, 2005).

Job opportunities can also be created near residential areas in the city’s outskirts (Yates et al., 2006). Households wanting to own their own home may still not be able to buy homes in these areas because house prices may have already started increasing as new workers move in. Young renters, the affluent and those without children will be likely to dominate the areas with jobs because they can afford the housing in these areas, particularly the inner-city areas (Yates et al., 2006). As a result, many households (especially family households) will live in the outskirts of capital cities where there may be fewer jobs, higher housing stress and high transport costs to get to areas where jobs do exist. This will tend to affect the more disadvantaged households. This supports the finding of Dodson et al. (2006) that transport disadvantage is highly correlated with housing disadvantage.

3.2 Housing Stress Outside Capital Cities

Having examined housing stress within capital cities, we now look at the pattern of housing stress outside the capital cities. Figure 1 shows that the areas with housing stress outside capital cities are dominated by areas on the eastern coast of Australia, mainly the New South Wales north coast up to Queensland. The picture in Queensland mainly confirms the picture of housing stress outside Brisbane described by Phillips et al. (2006), showing high levels of housing stress in the areas outside Brisbane, especially in the coastal area north of Brisbane, as well as coastal areas in the south of Brisbane. We also find that housing stress continues down the northern coast of New South Wales to Newcastle indicating the vulnerability of the growing retirement and evolving manufacturing areas outside capital cities as predicted by Stimson et al. (2001).

The proportion of households living in this area is relatively large especially in New South Wales and Queensland, where 28.1 per cent and 33.8 per cent of the population outside the capital cities respectively, live in areas that fall into the highest quintile of housing stress. This supports the argument of Blunden et al. (1998) that migration towards rural areas is often concentrated in a few areas while many other rural areas are facing net out-migration.

The different migration pressures in different rural regions means that housing costs in rural areas vary significantly (Mikelbank, 2004) while in capital cities the trend shows an increasingly homogeneous cost, especially in the inner-city area (Yates et al., 2006). On the other hand, income in rural areas is generally much lower than in the capital city. Therefore, although capital cities could be more vulnerable to housing stress because of higher housing costs, the ‘balance of state’ area is also vulnerable because of lower incomes combined with large spatial variations in housing costs. According to the 2003/04 HES, the average housing cost in a capital city was 45.5 per cent higher than it was outside a capital city, while the income gap was only around 17.5 per cent. We estimate that the level of housing stress in capital cities at 10.5 per cent is only slightly higher than the level in the ‘balance of state’ at 10.3 per cent. In addition to this, the impact of transport costs on housing stress could be higher outside capital cities due to the road infrastructure and the lower availability of public transport outside capital cities, as well as the longer distances that need to be travelled due to the more dispersed settlements and the poor availability of goods and services (Pucher and Renne, 2005; Delbosc and Currie, 2011).

4. The Inclusion of Transport Costs in Housing Stress

From the spatial pattern of housing stress in Figure 1, we could expect that there are many households already experiencing housing stress that would experience even worse housing stress when transport costs are added to housing costs. As this may also be the case outside capital cities, this section will look at the impact of adding transport costs to housing costs in both the capital city and ‘balance of state’ areas.

4.1 The Contribution of Transport Costs in Capital Cities

We first examine how much an average householder in housing stress is paying in transport costs and then how many more households would experience housing stress if transport costs were included in housing costs.

It can be seen from Table 1 that the average weekly transport cost for purchasers in housing stress was A$63.76, or around 9 per cent less than the A$70.15 paid by purchasers not in housing stress. The difference is higher for private renters as the average transport cost of those in housing stress was A$37.40 per week, which is almost 37 per cent less than the A$58.96 paid per week by those not in housing stress.

Table 1.

Housing cost and transport cost as proportions of disposable income, capital city of states, 2003/04

	Weekly disposable income (A$)	Weekly housing cost (A$)	Housing cost as a percentage of income	Weekly variable transport cost (A$)	Variable transport as a percentage of income	Housing plus transport cost (A$)	Housing and transport cost as a percentage of income
Purchaser	1 231.81	307.45	24.96	69.26	5.62	376.71	30.58
Not in housing stress	1 335.08	311.80	23.35	70.15	5.25	381.95	28.61
In housing stress	593.35	280.54	47.28	63.76	10.75	344.30	58.03
Private renter	896.81	214.69	23.94	52.72	5.88	267.41	29.82
Not in housing stress	1 079.65	223.43	20.70	58.96	5.46	282.39	26.16
In housing stress	448.12	193.22	43.12	37.40	8.35	230.62	51.46

Source: Calculated from capital city of states sample of HES 2003/04, excluding households with zero or negative disposable income.

Another way of looking at this is to look at what proportion of income is being spent on transport costs. On average, home purchasers who are already in housing stress are paying 10.8 per cent of their disposable income on weekly transport costs, double the proportion spent by those not in housing stress (5.3 per cent; see Table 1). Transport costs also take a greater proportion of the income of private renters in housing stress (8.4 per cent compared with 5.5 per cent of those who are not in housing stress).

Purchasers in housing stress may face higher transport costs because they can only afford houses on the outskirts of the city. The high proportion of households with mortgages in this area, as shown in Baum et al. (2006) could well explain this result. For renters, although transport costs are still a high proportion of income, transport costs of private renters in housing stress are lower than for purchasers. This supports the theory that there are young private renters who are willing to live in the inner-city areas while experiencing housing stress, as shown by Yates et al. (2006). An alternative explanation is that the limited income of these private renters restricts their mobility.

Table 2 shows that changes in housing stress after including transport costs are different for purchasers and renters. When transport costs are added to housing costs, housing stress for private renters increases from 23.2 to 29.0 per cent, while the level of housing stress for purchasers goes from 11.0 to 13.9 per cent. The number of both purchasers and renters who are in housing stress increases by around 25 per cent if the transport costs are included.

Table 2.

Percentage of households in housing stress with and without transport costs, capital cities, 2003/04

Family type	Number of households	Transport cost (percentage of income)	Housing stress without transport cost	Housing stress with transport cost	Percentage point difference	Percentage increase
Purchasers
Couple only	386 120	5.16	5.5	6.5	1.0	18.6
Couple with children	776 118	5.78	14.9	19.2	4.3	29.0
Sole parent	83 956	7.09	20.2	26.4	6.1	30.3
Lone household	244 257	6.01	10.4	10.9	0.5	5.0
All	1 719 728	5.62	11.0	13.9	2.9	26.3
Private renters
Couple only	195 439	5.71	17.5	20.5	3.0	17.1
Couple with children	232 082	5.67	20.6	29.7	9.1	43.9
Sole parent	112 248	5.83	37.9	50.2	12.4	32.7
Lone household	343 141	6.76	29.8	33.0	3.2	10.9
All	1 101 103	5.88	23.2	29.0	5.7	24.7

Source: Calculated from the capital city sample of HES 2003/04, excluding households with zero or negative disposable income.

To see further how transport costs affect households, we look at the impact on several types of households where the number of observations from the survey is adequate. Table 2 shows that the inclusion of transport costs into housing costs in capital cities will affect families with children, especially sole parents, more than couples without dependent children and lone-person households. With transport costs consisting of, on average, 7 per cent of the sole-parent disposable income, the level of housing stress for sole parents who are home purchasers increases from 20.2 to 26.4 per cent. This means an increase of around 30 per cent in the number of sole-parent households in housing stress as a result of including transport costs. Although on average the proportion of income used for transport by lone-person households is slightly higher than in couple households with children, the inclusion of transport costs pushes more couples with children into housing stress.

The picture is worse for families with children who are renting privately. The inclusion of transport costs increases the level of housing stress in households with children more than couples without children and lone-person households. The inclusion of transport costs increases the rate of housing stress for sole-parent renters from 37.9 to 50.2 per cent and couples with children renters from 20.6 to 29.7 per cent. This may be because there is a high proportion of private renters with children who are not in rental stress to avoid transport costs, but instead rely on renting to fulfil their housing needs (Wulff and Maher, 1998). Beer (1999) suggests that there is a considerable number of these families for whom renting is no longer just a transition stage to owning a house and that the financial pressure for private renters is severe.

One main conclusion that can be taken from this discussion is that families with children—both couples and lone parents and both renters and house purchasers—are the families in capital cities that are most likely to face additional transport cost pressures while in housing stress. Yates et al. (2006) have argued that this is the type of family that has moved away from inner-city areas as demonstrated by Dodson and Sipe (2006). They show that greater disadvantage is located not only in the outskirts of capital cities but also in the middle suburban localities. Both of these coincide with the areas with a high proportion of families with mortgages identified by Baum et al. (2006).

Sydney may defy this pattern as disadvantaged areas that are just to the west of the inner-city area have considerable access to public transport networks (Figure 2). This figure also shows that households facing housing stress in other capital cities (in Figure 1) are in areas where access to public transport is not as high. Therefore, the generally disadvantaged west and south-west Sydney show a bit less mortgage-transport vulnerability in the Dodson and Sipe’s (2006) index.

Figure 2.

Proportion of people using public transport to go to work, 2006.

This area is also identified by Baum et al. (2006) as one with a high proportion of families with a mortgage. The effect of transport costs is greater for families with children as Delbosc and Currie (2011) argue that the transport advantage due to location means little when you need to have a car and, according to the 2006 census, families with children usually do have a car (ABS, 2007).

4.2 Comparison with Balance of State Areas

Given the level of housing stress and higher transport costs in the balance of state areas, it is important to compare the results that we find in capital city areas with those in balance of state areas. Table 3 shows that the issue of housing stress outside capital cities is caused by incomes rather than housing costs as the weekly housing costs for those in housing stress are similar to those who are not in housing stress. On average, the weekly transport costs in balance of state areas are lower than the transport costs of households in capital cities. As a proportion of income, the transport cost in balance of state areas is only slightly lower for purchasers and higher for renters compared with households with similar tenures in capital cities.

Table 3.

Housing costs and transport costs as proportions of disposable income, balance of state, 2003/04

	Weekly disposable income	Weekly housing cost (A$)	Housing cost as a percentage of income	Weekly variable transport cost (A$)	Variable transport as a perentage of income	Housing plus transport cost (A$)	Housing and transport cost as a percentage of income
Purchaser	1 055.61	232.65	22.04	59.63	5.65	292.28	27.69
Not in housing stress	1 146.00	233.99	20.42	60.86	5.31	294.86	25.73
In housing stress	570.10	225.46	39.55	52.99	9.30	278.45	48.84
Private renter	785.66	146.97	19.47	46.67	6.18	193.65	25.66
Not in housing stress	960.74	147.13	15.31	51.05	5.31	198.18	20.63
In housing stress	391.25	146.69	37.49	38.95	9.96	185.65	47.45

Source: Calculated from balance of state sample of HES 2003/04, excluding households with zero or negative disposable income.

Table 4 shows that the level of housing stress for home purchasers increases from 10.2 per cent to 15.7 per cent as a result of including transport costs, a 54.3 per cent increase. Although the highest percentage increase is among sole-parent home purchasers, where the number in housing stress almost tripled when transport costs were included, the additional purchasers in housing stress after the inclusion of transport costs in balance of state areas is 54.3 per cent compared with 26.3 per cent in capital cities.

Table 4.

Percentage of households in housing stress with and without transport costs, balance of state, 2003/04

Family type	Number of households	Transport cost (percentage of income)	Housing stress without transport cost	Housing stress with transport cost	Percentage point difference	Percentage increase
Purchasers
Couple only	210 395	5.79	6.2	9.2	3.0	49.2
Couple with children	436 560	5.39	10.3	16.3	6.0	58.6
Sole parent	49 194	6.18	11.3	31.0	19.7	174.1
Lone household	132 274	6.52	15.3	17.6	2.3	14.9
All	915 582	5.65	10.2	15.7	5.5	54.3
Private renters
Couple only	113 447	6.06	11.1	20.1	9.0	80.8
Couple with children	133 754	5.39	19.1	32.7	13.6	71.4
Sole parent	95 893	6.18	39.8	51.3	11.6	29.1
Lone household	191 233	6.26	45.7	48.0	2.3	5.1
All	597 315	6.18	28.2	36.2	8.0	28.5

Source: Calculated from HES 2003/04 balance of state sample, excluding households with zero or negative disposable income.

While not as high as it was for purchasers, the increase in the level of housing stress for renters was also high (28.5 per cent). This may be due to the high proportion of lone-person households living in private rentals in the balance of state area, which contributes to the level of housing stress for renters in the balance of state being high even before including transport costs.

Given the initial premise that the effect of transport costs on housing stress would be higher in capital cities, we looked further at why the impact of transport costs is much higher in the balance of state area than capital cities. Figure 3 shows that one of the main reasons why the impact of transport costs is higher in the balance of state areas is because there is a high proportion (about 6 per cent) of households paying around 25 per cent of their income on housing. This peak is much higher than the similar peak in the capital city areas that contain less than 4 per cent of households. This means that the increase in costs as a result of adding transport costs will affect the proportion of households in the balance of state area more than it affects households in capital city areas. This can be seen by comparing the “Balance of State housing cost” line with the “Balance of State housing cost + transport” line. The peak at the 25 per cent of income in the balance of state housing cost line has moved to 35 per cent when transport costs are included, whereas the peak at 25 per cent for capital cities has moved to only 30 per cent of income when transport costs are included.

Figure 3.

The distribution of housing and transport costs among households with equivalised income in the bottom two quintiles.

Given the larger impact on purchasers, we could expect that most of the households in the balance of state peak are also home purchasers and likely to be living in the relatively high housing stress areas of the east coast of New South Wales and Queensland. Baum et al. (2006) indicate that households in these areas are more likely to commute to capital cities and the 2006 census shows that almost 5 per cent of workers in these areas still commute to Sydney or Brisbane compared with around 0.4 per cent in other New South Wales and Queensland balance of state areas.

Access to public transport could be one of the reasons why lower-income households in capital cities face lower transport costs. This can be confirmed by looking at the proportion of households who have spent money on public transport in capital city and balance of state areas from the 2003/04 HES. The proportion who have spent money on public transport in balance of state areas is much lower than the proportion in capital cities, with less than a third of the proportion of households in the balance of state areas spending money on public transport compared to those in capital cities. The lowest was among house purchasers in the balance of state areas, with only 8.8 per cent of households spending on public transport. With 42 per cent of households in capital cities in Australia spending on public transport, private renters have the highest proportion of people spending on public transport. It is higher than home purchasers in capital cities (31.3 per cent) and private renters in the balance of state area (12 per cent). This is also shown in Figure 2 which shows that while some cities on the east coast have similar levels of housing stress to capital cities, the proportion using public transport to go to work is much lower in these places.

5. Conclusions

This study began with the premise that the high cost of housing in inner-city areas may mean that households on low to moderate incomes move to the city outskirts to avoid housing stress with the consequence of higher transport costs. This affects Australian cities, but has also been shown to affect Paris, although the effect was ameliorated by people moving to areas with good public transport access.

The results from this study show that, first, moving to the outskirts of a city does not necessarily mean that the household will avoid housing stress and, secondly, being in housing stress does not reduce the exposure to high transport costs. This is especially true for home purchasers rather than private renters since home purchasers are likely to be willing to go to the outskirts of the city and still face housing stress as well as higher transport costs in order to own a home.

Transport costs faced by renters in housing stress are considerably lower than those who are not in housing stress. Following Yates et al. (2006), this pattern may be due to some private renters choosing to live in inner-city areas and enduring housing stress but reducing transport costs. The higher proportion of income being spent on transport costs for those in transport stress also indicates that the lower transport costs may be due to transport expenses being restricted by low income.

The study also finds that family households with children are affected more by transport costs. For this type of family, the impact of transport costs on housing stress is actually higher for private renters than for home purchasers, while renters who can avoid the impact of transport costs in inner-city areas are mostly without children (Yates et al., 2006). The impact of including transport costs is still relatively high for families who are buying their own house, especially for those with children, as they are moving to the outskirts of capital cities (Baum et al., 2006). Dodson et al. (2006) show that the availability of a public transport network such as that in Sydney could reduce the vulnerability of these families to high housing and transport costs. However, Delbosc and Currie (2011) argue that the impact of public transport on transport disadvantage is much less when the households still need to have a car to support their mobility and this is also shown using evidence from the 2006 census on families with children.

As urban areas outside capital cities grow, the joint issues of housing stress and transport costs are also becoming important in the balance of state areas. This is especially true for the east coast of Australia, especially to the north and south of Brisbane and through Tweed and Lismore to Newcastle. Although the areas with high housing stress are relatively small, the population living in these areas consists of almost one-third of New South Wales and Queensland balance of state populations.

The impact of including transport costs into the housing stress calculation for home purchasers in the balance of state areas is much larger than in capital cities. The lower access to public transport in the balance of state areas, and therefore a greater reliance on more expensive forms of transport like motor vehicles, certainly plays an important part in this additional cost.

There are some implications of these findings. First, the increases in housing and transport costs tend to affect families with children and those living outside capital cities the most. Both state and federal governments need to consider this when designing policies on public transport availability and housing releases.

In regard to public transport policy, while the results support the extension of the public transport network into the outskirts of capital cities and outside capital cities along the east coast of Australia, another question to ask is how the development of public transport could be more beneficial for families with children. More work could be done on the use of public transport by families with children and their dependence on the car. One of the interesting contrasts between the study in Paris and Australia is that the excellent public transport systems in European cities are used by low-income people to reduce transport costs. Sydney is the only capital city in Australia that may have a similar pattern where disadvantaged people live close to the railway network.

The third implication is that future research on housing affordability should take into account transport costs so that a stronger empirical evidence base becomes available to inform the development of policies affecting housing, transport and employment hubs.

Footnotes

Funding Statement

This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

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