Urban productivity and affordable rental housing supply in Australian cities and regions

This Inquiry examined changes in the supply of private rental housing and the implications for strategic policy interventions geared towards improving urban productivity. • Low-income (Q21) households are a critical sector of the workforce, but increasingly struggle to find affordable rental housing near employment centres of Australia's major urban areas. • Over two decades, the nation's shortage of affordable dwellings available for Q2 households in the private rental sector has grown to 173,000, with the most extreme shortage in Sydney (60,000 dwellings), where 71 per cent of all Q2 private rental households pay unaffordable rent. • The shortage is most acute in inner and middle ring areas which offer higher accessibility to greater concentrations of employment opportunities. Consequently, Q2 renters are either enduring affordability stress, commuting burdens, or both in order to access employment opportunities. There is lower employment participation by Q2 households who live in outer suburban locations of both Sydney and Melbourne, although the extent to which this reflects household trade-offs is unclear. • To address this, the Inquiry identified three primary policy development options: increasing affordable rental housing near key employment areas; improving accessibility and connectivity to outer suburban and satellite city housing markets via strategic investment in transport and communications infrastructure; and 'concentrated decentralisation' -fostering new employment clusters through strategic place-based funding interventions and digital innovation. • Providing more affordable rental opportunities in locations offering high access to employment would benefit Q2 households currently living in housing stress and support long term labour market sustainability. In particular, policies to increase affordable supply in middle suburbs through new development incorporating lower cost rental housing would assist employment participation and reduce housing stress of Q2 households. • Place-based funding interventions such as 'City Deals' have emerged as important models for catalysing new development, including housing, through strategic investment. Growing use of these models in Australian cities represents an opportunity to link transport and infrastructure investment to affordable housing in accessible locations. • Digital and innovation sectors can play an important role in urban productivity by supporting new work practices such as telecommuting, and potentially by creating economic opportunities in locations with lower cost housing, such as the outer suburbs of major cities and in satellite or regional cities. Planned innovation precincts which cluster around 'anchor institutions' like universities can achieve agglomeration benefits, particularly if supported by high quality transport and communications infrastructure. However, mechanisms to preserve affordability and ensure that new affordable rental housing is created as part of new development, are critical.