Housing and Inequality: RBA’s Luci Ellis says ‘security of tenure’ more important than type
Amid all talk of runaway home prices, especially in Sydney and Melbourne, and tightening of mortgage criteria by banks, RBA assistant governor Luci Ellis said low income households with disproportionately high debts pose a risk.
“It is rarely the median borrower who defaults. Risk comes from the tails of the distribution,” she said at the Australasian Housing Researchers Conference where the main theme was housing and inequality.
Ellis said that ,”Because higher-income households are more likely to be owner-occupiers, they are also more likely to have mortgage debt” but they were better able to service it than lower-income households which tend “to have quite a lot of debt relative to their incomes”.
“Sometimes this is because they have temporarily low incomes, but overall it does speak to the need to be aware of pockets of potential stress within a more benign overall picture.”
Ellis also said if “we are concerned about inequality of housing outcomes, perhaps we should focus less on the type of tenure, and more on security of tenure.”
She’s said participation in the housing market “need not be about owning your own home”.
Many rent, but renters are more likely to move than home owners, which could be disruptive and costly.
She questioned “whether all those moves by renters were desired by those households. Many renters are happy with their current home, but are required to move because the lease expired or the landlord sold the property.”
She said some earlier studies had suggested that transaction costs induce home owners to move less often than they might otherwise do, which makes it harder for them to take advantage of changing labour market opportunities, but that effect wasn’t clear in Australian data.
Earlier this week, NSW Premier Gladys sought former Reserve Bank governor Glenn Stevens’s advise on ways to improve housing affordability.
Tackling the affordability issue is one of her priorities, Berejiklian has said since becoming Premier in January.
Meanwhile, Macquarie Bank recently tightened its lending criteria, asking home loan borrowers for details on almost every little aspect of their living expenses, from grocery, internet to shoes.