Social Trends – Page 124 – Digital Finance Analytics (DFA) Blog

Changing demographics to alter dwelling demand

As Generation Y begins to enter the housing market, there could be a change in the types of dwellings sought after, a new report has suggested.

According to industry analyst and economic forecasters BIS Oxford Economics, changes to the age profile of the population over the next decade will likely result in a shift in the type of demand for dwellings, as Generation Y – those currently aged around 20 to 34 years old – begin to have their own families and move onto the property ladder.

According to BIS’s Emerging Trends in Residential Market Demand report, which examines trends revealed by a detailed analysis of Census data from the past 25 years, there will be “solid demand for units and apartments over the next decade” driven by an overall increase in “the propensity to be living in higher density dwellings across all age groups”.

The report outlines that while there will be continued demand for units and apartments over the next decade, the growth in demand will eventually slow.

Senior manager for residential property at BIS Oxford Economics, Angie Zigomanis, has suggested that, over the past 15 years, there has been rapid population growth among 20-to 34-year olds, as well as strong net overseas migration inflows, which have helped support the boom in apartment construction in the past decade by supplying a steady stream of new tenants to the market.

Mr Zigomanis also noted that there is evidence that people are staying in apartments and townhouses longer.

The analyst highlighted that, in Sydney, more than half (53 per cent) of households aged 35-to 39-years old, and nearly half (49 per cent) of households with children at a pre-school age, now live in these smaller dwellings.

While households have typically favoured townhouses over apartments, in Sydney and Melbourne, there has been an acceleration in the take-up of apartments by both groups since the 2011 Census. The trend has also been similar, although less pronounced in Brisbane, Adelaide and Perth, the report added.

Looking to the future, BIS notes that rising demand for smaller dwellings by Generation Y over the next decade would be apparent across all capital cities, although will be most pronounced in Sydney, and to a lesser extent Melbourne, where separate houses are least affordable.

In Brisbane, Adelaide and Perth, it argued, householders would be much more likely to be in a detached house once they enter their late 30s and 40s, and strong demand for new separate houses is therefore likely to continue.

However, BIS argues that it is likely that rising house prices and decreasing housing affordability in the most desirable locations in the capital cities are causing “an increasing trade-off” for some couples and family buyers between price, size of dwelling, and location, with many seeking smaller and more affordable dwellings to remain close to their desired location.

The analysts argued that, should this trade-off activity increase as Generation Y gets older, then this provides an opportunity for developers in all capital cities to meet this demand, especially given the fact that the boom in multi-unit dwelling construction has up until now been investment-driven “with design being geared toward Generation Y renters living as singles, couples without children, and in share households,” BIS said.

“To meet the potential growing number of Generation Y families in established areas, multi-unit dwellings will need to be designed to be more appropriate to family life, offering more space, both indoor and some outdoor, or located adjacent to public outdoor spaces,” said Mr Zigomanis.

“In particular, new apartment designs will need to change to provide more appropriate product for Generation Y families.”

However, should Generation Y follow the trend of the previous generations and eschew renting for owning their own, larger dwellings as they age, then this would “support a decade-long boom in demand for new houses and land in the new housing estates on the outskirts of Australia’s major cities and affordable major regional centres,” said Mr Zigomanis.

“Pressure is also likely to be maintained on house prices in established areas, as competition remains strong for Generation Y families looking to remain in the established areas where they have already been living and renting in smaller apartments,” he said.

ACCC win puts debt collectors on notice

The ACCC says that the Federal Court has found one of Australia’s largest debt collection firms, ACM Group Ltd, engaged in misleading or deceptive conduct, harassment and coercion, and unconscionable conduct in its dealings with two vulnerable consumers.

ACM’s conduct was found to be in contravention of the Australian Consumer Law.

The ACCC brought the action against ACM in respect of its conduct between 2011 and 2015 in pursuing two vulnerable customers who had defaulted on their phone bills. Their debts had been on-sold by their service provider to ACM for debt recovery.

“The ACCC and ASIC have done extensive work to improve debt collection practices,” ACCC Commissioner Sarah Court said.

“Lower-income groups suffer greater stress because of debt collection practices and have limited access to legal support, while creditors are using improper ways to escalate disputes.”

“This conduct by ACM was particularly egregious, as it included ongoing harassment of a care facility resident who had difficulty communicating after suffering multiple strokes, as well as a Centrelink recipient who was falsely told their credit would be affected for up to seven years if they failed to pay immediately,” Ms Court said.

“ACM was found to have made empty threats to litigate against both customers despite knowing they had no means, or only limited means, to repay.”

“One of the ACCC’s enduring enforcement priorities is taking action against conduct that impacts disadvantaged or vulnerable consumers,” Ms Court said.

In his judgment, Griffiths J rejected a number of explanations of why ACM had contacted one of the consumers 34 times and found that conduct amounted to undue harassment and coercion.

Griffiths J also found that the multiple telephone calls, coupled with the number and content of its correspondence was calculated to intimidate or demoralise the consumer.

Griffiths J stated that “ACM cannot justify its conduct on the basis that it required verification of information about [the] medical or financial circumstances when ACM itself did not take reasonable steps to contact people who may have been in a position to provide such verification”.

Background

The alleged conduct occurred between 2011–2015 in relation to one consumer, a resident in a care facility, and in September 2014 in relation to the other consumer, a single parent with a limited income. In each case, the debt being pursued had been sold to ACM Group by Telstra.

In 2012, in a case brought by ASIC, the Federal Court found that ACM Group had harassed and coerced consumers and engaged in ‘widespread’ and ‘systemic’ misleading and deceptive conduct when seeking to recover money.

In December 2013, the ACCC released ‘Dealing with debt collectors: Your rights and responsibilities’, a guide that helps consumers in trouble with debt understand their options and how to deal with debt collectors and creditors.

In July 2014, the ACCC and ASIC released updated guidelines for debt collection firms regarding their contact with consumers and compliance with the law. The guidelines encourage debt collectors to be flexible, fair and realistic and to recognise debtors who are vulnerable. The industry association for debt buyers, the Australian Collectors & Debt Buyers Association, required its members to accept these guidelines in March 2016.

In 2015, the ACCC released a report into the Australian debt collection industry.

Both the ACCC and ASIC are responsible for consumer protection in the debt collection industry. The two agencies work closely and in this case ASIC delegated its powers to the ACCC to pursue this action.

Why rents, not property prices, are best to assess housing supply and need-driven demand

From The Conversation.

If property prices are rising, it is commonly assumed we must be facing a shortage of supply relative to demand. So if we’re ever going to reduce housing affordability problems, we’re simply going to have to build our way out of it. After all, as anyone who’s sat in an introductory economics class would tell you, basic economics is sufficient to at least suggest that if prices are rising in the long term, then supply must be lagging behind demand.

It’s true the housing market is largely subject to the forces of supply and demand. The deficiency of this argument lies, not so much in any perceived cracks in the supply-demand framework taught in Economics 101, but in the fact that the appropriate “price” indicator is not property prices. It’s rent.

What’s the ‘price’ of housing?

The problem with relying on rising property prices as a “price” signal of a supply shortage is that the dwelling an owner-occupier buys is both a consumption and an investment good. It offers a place to live as well as an asset in which the owner invests a substantial part of their wealth. Hence, property prices are at best a murky indicator of the balance of supply and demand for housing as a home to live in and an asset to own.

It is well established in the housing economics literature that the “price” signal for the adequacy of supply relative to demand for housing services is rent. Rent reflects the cost of consuming housing or, to put it another way, the cost of living in a home. So if housing supply is lagging behind demand for housing as a place to live in, we should expect to see rents rise.

Are rents keeping pace with property prices?

Property prices have clearly surged over the long term in Australia, as the chart below shows.

The Residential Property Price Index (RPPI), adjusted for inflation and averaged across all capital cities, climbed by nearly 30% from 2008-18. Property prices in Sydney and Melbourne, where the real RPPI surged by 54% and 43% respectively, largely drove this average increase.

But housing economics principles tell us this can only be attributed to a supply shortage if rents have also soared.

It turns out real rents have remained relatively flat in most capital cities over the last decade. The chart below shows the real weekly rent of three-bedroom houses across all capital cities over the past decade. The weighted average has shifted upwards by a mere 10%, from $389 to $429.

For two-bedroom units, the average real weekly rent has also shifted slightly from $393 to $446. That’s a mild 13% increase over a decade.

The real rent increases have been relatively minor compared to the nearly 30% surge in real RPPI across all capital cities. There are again some differences between cities, but only Sydney had a noticeable increase in real rents. This still lagged behind the spike in real RPPI in the city.

Dealing with the crux of the affordability crisis

Overall, rent increases are clearly not keeping pace with soaring property prices in all major capital cities in Australia. So claims that a housing shortage is the principal cause of a lack of affordable housing are unfounded. Supply-side solutions, while important, will need to be targeted directly at low-income groups who find it difficult to compete in private rental markets to meet housing needs.

On the other hand, successive governments have offered preferential tax treatments of housing assets. These have encouraged a significant build-up of wealth in housing assets.

Some of these favourable tax advantages have undoubtedly been capitalised into rising property prices. That has made it harder and harder for renters to break into the home ownership market.

These are structural problems embedded within our tax policy settings. Hence, their impacts on house prices will not magically disappear any time soon unless policymakers are willing to undertake meaningful tax reform that shifts the emphasis away from treating housing as a commodity back to affordable housing as a fundamental right of all Australians.

Authors: Rachel Ong, Professor of Economics, School of Economics and Finance, Curtin University

The Two Sides Of The Household Debt Issue

Michael Pascoe has penned an article in the New Daily, which attempts to bring some balance to the discussion of the severity of household debt in Australia.

“there are no guarantees and household debt levels do indeed need watching, but it’s not as simple an Armageddon as the scaremongers would like you to think”.

Good on him, for not just following the herd on this one. Because the debt footprint is more complex than some would like to admit.

Averaging data tells us very little. For example the RBA chart showing 190 debt to income includes all households, including those without debt, so the ratio is higher for those with big debts.

Second, you have to look at individual households and their finances. This is of course what our surveys do, alongside details of their overall assets, and net worth.

And yes, many are doing just fine (even if much of those assets are in inflated housing, or superannuation which is locked away).

But it is the marginal borrower who is under the gun now, even at rock bottom interest rates, and banking lending standards are a lot tighter so around 40% of households are having trouble getting a refinance. Plus we do have problems with some interest only loans, especially where the borrower is a serial leveraged investor with a significant number of properties.

Then of course there is the question of whether employment rates will rise or fall, and the quality of new jobs on offer. As a piece in The Conversation today shows:

many jobs are Job creation in the female-dominated health and education service sectors is driving both full-time and part-time employment growth in Australia.

And some of these will be less well paid.

Here is a plot for all households of TOTAL debt repayments as a ratio to income at the current time. This includes households with a mortgage, those who own property outright and those renting. Many have no debt.

For those borrowing, debt can include mortgages (both owner occupied and investor), personal loans, credit cards, and other consumer finance. This does not include business lending.

Many more have commitments which require less than 20% of household incomes (from all sources). But others have much higher debt servicing requirements, and a few are through the 100% barrier – meaning ALL income is going to repay debt. Not pretty. In some cases this is triggered by changes in personal circumstances.

If you boil it back to owner occupied mortgage borrowers, then our data suggests around 30% have little wiggle room at current levels. Even small rises would be concerning.

And at the end of the day it will be the marginal borrower who has the potential to trigger issues down the track – as happened in the USA post the GFC.

It is certainly not an all or nothing picture. Granularity is your friend.

Women are dominating employment growth, but what sort of jobs are we talking about?

From The Conversation.

One of the biggest transformations we have seen in advanced economies is the increased participation of women in the paid workforce. In recent Australian labour force trends, female participation is growing at nine times the rate of men’s. Women are dominating both full and part-time employment growth in Australia.

Why do changes in participation matter? Participation in the paid workforce – either being in employment or looking for work – is a key indicator of the overall health of any economy. It measures how much labour is being supplied relative to the population that we think should be engaged in the labour force – typically those aged 15-64 years.

Over the past three decades female participation rates in Australia have increased dramatically – from around 40% to 60% – while male participation rates have fallen from 80% to 70%.

Labour force participation rate – men and women. ABS Cat No.6202.0, Labour Force, Australia

What is driving the increase for women? Gains in educational attainment, increased support through child care for women to engage in the paid workforce, and growth in female-dominated service sectors, such as health and education, are all strong contributors to these patterns.

On the other hand, several factors are likely to be contributing to the overall decline in male participation. These include a greater propensity to engage in post-school qualifications rather than go straight into the workforce, slower growth in traditional male-dominated sectors, such as manufacturing and wholesale trade, together with increased retirement support through the aged pension and superannuation.

These patterns are likely to continue. That means male and female labour force participation rates are likely to converge in the next 10-15 years.

Women have dominated job market growth

Job creation in the female-dominated health and education service sectors is driving both full-time and part-time employment growth in Australia.

Analysis of the latest Census data reveal an increase of around 400,000 jobs in each sector. Most of these have gone to women.

Job losses and gains by sector, men and women, 2006 to 2016.

Reflecting the large growth in the health care and social assistance sector, around 170,000 more carers and aides are employed than there were ten years ago. And 150,000 of these workers are women.

Australia’s ageing and ailing population is no doubt playing a key role in this trend, with aged care and disability workers falling within this occupation category. This category also includes childcare workers.

The number of health professionals has also increased substantially – by around 150,000 workers in the ten years to 2016. Again, the majority of these extra workers are women.

Top ten growth occupations (volume), 2006 to 2016. Author's calculations from Census Tablebuilder

However, the way in which men and women engage in the paid labour force is very different. Women continue to dominate caring responsibilities and hence the part-time workforce. They typically use this employment arrangement as a means to balance work and family.

But we are seeing some changes on this front too. The rate of part-time employment is growing faster for men than for women. Male part-time work increased almost fourfold from 5% to 18% in the last four decades.

And both men and women are more likely to cite a preference for part-time work as the main reason for working part-time than they were ten years ago.

Where is the labour market headed?

The strength of the Australian labour market is currently founded in service sectors that are generally dominated by women.

This pattern will continue for the foreseeable future and beyond. Demand for “caring” occupations is unlikely to subside and automation is unlikely to produce any substantive substitute. Mining and construction booms may come and go, but these caring jobs are here to stay.

Many of these jobs are low-paying, however. This means that while we’re creating the jobs that are needed, we may not be assigning the appropriate value.

And while the future of work for the most part appears to be more “female” than “male”, this doesn’t necessarily mean men are unable to access these jobs, nor does it mean women are faring better overall in the labour market than men.

Author: Rebecca Cassells Associate Professor, Bankwest Curtin Economics Centre, Curtin University

Rentals Under The Microscope (Part 1)

We have had a number of people asking for some analysis of the rental sector, (including on our recent Live Event, which by the way is still available to watch) as well as in the comments on the channel. So today we take a look, using data from our household surveys, and other sources. This is part one of our latest series.

And by the way, if you value the content we produce please do consider joining our Patreon programme, where you can support our ability to continue to make great content.

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To start with, across our surveys, there are 31% of households owning property mortgage free, 28% who have owner occupied property with a mortgage, and 39% of households renting. In fact, in recent years the proportion of households renting has been rising, and faster than the mortgaged sector, which itself is growing.

Looking at average household incomes across those who are owners and those who are renting, it is striking that relatively more households with an income below $100,000 are renting, whereas higher up the income ranges, more are owners. So income is one element which drives property choices, perhaps no surprise there.

Turning specifically to the rental sector, we can look at household income and expenditure, just as we do with mortgage stress. Where expenses, including rental payments are lower than incomes, we classify these households as in severe rental stress. Where income and expenditure is borderline, they are in stress. And here’s the thing. 34% of renters are in stress and an additional 6% are in severe stress, meaning that close to 40% of those renting are living in financial stress, combined. This is compared with 30% of those in mortgage stress. So financial stress is more widespread among renters.

We can take the analysis further by looking at the relative stress distribution by age bands. While stress appears across all the age groups, we find that the bulk of households in severe stress are aged 60 or more. We also see a significant concentration of financial stress more generally here, as well as in those aged 30-39, where we see many young growing families are also under the gun.

Looking across the states, we find that the state with the most stress is NSW, where just 46% of renters have no financial stress, compared with nearly 80% in Tasmania. In addition, we find that 14% of renters in NSW are in severe stress, compared with 5% in VIC and 3% in QLD. This can be directly traced to the average property value, and rental payments, which are highest in NSW.

Now let’s flip the view to those providing rentals, by looking at investment property owners. We are able to calculate the gross rental yield and net rental yield, the latter after accounting for the costs of managing the property, repairs, etc. as well as repayments on the mortgage. On average, net rental yields are highest in ACT, TAS and NT, whereas those in VIC are most likely to be under water – in fact many owners, according to our surveys have not even tried to calculate these returns, preferring to look at the capital appreciation, and after tax position. We calculate our returns before any tax breaks, on a cash flow basis.

This means that many investors are NOT covering the full costs of owning a rental property, and of course if capital values fall in real terms, then this becomes a significant drain on household finances, and that’s before the upcoming changes in interest only loans, as they are switched to higher cost principal and interest loans.

So standing back, we can see the on one side renters are under pressure, and on the other so are many property investors, who despite owning the property are also feeling the pinch. This does not bode well for the future health of the market. In summary we are looking at a major policy failure.

Next time we will go further in to the sector.

Why the war on poverty in the US isn’t over, in 4 charts

From The US Conversation.

On July 12, President Trump’s Council of Economic Advisers concluded that America’s long-running war on poverty “is largely over and a success.”

While the council’s conclusion makes for a dramatic headline, it simply does not align with the reality of poverty in the U.S. today.

What is poverty?

The U.S. federal poverty line is set annually by the federal government, based on algorithms developed in the 1960s and adjusted for inflation.

In 2018, the federal poverty line for a family of four in the contiguous U.S. is $25,100. It’s somewhat higher in Hawaii ($28,870) and Alaska ($31,380).

However, the technical weaknesses of the federal poverty line are well known to researchers and those who work with populations in poverty. This measure considers only earned income, ignoring the costs of living for different family types, receipt of public benefits, as well as the value of assets, such as a home or car, held by families.

Most references to poverty refer to either the poverty rate or the number of people in poverty. The poverty rate is essentially the percentage of all people or a subcategory who have income below the poverty line. This allows researchers to compare over time even as the U.S. population increases. For example, 12.7 percent of the U.S. population was in poverty in 2016. The rate has hovered around 12 to 15 percent since 1980.

Other discussions reference the raw number of people in poverty. In 2016, 40.6 million people lived in poverty, up from approximately 25 million in 1980. The number of people in poverty gives a sense of the scale of the concern and helps to inform the design of relevant policies.

Both of these indicators fluctuate with the economy. For example, the poverty population grew by 10 million during the 2007 to 2009 recession, equating to an increase of approximately 4 percent in the rate.

The rates of poverty over time by age show that, while poverty among seniors has declined, child poverty and poverty among adults have changed little over the last 40 years. Today, the poverty rate among children is nearly double the rate experienced by seniors.

The July report by the Council of Economic Advisers uses an alternate way of measuring poverty, based on households’ consumption of goods, to conclude that poverty has dramatically declined. Though this method may be useful for underpinning an argument for broader work requirements for the poor, the much more favorable picture it paints simply does not reconcile with the observed reality in the U.S. today.

Deserving versus undeserving poor

Political discussions about poverty often include underlying assumptions about whether those living in poverty are responsible for their own circumstances.

One perspective identifies certain categories of poor as more deserving of assistance because they are victims of circumstance. These include children, widows, the disabled and workers who have lost a job. Other individuals who are perceived to have made bad choices – such as school dropouts, people with criminal backgrounds or drug users – may be less likely to receive sympathetic treatment in these discussions. The path to poverty is important, but likely shows that most individuals suffered earlier circumstances that contributed to the outcome.

Among the working-age poor in the U.S. (ages 18 to 64), approximately 35 percent are not eligible to work, meaning they are disabled, a student or retired. Among the poor who are eligible to work, fully 63 percent do so.

Earlier this year, lawmakers in the House proposed new work requirements for recipients of SNAP and Medicaid. But this ignores the reality that a large number of the poor who are eligible for benefits are children and would not be expected to work. Sixty-three percent of adults who are eligible for benefits can work and already do. The issue here is more so that these individuals cannot secure and retain full-time employment of a wage sufficient to lift their family from poverty.

A culture of poverty?

The circumstances of poverty limit the odds that someone can escape poverty. Individuals living in poverty or belonging to families in poverty often work but still have limited resources – in regard to employment, housing, health care, education and child care, just to name a few domains.

If a family is surrounded by other households also struggling with poverty, this further exacerbates their circumstances. It’s akin to being a weak swimmer in a pool surrounded by other weak swimmers. The potential for assistance and benefit from those around you further limits your chances of success.

Even the basic reality of family structure feeds into the consideration of poverty. Twenty-seven percent of female-headed households with no other adult live in poverty, dramatically higher than the 5 percent poverty rate of married couple families.

Poverty exists in all areas of the country, but the population living in high-poverty neighborhoods has increased over time. Following the Great Recession, some 14 million people lived in extremely poor neighborhoods, more than twice as many as had done so in 2000. Some areas saw some dramatic growth in their poor populations living in high-poverty areas.

Given the complexity of poverty as a civic issue, decision makers should understand the full range of evidence about the circumstances of the poor. This is especially important before undertaking a major change to the social safety net such as broad-based work requirements for those receiving non-cash assistance.

Author: Robert L. Fischer Co-Director of the Center on Urban Poverty and Community Development, Case Western Reserve University

Changes In The Private Rental Sector – AHURI

AHURI is a national independent research network with an expert not-for-profit research management company, AHURI Limited, at its centre. AHURI undertakes evidence-based policy development on a range of priority policy topics that are of interest to our audience groups, including housing and labour markets, urban growth and renewal, planning and infrastructure development, housing supply and affordability, homelessness, economic productivity, and social cohesion and wellbeing.

The have just published a report – “Navigating a changing private rental
sector: opportunities and challenges for low-income renters“, utilising data from both HILDA, and other sources and using Clapham’s (2005) ‘housing pathways’ approach. As well as presenting data they also recommend a number of policy reforms.

This included HILDA data from 2015, which whilst dated now, highlights the issues in the low-income renter sector.

They say that the Private Rental Sector:

… has been expanding and transforming in a number of ways over the past decade as renters and investors/landlords adapt to rising house prices and rents, particularly in Sydney and Melbourne markets. At the low end of the sector, key developments have been the entry and expansion of the role of online platforms and community agency intermediaries in facilitating access to and tenancy management of private rental rooms and dwellings. The profile of renters is becoming more diverse as long-term renting continues to increase across all income groups, generating high competition for the limited dwellings that are affordable on a low income. The profile of investors/landlords and the lease lengths they choose to set for rooms and dwellings is also more varied.

They find that:

The accessibility and affordability of dwellings at the low end of the PRS undoubtedly remains the central issue for vulnerable groups of renters. In seeking to understand how low-income renters navigate changing PRS institutions, we first examine their individual and household income profile, drawing on existing HILDA and Journeys Home data. This background analysis reveals the importance of understanding the connection between individual and household income for low-income renters, beyond existing measures of affordability stress at the household level, which can conceal the difficulties faced by individuals as they navigate access to the PRS. Factors to be considered include the interim solutions individuals may seek when locked out of formal rental pathways (such as more informal or supported pathways into the PRS), and the consequences of persistently low individual and household incomes over time.

Applying an individual–household income typology within the HILDA data we find that:

more than half (55%) of low-income (Q1–Q2) individuals in a low-income (Q1–Q2) household who are renting privately remain in this household group over a five-year period

this group of private renters is most likely to make a transition into social housing and is less likely to move, but when they do move it is typically ‘forced’ (i.e. their property is no longer available to rent)

low-income renters are least able, in terms of personal savings, to afford the upfront and relocation costs of a move.
In examining formal, informal and supported rental arrangements of individuals who have experience of or are at risk of homelessness, drawing on the Journeys Home longitudinal survey, we find the following.

Individuals and households in the lowest 20 per cent of the income distribution (Q1) are least likely to rent in the formal PRS, with over 70 per cent reporting a lack of affordable housing as an obstacle to finding more secure housing. The main type of living arrangements for those with Q1 individual (40%) and Q1 household (31%) incomes was renting from friends and family.

Among Q1 individuals renting in the formal PRS, the main transition between consecutive waves of the HILDA data was to move into an informal arrangement where they rent privately from friends and family (24%).

Transitions in individual income groups showed that 70 per cent of Q1 individuals and 74 per cent of Q2 individuals remained in the same income group over the data collection period (2011–14).

They state:

The formal institutions within the PRS designed to overcome barriers to accessing and managing tenancies for low-income renters have not kept up with the pace of change occurring within informal rental living arrangements. Any reforms to existing formal institutions intended to deliver better outcomes for private renters on a low-income must grapple with an increasingly complex and fragmented PRS. There is a clear need for centralised forms of assistance delivered via the statutory income system of support, but also a need for more devolved initiatives that can target informal and supported pathways through state and local government tenancy regulation and policy intervention. Within this framing, policy reform should take into account the following:

Centralised reforms of rental housing assistance and regulation must seek to redress the growing imbalance in horizontal equity (treating those with similar incomes and wealth the same) and vertical equity (reducing the divide between those at the top and bottom of the income and wealth distribution). This includes reviewing the adequacy of wages, statutory incomes and rental assistance in view of rising costs of living.

There is clear evidence that the informal pathway into the PRS is expanding through the reach of online platforms to exploit and disrupt formal paths to access and management. Regulation of informal rental practices, particularly in the context of online intermediaries and the growth of room rentals, must ensure that supply and access to urgent housing is not impeded, whilst also ensuring that tenants have adequate recourse to live in safe and secure rental housing.

As the community sector expands its focus, there is growing capacity to establish more formal and enduring institutions at the low end of the PRS via a supported pathway delivered through an expanded community housing and welfare sector, in a similar manner to the social rental agencies developed in Belgium (see, for example, Parkinson and Parsell 2018). However, existing policy assumptions surrounding time-limited supported housing in the PRS, including financial subsidies through head-leasing initiatives, are highly problematic for those whose individual and household incomes remain low over time. A
AHURI Final Report No. 302 87
viable supported pathway into the PRS will require appropriate incentives for landlords to set their rents to be comparable with social housing rentals.

The emergence of different types of landlords (offering properties and rooms on a short- through to long-term basis), combined with the expanded reach of online platforms, provides opportunities for policy makers to assume a more direct role in better matching landlords with tenants. This includes targeting of landlord financial and taxation incentives to encourage supply of a mix of leasing options, dwelling types and locations at the low end of the market.

The findings and directions outlined in this report, together with those from an international and national institutional review of sector change and innovation, will inform the broader Inquiry report on The future of the private rental sector to provide a more detailed blueprint for institutional reform.

No presents, please: how gift cards initiate children into the world of ‘credit’

From The Conversation.

Western children have more toys, games and possessions than ever before. And Australia has one of the highest rates of average spending per child on toys. Faced with a glut of children’s toys at home, more and more parents are presenting gift cards in lieu of presents.

Gift cards neatly bridge the risk between giving a tangible present, which might be returned or exchanged, and giving cash, which some cultures consider impersonal.

Children, and often very young children, are themselves asking for gift cards so they can choose their own presents. However, children process information very differently from adults. As a result, giving gift cards to children has implications for how they make consumer-related decisions and how they spend the “credit” a gift card provides.

How do young children decide on a purchase?

Children have a limited ability to process certain types of information. They tend to pay more attention to visual and auditory stimuli rather than textual information. At a very basic level, children are more easily influenced by colour and movement.

In terms of the developmental stages identified by Jean Piaget, children do not reach “formal operations” until around 11 or 12 years of age. Only then do they develop more abstract thinking and the ability to apply logic to all types of problems, including those inherent in purchase decisions and financial transactions. It is generally accepted that children are not “consumer literate” until they reach this stage of development.

There is evidence that children, particularly those under the age of seven, have a limited ability to detect the advertising content in a message. Indeed, they may regard an advertisement as just another type of program. They see advertisements as a type of information service to help people know what to buy and where to buy it.

It’s important to note that many children may not be able to understand the persuasive intent of advertising. To add to the problem, animated and other characters in children’s movies are increasingly merchandised as toys. An array of products, including foods and confectionery, is also being “placed” in movie content.

Depending on their age, children might not be able to discern the selling strategies being used here, nor appreciate that such content is not passive.

Gift cards represent ‘credit’

There are hundreds of different types of gift cards for use in retail stores or online. Popular gift cards for children can be exchanged for music and online games.

Australians spend around A$2.5 billion a year on gift cards. A gift card comes with responsibility for managing the “credit” that it bestows, and for children this is an important consideration. However, almost one-third of consumers (including children) who are gifted a card never actually exchange it for goods or services.

Young children also face the dilemma of overspending or underspending when they redeem the card. Overspending happens when the child selects a product that exceeds the value of the gift card and has to negotiate with their parents or carer to make up the difference, or decide on a different purchase. Conversely, they might select an item that costs less than the amount of the card, and not understand terms and conditions such as non-transference of value or non-cash redemption.

These scenarios can be problematic for adults, let alone children. Research shows that “disclaimers” are not well understood by children. This has implications for how effectively children can manage the notion of “credit”.

Another consideration is the rise in digital gift cards and e-vouchers. Although many young children are digitally literate, the digital format may present additional challenges for young consumers.

Because digital cards are sent electronically to the recipient, or in the case of a young child to their parents, in this situation children do not receive any sort of tangible gift. What impact does this have on nurturing gratitude and appreciation in young children?

Dear Santa

Researchers in the UK looked at the content of children’s letters to Santa and found a link between the amount and type of advertising they were exposed to, as well as their age. Children exposed to more advertising were more likely to include requests for branded items than children who watched less advertising.

Will we see more letters to Santa asking for gift cards? Probably. These cards continue to grow in popularity as gifts for young people, particularly at Christmas.

An Australian Youth Forum survey found some younger Australians are using gift cards in lieu of credit cards. The number of children given access to their parents’ credit cards is also growing. Children as young as eight and nine are being authorised to use credit cards. These young consumers might often not know the difference between a credit card and gift card.

Children do not have the cognitive skills to evaluate the marketing messages for toys and other products with the same scepticism as adults. Nor do they have the maturity to make many of the decisions required for spending the “credit” from gift cards. This makes them a particularly vulnerable group.

Authors: Louise Grimmer Lecturer in Marketing, Tasmanian School of Business and Economics, University of Tasmania; Martin Grimmer Professor of Marketing, Tasmanian School of Business and Economics, University of Tasmania