So-called market cooling not trickled down to housing affordability for emergency and essential services

Sydney’s fast-paced property market is pricing the city’s key workers out of metropolitan areas, threatening the viability of the key services they provide to our city.

This was the finding of a wide-ranging study, Key Worker Housing Affordability in Sydney, commissioned by member-owned Teachers Mutual Bank, Firefighters Mutual Bank and Police Bank, and undertaken by the University of Sydney’s Urban Housing Lab led by Professor Nicole Gurran and Professor Peter Phibbs.  

The report detailed declining levels of housing affordability across greater and metropolitan Sydney for key workers - including teachers, firefighters, nurses, police, ambulance drivers and paramedics.

The report identifies five key priorities for policy makers and private sector stakeholders to consider, which include:  

• Reducing the deposit gap: Proposes a shared equity model allowing key workers to buy up to 75 percent of the property’s value, reducing deposit requirements to between five and 10 percent. 
• Securing alternative development and financing models: Proposes ‘deliberative development’ models, an alternative to conventional multi-unit development models which could achieve prices which are 10-12 percent lower than the current market.
• Establishing alternative tenure arrangements (Community Land Trust or ‘CLT’ model): Proposes that homes are purchased with a conventional mortgage and/or the land component is rented at a marginal rate e.g. two percent of ‘unimproved’ capital value. A CLT model in NSW could reduce purchase costs by 25 percent.
• Reducing development and or construction costs and passing savings on to eligible purchasers: Smarter designs, construction material and processes could reduce costs by 25-35 percent, equating to savings of $75,000 to $100,000 for 2-3-bedroom units or townhouses.
• Reducing land costs (inclusionary planning): Mandating that 20 percent of dwellings in all major new housing developments are affordable to moderate income earners, including key workers, could deliver 6,000 to 7,000 affordable ‘start-up’ homes per year in Sydney. 

The report found that in the 10 years leading up to 2016, key areas in Sydney lost up to 20 percent of teachers, nurses, policy and emergency service workers to outer and regional areas.

Sydney’s Inner South West (-14.6%), Inner West (-11.3%), Eastern suburbs (-15.2%), Ryde (-14.2%) and Parramatta (-21.4%) all experienced a net loss of key workers, while areas including the Illawarra (+10.5%), Southern Highlands (+17%) and Hunter Valley (+13.6%) all had net gains.

The nature of this group’s shift work combined with living a distance away in areas with unsuitable public transport meant 77.4 percent of key workers drove their private motor vehicle to work in 2016, compared with just over 43 percent for the general population. 

Only five percent of key workers used public transport to get to work, compared with 12.7 percent for the general population. 

Despite reports of Sydney’s housing market cooling, Teachers Mutual Bank CEO Steve James said key workers’ hip pockets are still under serious pressure.

“Any so-called cooling of the housing market has not trickled down to prices in the range that key workers such as teachers, ambulance drivers, firefighters, paramedics and police officers can afford. It would have to be the Ice Age for any such cooling to fit their salary and household budget,” he said.

“For teachers who are earning under six figure incomes, a 10 percent deposit on a $1.5 million house is not feasible. While a slight drop in prices in some areas can be factored in, it’s a drop in the ocean for the key workers who protect and support our city. They still can’t afford to live within 100km of where they work.”

Mr James added that the pressure this situation puts on people already working in high pressure jobs is unfair, whether they’re looking to rent or buy.

“Longer commute times, especially in private vehicles, lead to significantly higher financial costs and serious social consequences for key workers and their families, disrupting work life balance and impacting their lifestyle,” he said.

The report also looks at urgent solutions that can be implemented to help key workers buy their own homes both close to their place of work and their established support networks including family, friends, and the wider community including local groups, clubs, and schools. 

The report reveals that between 2003 and 2016, the median price of established homes in Sydney more than doubled from $400,000 to around $900,000 beyond the reach of many key workers, especially those who are single. Soaring rents have heightened the crisis, making a 20 percent home loan deposit out of reach for many key workers.

For instance, a single key worker eyeing a property in Sydney’s inner ring at the 2016 median price of just over $1 million would need 13 years to save for a deposit. This is a sharp increase from the 8.4 years needed to save a 20 percent deposit in 2006. 

“For a key worker, finding somewhere affordable to live in reasonable proximity to their work is becoming impossible for those not already in the property market.

“The report has found that the closest local government area with an affordable median rental price for an entry level enrolled nurse is Cessnock in the Hunter Valley. That’s about 150km from any hospital in Sydney city, making it a 300km round trip per day. 

“Without urgent and genuine intervention on the part of policy makers and other institutions, a growing number of key workers in NSW and Sydney may never be able to afford to own their own home within reasonable distance of Sydney,” said Mr James.

Police Bank CEO Tony Taylor said that the five key measures identified in the report to improve housing affordability for key workers were worth serious consideration.

“We could see more key workers pushed further out of the Sydney metropolitan area, the effects of  which will be felt by each and every one of us."

“Addressing these key barriers to housing affordability could deliver residential housing products in metropolitan Sydney as much as 20 percent cheaper than today’s prices, and with vastly more manageable deposits for key workers looking to buy a home,” he said.