Housing deprivation or financial debt: betwixt the devil and the deep blue sea?

Houses are not merely homes, says AHRC speaker Ashton De Silva, and the level of wellbeing of a household unit depends on more than just access to a safe and affordable physical structure.


The chief aim of any government is to optimise the wellbeing of its citizens. Previous research by the OECD, World Bank and other notable institutions clearly show that an individual’s wellbeing is determined, (in part) by their housing as well as personal finances.  For example, that households require access to particular goods including washing machines, separate beds for each child and televisions for them not be considered deprived.

These items distinguish (in part) a home from the house. Importantly, low income earners and welfare recipients have limited capacity to secure these items. In particular, acquisition costs of such items typically exceed their weekly/fortnightly cashflow many times over. Further, low income and welfare dependent households typically have very low savings and therefore are typically unable to absorb intermittent expenses of this nature.

In addition, previous research also shows that failure to secure housing essentials can lead to deprivation.It is therefore important to consider how such households might source these items in the pursuit of realising a home. A growing phenomena facilitating access to these items is the use of Alternative Financial Services.

This research focuses on a particular aspect of the housing and personal finance nexus.  It is well known that individuals on welfare or receiving precarious income streams often have limited amounts of savings.  Therefore, if a housing essential is required they generally must seek some form of credit, this is typically from an Alternative Financial Service (AFS) provider as standard options such as Bank credit are not accessible.  AFS providers take on many forms including Family and Friends, Small Amount Credit lenders (sometimes (incorrectly) referred to as payday lenders), Not for Profits (offering No Interest Loans) and Consumer Lease Providers.

Commercial alternatives are typically relatively expensive and have come under increasing amounts of public scrutiny and government regulation.  Interestingly and importantly some evidence suggests that individuals are using these commercial forms of credit to secure housing essentials.  This does not seem to be acknowledged in current policy discussions.  Further, it also suggests that some individuals may be choosing to carry financial debt rather than endure housing deprivation.

Legislative changes are currently before the Federal parliament. I believe, without further information, proposed regulatory changes run a significant risk of delivering (unintendedly) greater forms of housing hardship. In short, a more nuanced understanding of why individuals seek these forms of credit (in place of no interest alternatives and hardship provisions) as well as what they are secure for the individual is necessary.

Further, assuming individuals are fully informed and they make less mistakes in maximising their own wellbeing than third parties such as the government (ceritus paribus) they are better placed to choose between debt and housing deprivation. Therefore, any form of regulation will need to be carefully constructed to maximise competition and efficiency of the sector.

Ashton De Silva will be speaking at the Australasian Housing Researchers Conference 2017 (15th to 17th February) hosted by RMIT University, Melbourne.

  • Header image: Houses are not merey homes. The level of wellbeing of a household unit depends on more than just access to a safe and affordable physical structure and this needs to be addressed