What's happening to the Great Australian Dream?

Updated

Should you sacrifice your lifestyle to buy and build? What's wrong with renting forever? Are there smarter ways to win the housing game — or should you just refuse to play?

Getting in: The young builders

Two years ago, 27-year-old Matt Maclure and 30-year-old Nicki Ellis were each living in rented share houses in Melbourne's inner north, and didn't know each other.

Now, after meeting through a dating app, they are planning a wedding and have just built their own four-bedroom house on the city's rapidly expanding western edge.

Drive 28 kilometres west from the CBD, past Altona and Laverton, and you reach the suburb of Truganina.

Without traffic it's a quick half-hour trip, but with the route taking you over the West Gate Bridge, there's the potential for a gridlocked peak-hour commute.

Out here is where the couple found an emerging housing estate called Allura — so new that Google Maps hasn't quite caught up. It still shows sun-bleached paddocks and open space.

En route, you still pass the odd dilapidated shed, corrugated iron askew. A weak parting nod to the area's previous incarnation.

To cruise along these cul-de-sacs lined with house frames and portaloos is to witness the birth of modern suburbia.

Forget the quarter-acre block — the soon-to-be Maclures' land is a cosy 392 square metres. The houses on each side are so close you could virtually pass a cup of sugar. There is no backyard to speak of, more a narrow strip of grass between the back door and the back fence.

"We did wrestle with that a little," says Matt. "But as we have ovals across the road, it became a non-issue. Ours is actually on the bigger side of most of the blocks on our street."

The land cost $311,000, and the house $243,500 plus $7,000 stamp duty. A $10,000 first home buyer grant helped.

"We originally looked in William's Landing because Nicki's parents are in Deer Park which isn't far away, so ideally we'd like to be close to them. William's Landing has a few more facilities, the metro train station and supermarket. But the land was $150,000 more expensive and Truganina's five minutes away. So for the sake of five minutes we thought we'd go here and save $150,000."

Remarkably, the couple saved a deposit for the house and land in the space of a year by moving in with Nicki's parents and sticking to a strict budget.

"We moved in to house-sit and basically didn't leave. To rent and save is almost impossible," says Matt.

"We gave ourselves pocket money each week and didn't spend frivolously, bought only what we really needed, like food and drinks. We were living off $60–80 a week each. It was really hard."

Cramping their style for a year meant the majority of their wages — from Matt's sport industry jobs and Nicki's work at a major bank — was able to go towards the house and land.

Move-in day was a surreal moment.

"It's just been a lot of stress and a lot of heartache and a lot of angst for a long time," says Nicki.

"And now to finally be in our own home it's a weird feeling. I can't really believe it, to be honest. I never thought it'd be on the cards because you do hear it's so unaffordable."

There were multiple roadblocks that had to be overcome. The lowest point in the process was when a mortgage broker told the couple not to come back until they had $50,000.

"Nicki came home crying, saying, 'We're never going to get a house'."

"We didn't have anything saved up at that point," she recalls. "And to be told you don't have a shot…"

"…was pretty heartbreaking," finishes Matt, the pair already completing each other's sentences like the old married couple they plan to one day be in this same house.

That mortgage broker got the flick and they found one with a can-do approach.

"You almost have to project manage the whole thing," says Nicki.

"It's like, we're not going to give up. So we dumped him and got a different mortgage broker who was actually really helpful and made it affordable for us."

"As first home buyers we haven't been through this before," says Matt. "So all the documents, loans and mortgages kind of went over our heads. It was just finding the right bank, finding the right loan, finding people who actually want to help you."

He has one key piece of advice for others wanting to replicate their success:

"If you have the option of moving back home, do it. It's the easiest way to save.

"Everyone loves living out of home and the independence, but if you do want the long term dream of a home, it's worth it."

Michael Yardney — the CEO of Metropole, a national company of property strategists and buyer's agents — says there are 9.7 million properties in Australia, and 7 million homeowners.

He commends Matt and Nicki's approach to joining them.

"Those of us who want property to be cheaper today, so we can get into the market, don't want property to remain cheaper forever because we want to see the value of our investments go up," Yardney says.

"Is there a way of making housing more affordable that isn't going to affect our house values? No, otherwise people much cleverer than me would have come up with it."

He says it's a simple equation of supply and demand: a swelling, cashed up population in cities like Sydney and Melbourne, coupled with the fact that planning codes mean we're not producing enough of the kind of properties people want is pushing prices up.

Rather than lowering interest rates or boosting grants to first home buyers, Yardney suggests changing expectations around home ownership.

"If you lived in New York, London or Paris you wouldn't expect to buy a home in your 20s or 30s. Young families shouldn't expect to live in the inner ring in modern accommodation with two spare bedrooms, because that's not how people started before."

One experienced Melbourne real estate agent concurs. "My daughter said to me, 'Dad, how am I going to afford a house?' I said to her, 'You expect to live in the Taj Mahal for your first home.'

"Recently I said to some parents who were disparaging the home their child was contemplating buying, 'Do you remember your first home?' My first home was falling down around my ears.

"I'm now on home number four or five. It's taken a lot of buying, holding and selling."

So how do you get into the market for the first time?

"What people have to do is to learn to spend less than they earn," says Yardney. "For many people it's just getting a budget and sticking to it.

"Make your first home a stepping stone for the future. You're not going to be able to afford your dream home or anything remotely like that."

"Just buy somewhere that's going to appreciate. Start small. Maybe it's only a one bedroom apartment rather than a house. Maybe it's something older that needs some work to it - you can do it in due course.

"Look for a suburb that's gentrifying, go to the next suburb that may not be as trendy but that's going to get the ripple effect.

"Buy what you can, today."

Stuck: The long-term renters

James Hullick and Charlotte Bolcskey love where they live in Melbourne's inner north.

For 14 years their life together has unfolded here.

They can walk past the pub on the corner of Brunswick and Gertrude streets where they first met, seeing a mutual friend's band.

"He was very kind and funny and he wasn't trying to be cool," remembers Charlotte.

"I was … but it didn't come across," laughs James.

There are the share houses where Charlotte remembers paying $80 a week for rooms in Fitzroy and Carlton.

Once the kids came along there was mothers' group and kinder and a deepening sense of community.

These days, when you go to the shops the people you bump into are your neighbours and friends.

There's just one thing missing: their own piece of the neighbourhood.

"I thought we would own our own home at this life stage," says Charlotte.

"We just don't have a deposit and house prices are so high there's just no way we can save hundreds of thousands of dollars to get a deposit together for a home large enough for a family.

"It's not a decision. It's just how our life is."

When they met, Charlotte was working at a publishing house where the pay wasn't great, and James was studying. Money was tight.

Once James had his education behind him and was making good money the couple had become parents and needed a larger space.

At the same time house prices had gone through the roof. There were childcare fees to pay.

And so they were stuck. Living in the suburb they loved, but locked in a perpetual cycle of renting.

And that's how it remains.

Both now aged 44, they're earning a double income, and paying as much rent as they'd need to service a mortgage — but unable to save a deposit.

"For a modern townhouse in this area it'd be over a million and we'd need quite a hefty deposit," says Charlotte.

They're still trying to get on top of the expenses of moving last year — including the removalist fees, the overlapping rental payments, and the loss of freelance work.

"That wiped out some savings we had, actually. If you're a family with a high rent, it's brutal."

According to the Tenants Union of Victoria , the median household rent for the state's 1.5 million renters has increased by 75 per cent over the past decade, while the median household income has gone up by just 38 per cent.

"It can be particularly difficult for families with children and the elderly to live in the inner to mid suburban areas," says spokesman Devon LaSalle.

"Quite often these tenants need to live in these areas due to job or business commitments, family obligations or to simply be closer to schools, medical facilities and other things that people need to live."

Most of Charlotte and James' friends own, but they don't know anyone who's done it by saving a deposit — it's been family money.

The couple's split-level townhouse is beautifully furnished with mid-century modern tables and chairs draped with greenery — collecting rare and exotic indoor plants is a hobby of Charlotte's.

Books fill shelves from the 50s, individual pieces hunted from secondhand stores.

The sideboard that used to be Charlotte's grandmother's. The coffee table bought from a ceramicist on Facebook.

None of it has a remotely temporary feel. This is a lovingly crafted home out of the pages of a magazine.

But there's constant anxiety over the ever-present threat of a vacate notice.

Inspections and condition reports Charlotte finds an indignity.

"Being an adult and having someone come around to look at your house and check that you're living properly — I mean we're adults but we're being treated like children."

And she's conscious of a social stigma in the heavily gentrified inner suburbs.

"In Europe a large proportion of the population do rent and that's totally normal. People here still have that idea that renting is just for no hopers and young people, and we must be no hopers because we're not young anymore."

Yardney has a harsh read of the couple's situation.

"The right time to get in to the market is not when you've got two kids and two sets of school fees.

"The answer is not everyone's going to be able to own a nice home. They may have to move Berwick or Pakenham."

The idea of moving further out? That's a compromise James and Charlotte are determined to resist.

"Our kids have friends here and we are established, we've set down roots and we're not prepared to change schools and get another car and have to drive a long way to get anywhere," says Charlotte.

University of Technology Sydney urban housing scholar Alan Morris led a team of three researchers to conduct in-depth interviews with 60 long-term renters in Sydney and Melbourne.

He estimates four out of five private renters are doing so reluctantly.

"The effects of long term renting on wellbeing are tremendous," he says.

Morris says while in the 1990s about one fifth of Australians rented their homes from private landlords, it's now swelled to more than one quarter.

"Tens of thousands of households are constantly concerned about the possibility that their rent may be increased to an untenable level or that they may be be asked to leave."

While renting temporarily before buying is still the dominant trajectory, a growing number of Australians cannot make the transition.

At least one in three private renters are long-term private renters, who've been tenants for ten or more years. This equates to at least one in 12 households.

As hard as it is for Charlotte and James, it's even worse for low-income households.

"Middle-class households generally have the financial capacity to fairly quickly find an alternative dwelling if they're told to vacate," says Morris.

"However, for low-income households, finding another rental property can be extremely difficult and stressful especially in tight rental markets like Sydney and Melbourne."

Morris says the solution to the housing affordability crisis is three-fold.

First, there needs to be tighter regulation of the private rental sector to resolve the power imbalance between landlords and tenants and improve conditions for renters.

Second, he recommends increasing the stock of public and affordable housing.

Finally, there must be an "avid endeavour" to end the massive increases in house prices.

"It is clear that negative gearing and the capital gains tax contribute to increased prices. What is evident is that the market by itself will not resolve the problem," Morris says.

"What is required is active government intervention. Also, we need a shift in perspective. Housing needs to be viewed as a human right."

As James and Charlotte grapple with their options, they see the writing on the wall all around their neighbourhood.

The place next door just sold for $1.2 million. A decrepit house bound for demolition.

"It's the social destruction that I'm finding really difficult," says Charlotte. "By gobbling up all the property and forcing out first home buyers and younger people who are renting and people like us who are just renting, it's becoming a class issue.

"We are the renting class now. It doesn't matter if you're middle class or working class or whatever. We are now the renting class."

Opting out: The tiny houser

There are moments when Sarah Smethurst feels like the smartest, luckiest person alive.

Like when the sun is streaming through her windows and she's sitting eating the cake she's just baked on her wood-fired combustion oven.

"The thought of living in a two-bedroom brick house makes me want to cry," she laughs.

"It's a great position for lots of people but it wasn't something I wanted to do. It just doesn't appeal to me, having a big space that I fill up with stuff that I don't need that I then need a job to pay for. It just seemed like a nonsensical cycle to me."

At 28, she's the only one of her four siblings, other than her younger brother, who doesn't have a mortgage.

"They're stressed about money and they're supporting families and working hard. I think we've got this idea in our heads of what success looks like and so everyone's striving to get to that picture of success.

"It does feel strange for me to have just quit a full-time job to go part-time. People are like, 'What are you doing?' It's a bit of dissonance because I'm going backwards in some ways, I've taken a demotion.

"But in other ways it means I get to spend time, I get to relax. I get to exercise, I get to hang out with my nephews and nieces. I get to go camping whenever I want — I'm going on a seven-week road trip in a couple of weeks because I can."

The tiny house is central to this unencumbered lifestyle: there is no debt, no repayments to make.

After growing up on a farm in Gippsland, in Victoria's east, Sarah moved to the city, then went overseas for a while. She can't quite put her finger on how she ended up living in a 6.5-by-2.8m wheeled cabin, parked on the back of her sister's block in country Victoria.

For someone who'd never built anything in her life, and had been a bit of a hoarder, the do-it-yourself approach and enforced minimalism of tiny living was a leap.

A stay in a bush shack planted the seed.

A friend's dad had knocked together a temporary dwelling out of a leftover dairy and an old car port.

"It was just the most peaceful, incredible little haven that I've ever stayed at, and it had an outdoor bathtub. It was cold and you could have a hot bath under the stars."



At that time, just 12 to 18 months ago, Sarah could find next to no information about tiny houses in Australia. She'd stumbled upon the concept when browsing websites devoted to cabins and then found her way to the American tiny house movement.

In the US, it's been postulated that two groups are fuelling the movement: millennials whose college debt has put traditional home ownership out of reach and retiring baby boomers seeking affordable homes with minimal maintenance.

Here in Australia it's far more difficult to get a handle on the size and nature of the tiny house movement.

When Darren Hughes began the Tiny Houses Australia Facebook page in early 2013, he knew of only one Australian tiny house. Now he's counted more than 100 tiny house builds either underway or complete, and the page has more than 45,000 followers, 29,000 of them Australian.

But that's the tip of the iceberg, he says. "I guarantee there are hundreds more tiny houses that have been built around the country that no-one knows about — built by people who just want to do it, get on with their lives and enjoy the benefits."

A big part of the appeal of tiny living for Sarah was the sustainability ethic. And you have to be into it, she says. "I have a couple of friends who say quite openly that they love it but they wouldn't want to live in it. It's a commitment to the lifestyle, not only in terms of what you have to do but also what you can't do. I've got one cupboard for clothes, that's it. If shopping is your hobby it's not really going to work.

You have to be okay with emptying your wee in a bucket. But most people come and they say, 'I love it'."

The structure is mostly timber, the walls a painted plywood with gabled ceilings lined with pine.

"People come in here and they say it either looks like a church, or sometimes people say it looks like a boat."

Steps ascend one side to a sleeping loft where Sarah's nephew likes to perch and watch her make breakfast in the kitchen below. The bench was salvaged from the dairy farm where Sarah grew up — her father had saved it for close to 20 years — now revived with a coat of shiny aqua paint. A wood-fired combustion oven keeps the space toasty.

Sarah is still working out how to cook banana bread in it without burning the top while leaving the inside raw. Double-glazed wood-framed doors open out onto a back corner of an acre and a quarter of land that was once her grandparents', where camellias and roses still flower in an overgrown backyard made for cubby houses.

For Sarah, being connected to nature was important. Two neighbouring houses are visible, but through a screen of greenery. There's no laundry — relatives come in handy for that.

"In some ways it is very romantic. But there are nights that I get home and it's cold and dark and I don't have any wood and it takes an hour for my heater to warm up and I just want to eat dinner but I don't have a microwave.

"There are times it is really inconvenient and I think, 'What have I done? Why have I decided to do this?'

"I think sometimes my parents laugh at me because I've chosen to do things in a slower way and for me that's a big part of it as well, getting away from this convenience mindset that is often quite wasteful."

There is no outdoor bathtub — yet. The shower stall is corrugated iron. The toilet is composting and there's a nascent grey water system.

According to Darren Hughes of Tiny Houses Australia, the interest in this way of life is driven mainly by cost. "Australia is one of the most indebted countries in the world right now. Rents are at record levels and personal debt is skyrocketing.

"With the average price of an Australian home now over $695,000, many people are finding it more and more difficult to even qualify for a mortgage on an entry-level property. Australians are now realising they will likely never own a home in the current system.

"The cost of a tiny house is vastly less. If you build largely yourself it will cost you between $10,000 and say $60,000, depending on how much of the work you contract out. It will also depend on how much you focus on new materials versus using free or reclaimed or recycled materials."

If you don't have the skills or the inclination to build yourself, you can now go to one of several companies that will build you anything from a lock-up shell to a fully-finished turn key tiny house which will cost you between $50,000 and $150,000 depending on the company and the design.

Sarah's build has been a communal effort. Every board, every nail bears the memory of the friend who helped her bang it in. Borrowed tools, loaned trailers for picking up materials. Shared expertise. Sometimes, sheer grunt. Cash paid to a builder friend was "the most sensible five-grand I spent on the project". Friends would come to stay for the weekend and help lay the floor, or dig a ditch.

But there are hidden costs too - such as the $5,000 to set up power for the structure, which is entirely off-grid.

"Including all the furniture I've had to buy since moving in here, I'll probably have spent $50,000 and that's including the work to the block - which is a lot of money when I think about the fact that what I've got out of it isn't increasing in value."

There was a time when Sarah, who works in the family violence sector, considered buying a house or investment property.

"I was getting to that age and that point where I was working full time and I was like, 'Oh should I buy a house? Should I invest my money somewhere because that would be sensible thing to do?' But to be honest I just couldn't bring myself to do it financially.

"I think that's another thing that's been a driver for me, is that I've just never been attracted to the idea of being locked in to anything.

"Sometimes I think it makes me sound a bit fickle or a bit flaky, but I see a lot of people around me who have chosen to go down that route and that's kind of the prescribed path.

"Having volunteered overseas and met lots of people who choose very different paths, I realised there are lots of different ways you can do things. The idea of committing to something like a mortgage or being financially tied to something that would mean my life choices would be restricted is what didn't appeal to me.

"But also once I'd gotten the idea in my head of having this little space that I could design around my values, I couldn't let go of it actually."

This is the tiny house news, Sarah's 10-year-old niece has scrawled on the blackboard beside the sink. Yesterday we welcomed Albert the fish.

Fittingly, Sarah's only pet requires a small circle to swim in. He can also be carried next door to be fed by someone else when she's away.

A miniature garden of succulents grows in pots on an old tea chest. (Another chest is moved around to serve as a second kitchen bench or coffee and dining table.) The housewarming saw three adults and three children cram into the compact space, a little celebration complete with tiny teddies, tiny birthday cake and tiny sausage rolls.

However, the tiny experience has brought its own suite of not-so-small worries, mostly due to having to operate without a clear legal framework in the grey area between caravans and fixed dwellings.

"This has caused me a lot of anxiety at times. Am I going to get in trouble with the council? Am I going to have to move it? Am I going to be kicked out? Is it going to fall down? Is it going to be a disaster?"

Most Australian tiny housers are tending towards an under-the-radar approach, where it's safer to adopt a 'don't ask, don't tell' attitude, not annoy the neighbours and deal with repercussions if they arise.

The to-do list in a place you build yourself, however small, is never ending. Once the house is finished there are plans for a woodshed, a hen house. That outdoor bath tub...

"I don't know what future-Sarah is going to think of present-Sarah's decisions. Maybe in 10 years I'll have a family. I don't know if I'm going to make those decisions but if I do and I've spent my mid-20s working part time so I can relax, is that going to come back to bite me? I don't know, probably."

As Melbourne's population booms, the ABC is putting the spotlight on the city's housing game. Visit ABC News Online, tune into ABC Radio Melbourne and watch ABC News Victoria on Monday July 17 and Tuesday July 18.

Topics: community-and-society, government-and-politics, housing, truganina-3029, northcote-3070, melbourne-3000, vic

First posted