AUSTRALIAN INSTITUTE OF FAMILY STUDIES · I I I \1 I , I I , I I -, I I' 'I I , I I' I-LIST OF CONTRIBUTORS Within the Australian Institute of Family Studies, the following members

$Page 1: AUSTRALIAN INSTITUTE OF FAMILY STUDIES · I I I \1 I , I I , I I -, I I' 'I I , I I' I-LIST OF CONTRIBUTORS Within the Australian Institute of Family Studies, the following members$
HOME OWNERSHIP FOR LOW INCOME FAMILIES

SECOND EVALUATION REPORT ON THE VICTORIAN MINISTRY OF HOUSING AND CONSTRUCTION

CAPITAL INDEXED LOAN (CAPIL) SCHEME

AUSTRALIAN INSTITUTE OF FAMILY STUDIES

JUNE 1988

300 Queen Street Melbourne, 3000 Victoria

Australia

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LIST OF CONTRIBUTORS

Within the Australian Institute of Family Studies, the following members of

the staff were involved in this project:

Andrew Burbidge (Research Fellow)

Don Edgar (Director)

Frank Maas(Senior Research Fellow)

Peter McDonald (Deputy Director, Research)

Maryann Wulff(Fellow)

Capil Project Team:

Paul Napper (Project Officer)

Terese Barton (Data Analyst)

Anthony Monteleone (Fieldwork Surpervisor)

Coding

Judith Foster

Gillian Hamerston

Diane Miller

Data Analysis Support

Terese Barton

Rosangela Merlo

Renae Low (Chapters 5,6, and 7)

Graphics

Rosangela Merlo

Word Processing

Allyson Trainor

The Computer Services Section provided support and assistance.

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ACKNOWLEDGEMENTS

The steering Committee include the following members from the Victorian

Ministry of Housing :

Robert Carter

Tony Cahir

Stasia Zika

and as an external member:

Judith Yates from the University of Sydney

Subsequent to the compilation of this report, the Ministry of Housing has

undergone a change of name to the Ministry of Housing and Construction.

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TABLE OF CONTENTS

INTRODUCTION and SUMMARY OF OUTCOMES - P.Napper, F. Maas and T. Barton

Introduction

The Capi 1 Loan .................................................... .

Capi1 Loan Sample (Second Evaluation Report) •••••••••••••••••••••••

Exits (families who sold their Capi1 home and 'exited' from the

scheme) •••••••••••••••••••••••••••••••••••••••••.••.••.••••••••••

Control Group Sample (Second Evaluation Report) ••••••••••••••••••••

Issues for the Second Report ...................................... .

HOME OWNERSHIP FOR LOW INCOME FAMILIES •••••••••••••••••••••••••.•••••••

Summary of Outcomes ••••.....•••....••••••••••••••••.•••••..........

Change in Family Composition, Employment and Income ••••••••••••••••

Housing Repayments and Costs ...................................... .

Coping Financially as a Capi1 Pilot Family •••••••••••••••••••••••••

Determinants of Housing Satisfaction Among Capi1 Families ••••••••••

Repairs, Renovations and Home Improvements among Capi1 Respondents •

Respondents' Perceptions of the Capi1 Loan Scheme ••••••••••••••••••

Assessments of Advantages and Disadvantages of Home OWnership ••••••

. FAMILY STATUS, EMPLOYMENT AND INCOMES - A. Burbidge, F. Maas and

P. McDonald ..•••••.•• ~ •••••.....••••..••••.•••..•••.••..••.•....•....

Introduction .......................... ~ ........................... .

Family Status at the Second Wave

Changes in Family Status Between Waves 1 and 2 ••••••..••..•.•••••••

Other Changes in Family Composition ••••••••••••••••••••••••••••••••

Employment .......................•.....•.......•...................

Employment Preferences ............................................ .

Incomes

Changes in 'Real' Income ........................................... .

Income Changes in Relation to Average Weekly Earnings (AWE) ••••••••

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1

1

2

3

4

5

7

7

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8

9

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13

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15

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16

19

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24

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30

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Income Changes According to Birthplace •••••••••••••••••••••••••••••

Income Changes and Family Type •...••••.•••..••..•....•••.•..•......

Income Change, Employment Status and Family Type •••••••••• ~ ••••••••

Summary •..•.••••..........•....••••...•••.•••.....•.......•........

EXAMINING HOUSING REPAYMENTS & COSTS UNDER THE CAPIL SCHEME - T. Barton

Introduction ...................................................... .

Mortgage Repayments •••••••••••••••••••••••••••••••••••••••••••••.••

Average Weekly Family Income Levels •••••••••••••••••••••••••••••••

Changes in Family Incomes and Impact on Mortgage Repayments ••••••••

Comparison of Housing Costs: Capil and Renter Groups ••••••••••••.••

Disposable Income After Housing Costs ••••••••••••••••••••••••••••••

Surnrnary and Conclusions •••••••••••••••••••••••••••••••••••••••••.•.

COPING FINANCIALLY AS A CAPIL FAMILY - F. Maas ••••••••••••••••••••••.••

Experience of Financial Difficulties

Financial Difficulties and Change in Income ....................... .

Families with Arrears Agreements •••••••••••••••••••••••••••••••••••

coping With Mortgage Repayments

Families Financial Situation at Time of Wave 2 Interview ••••••••.••

Financial Situation According to Place of Birth ••••••••••••••••••••

Better Or Worse Off Than A Year Ago? ............................... .

Perceived change in Financial Position and Changed •••••••••••••••••

Perceived Change in Financial Position and Change in Income ••••••••

Perceived Change in Financial Position and Proportion of Income

Devoted to Mortgage .••.•.•..•••••..••.•.•••.......••.••.••.•.....

Better Or Worse Off In The Year To Come? •••••••••••••••••••••••••••

Summary •.••••.•••••.....••••....•••....••.•••..••.••...............

DETERMINANTS OF HOUSING SATISFACTION AMONG CAPIL RESPONDENTS - M. Wulff

Introduction: ..................................................... .

Housing Satisfaction at Wave 2: Comparing the Capil Loan Group with

it

31

33

37

38

42

42

42

47

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SS

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64

67

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Private and Public Renters ....................................... 92

The Impact of Ethnicity on Housing Satisfaction •••••••••••••••••••• 94

Average Declines in Satisfaction Levels, Wave 1 to Wave 2 •••••••••• 100

Determinants of Housing Satisfaction ••••••••••••••••••••••••••••••• 102

Explaining Housing Satisfaction •••••••••••••••••••••••••••••••••••• 103

Explaining Satisfaction with Housing !=osts ••••••••••••••••••••••••• 105

Summary and Conclusions ............................................ 106

REPAIRS, RENOVATIONS & HOME IMPROVEMENTS AMONG CAPIL FAMILIES- M. Wulff 111

Home Repairers and Improvers ••••••••••••••••••••••••••••••••••••••• 112

Types of Repairs and Improvements •••••••••••••••••••••••••••••••••• 115

Level of Expenditure on Repairs •••••••••••••••••••••••••••••••••••• 117

Sources of Finance for Repairs and Improvements •••••••••••••••••••• 124

Looking Back: Home Repairers and Improvers Since Entry into Capil

Home ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 134

Summary and Conclusions .......................................... ~. 139

RESPONDENTS' PERCEPTIONS OF THE CAPIL LOAN SCHEME - M. Wulff ••••••••••• 140

Implications of Lack of Understanding of the Capil Scheme •••••••••• 142

What the capii families say about the scheme ••••••••••••••••••••••• 145

Do families see Capil as a worthwhile investment? •••••••••••••••••• 151

Mortgage Repayments and Perceiving Capil as Worthwhile Investment •• 152

Location and Capil as a Worthwhile Investment •••••••••••••••••••••• 153

Summary and Conclusions 157

CAPIL HOME OWNERSHIP - P. Napper ••••••••••••••••••••••••••••••••••••••• 158

General Satisfaction With Capil Itself ••••••••••••••••••••••••••••• 158

Capil and disadvantages of home ownership •••••••••••••••••••••••••• 163

CONCLUDING COMMENTS - F. Maas •••••••••••••••••••••••••••••••••••••••••• 167

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LIST OF TABLES

Table 1.1: Sample loss (Loan Group) Wave 1 to Wave 2*

Table 1.2: Sample loss (Control group) Wave 1 to Wave 2*

Table 2.1: Family type of capil families, according to place of birth

(per cent)

Table 2.2: Family composition of Capil and renter families at Wave 2,

showing changes from Wave 1

Table 2.3: Employment of Capil and renter families at Wave 1 and Wave 2

(per cent)

Table 2.4: Employment status of Capil families according to family type

and place of birth.

Table 2.5: Changes in employment and family status of capil group, Wave

1 to Wave 2, (frequency distributions)

Table 2.6: Current job status and preferred job status of Capil group,

percentage distributions

Table 2.7: Employment status by age of youngest child: Capil group, Wave

2

Table 2.8: Stated reasons for not working and not seeking work, Capil

group, Wave 2

Table 2.9: Most important reason for not working and not seeking work,

Capil group, Wave 2

Table 2.10: Net weekly family income, Waves 1 and 2, Capil and renter

groups (per cent)

Table 2.11: Family income as a proportion of AWE for Capil and renter

families at Waves 1 and 2 (per cent)

Table 2.12: Net weekly family income of Capil families, Waves 1 and 2,

according to place of birth (per cent)

Table 2.13: Change in income Wave 1 to Wave 2 for capil families,

according to place of birth (per cent)

Table 2.14: Net weekly family income of Capil and renter families, Waves

1 and 2, according to family type (per cent)

Table 2.15: Change in income Wave 1 to Wave 2 for capil and renter

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families, according to family type (per cent)

Table 2.16: Change in income Wave 1 to Wave 2 for Capil families,

according to principal source of income at Wave 2 and family

type (per cent)

Table 2.17: Net weekly income of Capil families at Wave 2, according to

employment status and family type (per cent)

Table 3.1: Mortgage as percentage of family income; Capil group Wave 2

Table 3.2: Family income by percentage of income spent on mortgage

repayments

Table 3.3: Change in real family income since Wave 1, according to

percentage of income spent on mortgage repayments

Table 3.4: Weekly Housing Costs: Capil and Renters by tenancy.

Table 3.5: Weekly housing costs as a percentage of income at Wave

Capil and Renters

Table 3.6: Rent as a proportion of family income, renter group by

tenancy and family type

2:

Table 3.7: Disposable income after housing costs, Wave 2: Capil and

Renter groups by family type

Table 3.8: Disposable income after housing costs, Wave 2: Capil and

Renter groups, by tenancy

Table 3.9: Disposable income after housing costs, according to family

type: Capil and Renters

Table 4.1: Financial difficulties experienced since Wave 1 by loan and

renter groups, per cent of each group responding

'frequently' or 'occasionally'

Table 4.2: Financial difficulties experienced by Capilgroup families

since Wave 1 according to place of birth, per cent who have

Table 4.3: Financial difficulties experienced since Wave 1 interview by

change in real family income - Wave 1 to Wave 2 for Capil

group

Table 4.4: Families with MOH arrears agreements, according to family

type and level of change in income

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Table 4.5: Difficulty currently experienced in meeting mortgage

payments, according to family type

Table 4.6: Difficulty of currently meeting mortgage payments, according

to percentage of income spent on repayments

Table 4.7: Financial difficulties experienced by loan group families,

according to financial situation at Wave 2, per cent of each

group who responded 'frequently' or 'occasionally'

Table 4.8: Financial situation of Capil and renter group families at

Wave 1 and Wave 2, according to family type

Table 4.9: Financial situation of Capil group families at Waves 1 and 2,

according to place of. birth

Table 4.10: Change in financial position over previous year, loan and

renter groups according to family type

Table 4.11: Perceived change in financial position over previous year,

renter group according to nature of tenancy and family type

Table 4.12: Change in financial position over previous year, Capil group

according to place of birth


Capil group according to change in employment and family

type


Capil and renter groups according to change in income

Table 4.15: Change in financial.position over previous year, Capil group

families according to proportion of income committed to

mortgage payments

Table 4.16: Predicted change in financial position over coming year,

Capil and renter groups according to family type

Table 5.1: Satisfaction with housing items by tenure status, , satisfied

or very satisfied

Table 6.1: Level of expenditure on repairs and home improvements by

birthplace of Wave 2 repairers

Table 6.2: Source of finance for repairs and improvements by family

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status of Wave 2 repairers.

Table 6.3: Source of finance for repairs and improvements by birthplace

of Wave 2 repairers

Table 6.4: Source of finance for repairs and improvements by net weekly

family income of repairers

Table 6.5: Typology of repairers by percentage of income spent on

mortgage repayments

Table 7.1: Perceptions of Capil as worthwhile investment by proportion

of family income spent on mortgage repayments

Table 7.2: Perception of Capil as worthwhile investment by ability to

meet mortgage payments

Table 7.3: Perception of Capil as a worthwhile investment by original

purchase price

Table 8.1: Satisfaction with Capil by family status

Table 8.2: Satisfaction with Capil by ethnicity

Table 8.3: Satisfaction with Capil by income change

Table 8.4: Satisfaction with Capil by Income

Table 8.5: Satisfaction with Capil by workforce participation

Table 8.6: Satisfaction with Capil by level of education

Table 8.7: Satisfaction with Capil by financial situation

Table 8.8: Major advantages of home ownership by family status

Table 8.9: Major advantages of home ownership by ethnicity

Table 8.10: Major disadvantages of home ownership by family status

Table 8.11: Major disadvantages of home ownership by ethnicity

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I I· I LIST OF MODELS

Model 1: Regression Model Explaining Satisfaction with Housing

I Model 2: Regression Model Explaining Satisfaction with Housing Costs

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LIST OF FIGURES

Figure 2.1 Composition of Loan and Renter Families by Family Status: Wave

Two

Figure

2.2 Composition of Loan and Renter Families by Age of Youngest Child

3.1

3.2

3.3

3.4

3.5

3.6

3.7

Mortgage as a Percentage of Income by Family St~tus: Loan Group

Mortgage as a Percentage of Income by Ethnicity: Loan Group

Average Weekly Income Levels of Selected Capil Groups

Mortgage as a Proportion of Income: Who is Paying 15 per cent or

less?

Mortgage as a Proportion of Income: Who is Making the High

Repayments (30% plus)?

Housing/Rental Costs as a Percentage of Income by Tenancy: Loan

and Control Groups

After Housing Disposable Income by Ethnicity: Wave Two, Loan

Group

Figure 5.1 Overall Satisfaction with Dwelling, Location and Costs: Capil

Loan Group and Public and Private Renters

5.2 Comparison of Capil Loan Group and Public and Private Renters on

Elements of Residential Satisfaction by Family Status

5.3 Changing Levels of Satisfaction by Ethnicity: Dwelling

5.4 Changing Levels of Satisfaction by Ethnicity: Housing Costs

(Mortgage, Rates, Fuel Bills)

5.5 Changing Levels of Satisfaction by Ethnicity: Location

5.6 Decline in Overall Residential Satisfaction by Selected

Characteristics of capil Loan Group

Figure 6.1 Characteristics of Repairers and Home Improvers: % Who Undertook

Repairs and Home Improvements Between Wave 1 & Wave 2

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6.2

6.3

6.4

6.5

Characteristics of Dwellings Repairerd and Improved:

and Improved Between Wave 1 and Wave 2

Types of Repairs and Improvements

Level of Expenditure on Repairs and Home Improvements

Level of Expenditure on Repairs and Home Improvements

Type of Wave Two Repairers

, Repaired

by Family

6.6 Level of Expenditure on Repairs and Home Improvements by Net

Weekly Family Income of Wave Two Repairers

6.7 Level of Expenditure on Repairs and Home Improvements by Age of

Dwelling of Wave Two Repairers

6.8 Level of Expenditure on Repairs and Home Improvements by

Location of Wave Two Repairers

6.9 Sources of Finance for Repairs and Home Improvements: Wave Two

Repairers

6.10 Impact of Financial Source on Difficulty in Raising Repair Money

& Satisfaction With Repair Costs

6.11 Use of Family Funds and Savings to Meet Repair Costs by Level of

Expenditure on Repairs

6.12 Responsibility for Carrying out Repairs & Improvements

6.13 Responsibility for Carrying Out Repairs & Improvements by Family

Status of Wave Two Repairers

6.14 Responsibility for Carrying Out Repairs & Improvements by

Birthplace of Wave Two Repairers

6.15 Use of Professional Help by Nature of Repair: , Who Used

Professional Help

6.16 , of Owners who Carried Out Repairs Themselves or with Friends

by Family Income of Wave Two Repairers

6.17 Typology of Capil Home Repairers and Improvers: Wave One and

Wave Two

Figure 7.1 Capil Families Understanding of Loan Balance

7.2 Capil Families Understanding of Loan Balance by Ethnicity

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7.3 Who Has Difficulty Understanding capil Loan Balance? Selected

Characteristics

7.4 Satisfaction With Housing Costs by Understanding of the Loan

Balance

7.5 Dissatisfaction with Capil Loan Scheme by Understanding of the

Loan Balance

7.6 Whether Homeownership Under Capil is Worthwhile by Understanding

of the Loan Balance

7.7 Open-ended Responses to "How well do you think this loan scheme

is working for you?"

7.8 Percentage Who Think Capil is a Worthwhile Investment by Region

7.9 'Perceive Capil as Worthwhile Investment by Purchase Price and

Location

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CHAPTER 1

INTRODUCTION and SUMMARY OF OUTCOMES - P.Napper, F. Maas and T. Barton

Introduction

In November 1984 the Victorian Ministry of Housing initiated the Capital

Indexed Loans Scheme. The Capil scheme tests the effectiveness of extending

home ownership opportunities to very low income families through the use of

a capital indexed loan instrument. The Australian Institute of Family

Studies was contracted for the task of evaluating the Capil scheme and a

longitudinal study commenced in April 1985. In order to assess the

viability of the Capil instrument, and the affordability of home ownership

for low income families, the Victorian Ministry of Housing commenced a

program of lending to families with incomes under $200 per week at November

1984.

The Capil Loan

The Capil loan seeks to change the predominant form of home lending in

Australia - the credit foncier style lending arrangement. Instead of

repayments over the course of the loan staying at the same amount in dollar

terms (leaving aside fluctuations in nominal interest rates), a Capil loan

seeks to maintain repayments in real (inflation-adjusted) terms. As

repayments are based on income, initial repayments on a loan can be much

lower than for credit foncier loans. Capil assumes that repayments are

adjusted periodically by the borrower to 25% of current income. Repayments

are indexed to the CPI over the course of the loan by the Ministry of

Housing and Construction.

The Capil loan changes the experience of home ownership in two fundamental

ways:


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1. Households who are normally excluded (in a semi-deregulated

financial market) are provided with the opportunity for home

ownership, but must adjust their expectations to account for housing

costs rising with inflation, like other consumer commodities.

2. Under a Capil loan, with flexible loan terms the emphasis is on

increasing real equity in a house, rather than the expectation of

outright ownership over a time period set at the beginning of the

loan.

The Australian Institute of Family Studies presented the First Evaluation

Report to the Ministry of Housing in June 1987. It was based on interviews

with 481 families who had moved into a ca~il purchased or built home. A

control group of 275 families, renting both in the private and public rental

sectors were also interviewed. Ministry of Housing tenants accounted for

63% of this group while 37% were renting in the private rental market.

Capil Loan Sample (Second Evaluation Report)

Both the Capil and renter families were interviewed for a second time in

October-November 1987.

Interviews were conducted with 425 families in the Loan group and are

referred to in this report as 'Wave 2' interviews. The Institute was unable

to conduct interviews with 56 families from the Wave 1 Capil sample for

several reasons:

a. 26 families had sold the Capil home and were therefore ineligible for interview.

b. 4 Capil families refused to be interviewed.

c. 7 families had rented out. their Capil property and were unavailable for interview.

d. 19 families were not able to be contacted.

Table 1.1 shows number of characteristics of the Capil sample at Wave 1,

Wave 2 and the Capil sample loss.


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Table 1.1: Sample loss (Loan Group) Wave 1 to Wave 2*

Wave 1 Loan sample Wave 2 sample 10ss** sample***

Characteristics n=(481) N=(56) n=(406)

Mean age (median) 35.4 34.5 35.5 , Males 33.5 32.1 34.0 , Females 66.5 67.9 66.0 , Post-Sec/Tertiary educated 18.7 28.6 . 17.5 , Australians 52.9 52.7 52.2 , Europeans 30.6 38.2 30.0 , Asians 16.5 9.1 17.7 , Couple families 47.8 37.5 49.5 , Sole parent families 52.2 62.5 50.5 , Youngest child less than 5 years 4.1.0 28.6 43.4 Median family income $204.00 $203.00 $204.00 , Families mainly on Govt. benefits 76.9 76.0 77 .4 , Families able to save 20.6 21.4 20.2 , Residence non-metropolitan 42.4 35.2 43.6

* These figures are derived from data obtained at Wave 1 ** Sample loss specifically refers to the 56 families not interviewed at

Wave 2 *** The figure 406 is a result of sample loss (56 cases) plus a further 19

families interviewed at Wave 2, but dropped from the Wave 2 sample due to insufficient MoHC data.

Despite the loss of the 75 families, the Wave 2 sample of 406 families is

remarkably similar to the sample at Wave 1. Where differences do occur they

are very small. Proportionately, by Wave 2, the sample contained slightly

more couples and slightly fewer sole-parent families; slightly less families

from the metropolitan region and - within the three ethnic groups - more

European families were lost than Australian and Asian. Median family income

remained the same.

Exits (families who sold their Capil home and 'exited' from the scheme)

As previously indicated, 26 families had sold their Capil purchased home by

the time of the second interview. Limited analysis of data obtained at Wave

1 reveals:

a. 38.5 per cent have post secondary education compared with 18 per cent the Wave 1 sample

)


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b. 50 per cent were Australian families, 42 per cent were European born families and only 7.7 per cent Asian born families (7.7%)

c. 65 per cent were sole-parents compared with 52 per cent of the Wave 1 sample

d. On the whole, a lower median family income ($190.00) than the Wave 1 sample ($204)

e. 27 per cent were country residents compared with 42 percent of the Wave 1 sample

It is intend~d to follow up these families to obtain data on their reasons

for selling; their financial situation at the time of house sale; details of

the sale itself etc. To date, however, the Institute has experienced

difficulty in contacting these families.

control Group Sample (Second Evaluation Report)

The original Control group sample of 275 families has undergone considerable

reduction. In all, a total of 167 families were re-interviewed, consisting

of 71.3 per cent Ministry of Housing tenants and 28.7 per cent private

renters, resulting in a sample loss of 108 families. Of the 108 families

lost from the original Control sample:

a. 32 families had moved into homeownership through capil

b. 8 families had moved into homeownership through other loans

c. 19 families refused to be interviewed

d. 49 families were not able to be contacted

Using data obtained from Wave 1 interviews, Table 1.2 compares a number of

characteristics of the Control Wave 1 sample, Wave 2 sample and sample loss.


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Table 1.2: Sample loss (Control group) Wave 1 to Wave 2*

Characteristics

Mean age (median) , Males , Females , post-see/Tertiary educated , Australians , Europeans , Asians , Couple families , Sole parent families , Youngest child less than 5 years Median family income , Families mainly on Govt. benefits , Families able to save , MOH tenants , Private tenants , Said 'saving to buy a home' , Residence non-metropolitan

Wave 1 sample n=(275)

37.3 37.1 62.9 15.6 64.4 28.0 7.6

48.7 51.3 2.9.4

$215.00 70.5 11.7 63.3 36.7 32.0 44.7

Control sample Wave 2 loss sample

N=(108) n=(167)

36.4 42.6 57.4 15.7 58.3 30.6 11.1 52.8 47.2 37.0

$217.50 63.9 15.0 50.7 49.1 42.6 32.4

37.8 33.5 66.5 15.6 68.3 26.3 5.4

46.1 53.9 23.4

$213.00 74.8 9.6

71.3 28.7 25.1 50.9

* These figures are derived from data obtained at Wave 1

Proportionately, the Wave 2 Control sample retained more Australian families

and less European and Asian born families; slightly more sole-parent than

couple families and fewer families with children school age and over.

compared to Wave 1, the Wave 2 sample also had a higher proportion of

families reliant mainly on government benefits for their source of income

and a higher proportion of Ministry of Housing tenants than private renters.

Issues for the Second Report

The initial wave of the Capil evaluation provided a basic profile of the

loan and control groups with some data on the initial impacts of home

ownership. The findings for Wave 1 are detailed in the First Evaluation

Report of the Victorian Ministry of Housing's Capital Indexed Loan Pilot

Scheme, July, 1987.


- 6 -

The Wave 2 interviews were conducted at a stage where most Capil families

had occupied their homes for 2 to 2.5 years. Consequently it was a stage of

consolidation, of coming to terms with the experience of being an

owner/occupier and for many, a time of considerable input regarding repairs

and improvements. As such, Capil families have perhaps moved beyond a

honeymoon phase and into a consolidation period.

This second stage evaluation focuses on the following issues:

change in family circumstances. Changes in family composition,

employment characteristics, income and cost patterns are all

analysed. An important assumption ~nderlying the Capil scheme is

that low income families, in a large proportion of cases, will

experience gains in income over a medium to long term period and

Capil will allow them to enter home ownership and then to

consolidate and accumulate equity;

management of the costs of home ownership. The Capil proposals are

evaluated as to the impact on families of coping with a mortgage as

well as the extra costs of home ownership, costs such as rates,

insurance and repairs and maintenance.

level of satisfaction with home ownership and the Capil instrument.


- 7 -

HOME OWNERSHIP FOR LOW INCOME FAMILIES

Summary of Outcomes

Change in Family Composition, Employment and Income

Change in family composition

Approximately 10 per cent of families in the Capil group changed

their family status in the 18-24 month period between Waves 1 and 2.

About 15 per cent of sole parents had partnered and 3.5 per cent of

couples had split up. In the renter group, only 7 per cent of one

parent families had become couple families by Wave 2 and 10 per cent

of couple families had split up.

Changes in family composition (such as birth of a child) increased

household size in almost 20 per cent of Capil families. Amongst the

renter group, changes in family composition affected about 10 per

cent of families.

Change in employment

The period between Wave 1 and Wave 2 was notable for a marked

increase in employment, particularly among Capil group families.

Both couples and sole parent Capil families show large flows into

and out of employment, with an overall net increase in employment

activity. Renter group families also experienced a net increase in

employment, although to a lesser extent than Capil families.

Respondents' employment preferences indicate that the majority of

Capil families desire to further increase their employment and

income levels. Sole parents indicated a preference for incremental

increases in work activity. One third of those working part-time

would have preferred to work full-time, while one third of those not

working would have preferred to work part-time. Amongst couples,


- 8 -

male respondents expressed a strong preference for full-time work

while female respondents indicated low preferences for either

increasing their workforce involvement or for full-time work.

Families not working or not seeking work identified several barriers

to employment. Female respondents, in particular, identified the

needs of their children as an important barrier to employment.

Health problems were frequently identified by men in couples, while

availability of child care was also seen as a problem.

Change in income

Examination of the incomes of families shows that many are still

very much part of a low income group. Almost half of the Capil

group had an income, at Wave 2, of less that $250 per week and more

than 80 per cent had income less than $400 per week.

In real terms (allowing for inflation), 58 per cent of the Capil

group were found to have had a real increase in weekly income.

Forty-two per cent of the group experienced no real gains in income

or their income fell in real terms. The Capil group have fared

better than the renter group where 56 per cent of families had no

change or a fall in real income.

On average, Capil families continued to increase their incomes

relative to Average Weekly Earnings. The average income of Capil

families at Wave 2 increased from 50 per cent of AWE to 60 per cent

of AWE.

Overall, Australian and European born families were more likely to

have lower disposable incomes. The larger proportions of Asian born

families with higher levels of disposable income reflects the higher

levels of family income of this group.

Housing Repayments and Costs

On average, Capil families are repaying 24 per cent of their weekly

family income on repayments.


- 9 -

Fourteen percent of families are spending less than 15 per cent of

their income on repayments, while 16 per cent are spending over 30

per cent.

In general, families who experienced an increase in income between

Wave 1 and Wave 2 were paying less than the requisite proportion of

their income to the Ministry in repayments, while families with a

decrease in income were paying relatively more, suggesting a lack of

adjustment of mortgage payment when family income falls or rises.

The associated expense of rates and insurance add approximately 5

per cent to the overall housing costs of Capil families.

On the whole, average housing costs (taking into account repayments,

rates and insurance) are on a par or slightly higher than for

renters in the private sector, while Ministry tenants had the lowest

housing costs of all three groups.

After housing 'costs have been taken into consideration, the majority

of both the Capil and rent er group families have disposable incomes

of $200 per week or less. Overall, renter group families average

lower disposable incomes after housing costs and for both the Capil

and renter groups, one parent families are almost twice as likely to

have disposable incomes of $200 or less.

Coping Financially as a Capil Family

.-

Since Wave 1, one parent families were more likely to have

experienced difficulties in paying, for example, for bills or

purchasing food or clothing. Overall, couples in both Capil and

renter groups reported a similar incidence of financial difficulty

experienced, whereas one parent families in the capil group

experienced a lower incidence of difficulty in most areas of

financial coping than similar families in the renter group.

The higher degree of financial difficulty experienced by one-parent

families is clearly related to their having lower incomes than

couples and to experiencing less improvement in levels of income.


- 10 -

For Capil families, at least a third reported either 'occasional' or

'frequent' difficulties in meeting their mortgage repayment costs.

No less than a third and up to half of families have not had enough

money for food at some time. No less than half and up to 75 per

cent of families have not been able to buy clothes and up to 85 per

cent have been unable to spend money on leisure or entertainment

activities.

Families experiencing decreases in incomes of $50 or more per week

also reported the highest incidence of financial difficulty on all

items. On the other hand, a significant proportion of both couples

and sole parents who had entered into mortgage arrears agreements or

who were having difficulty meeting mortgage payments, had

experienced real increases in income. The proportion of income

being paid in mortgage repayments was not closely related to ease or

difficulty with meeting these payments, except for those paying less

than 15 per cent of their income where nearly 60 per cent reported

that making mortgage payments is 'easy'.

Characteristics of financial situation

Loan group families characterised their financial situation into two

predominant categories. Either they had 'no money left' (35%) or

'money left .goes on bills' (42%). Only about 13 per cent were able

to save while 11 per cent were spending more than they received, or

'dissaving' •

When Capil group families' financial situation is compared at Wave 1

and Wave 2, it is clear that proportionately fewer couple families

are saving each week, a substantially increased group have no money

left at the end of the week, and there are slightly more dissavers.

One parent families report a slightly reduced savers group and a

substantially increased proportion of dissavers. Both family types

now have similar proportions of those able to save.

In the renter group, couple families able to save increased as a

proportion, while the number of dissavers was substantially reduced.

One parent families in the renter group still have the highest

proportion of dissavers and the lowest proportion of savers.


- 11 -

Perception of changes in financial position

Overall, Capil participants regarq themselves as better off

financially than a year ago. Those most satisfied in this respect

were those with the largest increases in income and the smallest

proportions devoted to repayments. One-parent families and families

of Asian background reported generally higher proportions as being

better off. Renter group families, by comparison, are less

satisfied. with their financial situation now than a year ago.

Predicted future financial position

When asked to predict the state of their financial position over the

coming year Capil participants are more likely to be optimistic than

the renters. Both couple and one-parent families who had

experienced increased levels of employment were more likely to be

optimistic about the immediate future.

Determinants of Housing Satisfaction Among Capil Families

Two thirds or more of Capilfamilies report that they are satisfied

with nearly all aspects of their housing environment: features

including space, privacy, natural light, the condition of the house,

as well as the general location and accessibility of their home. The

notable exception to this pattern is found with the associated costs

of owning a home, such as rates, fuel bills and repair costs.

Between two-fifths and one-half of the families were satisfied with

these items.

Capil families were relatively more satisfied with their dwellings

per se than were public or private renters.

About 80 percent of Ministry of Housing tenants were satisfied with

their rent payments - a level of satisfaction with housing costs

higher than expressed by either Capil families or private renters.

Private renters reported lower levels of satisfaction on all aspects

of housing than Capil families or public renters.


- 12 -

For Capil families, the level of housing satisfaction reported

varies primarily with ethnicity (Australian and European born

families relatively more satisfied· than Asian born families); family

status (sole parents relatively more satisfied than couples) and

family income (families on lower incomes relatively more satisfied

than those with better incomes).

The older the dwelling, the lower the reported satisfaction of the

respondent: very likely a result of higher repair costs and

maintenance.

The level of housing satisfaction is clearly related as well to

overall subjective well-being. Those respondents who in general

ranked their sense of purpose in life high and were satisfied with

their standard of living tended to be satisfied with their dwelling

and their housing costs.

Repairs, Renovations and Home Improvements among Capil Respondents

Over two-thirds of families had undertaken repairs between Wave 1

and Wave 2. Indeed, nearly half the families had been steadily

undertaking repairs since they first purchased a Capil home.

About twenty per cent of Capil families expended over $2000 on

repairs and improvements between Wave 1 and Wave 2, including a

minority of families (4.5%) who spent over $5000.

General home renovations and outside improvements were the most

popular type of repairs with over sixty per cent of repairers

carrying out a home renovation and over half an outside improvement

such as garden sheds, fences, and other works.

Of the stock of housing purchased under Capi1, older dwellings,

particularly pre World War II, and timber dwellings received most

repairs.

seventy per cent of repairers used their own savings for family funds

to finance the repairs and improvements.

I I I I I I I ,I I I I I I I I I I I I I

- 13 -

OWners were personally involved (either in conjunction with a

professional, on their own, or with the help of friends) in carrying

out the repairs and improvements in seventy per cent of cases,

suggesting a high level of "sweat equity" in Capil homes.

Professional assistance was called in in just over half of all

repairs.

There is some indication that the costs of repairs and improvements

are related to repaying relatively lower amounts to the Ministry.

Respondents' Perceptions of the Capil Loan Scheme

One quarter of the Capil respondents reported "great difficulty" and

an additional 28 per cent reported "some difficulty" in

understanding how the Capil loan scheme works.

A lack of understanding of the Capil scheme results in lowered

satisfaction with housing costs, dissatisfaction with the Capil

scheme in general, and a greater tendency to question the

worthwhileness of Capil as an investment.

Families tend to judge the value of Capil as an investment on the

criteria of their immediate capacity to repay the loan, rather than

longer-term criteria such as location or equity growth.

Assessments of Advantages and Disadvantages of Home OWnership

In identifying the advantages of home ownership, two main themes

emerge from families' responses. Firstly, the independence and

security of ownership, and secondly, the economic advantages of home

ownership - home ownership as an investment, and freedom from high

rental. The qualitative advantages of home ownership, (especially

in the form of detached dwellings) such as privacy and space were

mentioned by a minority of families.

I I I I I I I I I I I I I I ~

I I I I I I

- 14 -

Over a third of loan group families could not identify a major

disadvantage of home ownership. Of those who could, three-quarters

cited the financial cost of ownership.

Overall, two thirds of the Capil group indicated that they were

generally satisfied with Capil. Just over 20 per cent indicated

they were dissatisfied with Capil with a further 13 per cent

undecided.

The Wave 2 data indicates that sole parents tended to be slightly

more satisfied with Capil than couples; Australian born families

were more likely to be satisfied with Capil than overseas born

families.

Families' perceptions of their financial situation were related to

their general satisfaction with Capil. Families who said they were

'able to save' were more likely to be satisfied with Capil.

I I I I I I

I I I I I I t I I I I I I

- 15 -

CHAPTER 2

FAMILY STATUS, EMPLOYMENT AND INCOMES - A. Burbidge, F. Maas

and P. McDona1d

Introduction

An underlying assumption of the Capil scheme is that, for many families with

children, low income is a temporary problem. Indeed, it can be argued that

housing assistance to low income families may provide these families with a

basic level of security from which they can begin to establish themselves

financially. The capil study was therefore designed to measure changes in

family status, employment and income over time. Changes in these

characteristics between the first and second interviews are described in

this chapter. The assumption that circumstances often change is borne out by

the finding that almost half (45 percent) of the Capil families had changed

either their family status or their employment status between the first and

second interviews.

Family Status at the Second Wave

The Capil families interviewed in Spring 1987 included 181 one-parent

families and 225 couples with children. (A small number of these had no

dependent children living with them at the time of the interview). On

average, there were 2.6 children in the two parent families and 2.0 children

in one-parent families.

In term~ of birthplace, 52 per cent of the Capil respondents were born in

Australia, 30 per cent in Eur9pe and 17 per cent in Asia. As set out in

Table 2.1, family composition differed markedly among the ethnic groups.

Nearly all the Asian families were couples with children, compared with

around half or less of the Australian and European families. Fifty-seven

per cent of the Australian loan families were one-parent families as were 43

per cent of the European Capil families.

I I I I I I I

" .

I v

I I i I f I , I t I I I·

- 16 -

Table 2.1: Family type of Capil families, according to place of birth (per cent)

Couple families

One-parent families

TOTAL per cent N=

Place of Birth

Australia

42.9

57.1

100.0 212

Europe

57.4

42.6

100.0 122

Asia

88.9

11.1

100.0 72

The composition of renter families at Wave 2 differed a little from the

capil group in that it continued to have a slight preponderance of sole

parents: 55 per cent of renters were sole parents, for example, compared

with 45 per cent of the Capil group (See Figure 2.1).

In both Capil and renter groups, the married couple families had markedly

younger children than the sole parents, with more than half of the Capil

couples having their youngest child under 5 compared with 20 per cent of

sole parents. Furthermore, Capil families, both two and one-parent, were

much more likely to have a child aged less than 5 than the renter families.

(See Figure 2.2).

Changes in Family Status Between Waves 1 and 2

Nine per cent of families in the Capil group changed their family status in

the 18-24 month period between Waves 1 and 2. Seven couple families had

become sole parent families and 31 one-parent families had become couple

families in the time between the two interviews. Thus about 15 per cent of

the sole parents had partnered and 3.5 per cent of the couples had split up

(Table 2.2).

- 17 -

I FIGURE 2.1

I S

il _I tn II

::;, .. ca 081 , .. UJ ~

~

-, .-E If ,t ~ <oJ 'I , tn Q) .- I I, -.-E ca o

t LL ... Q)

I .. c Q)

rs a:

I' 'C C

rs

I ca c ca

t .9 'to- It 1\ 0

.C 0 , .-.. . -tni

I" 8.F-E~

I 8~ 1\

I

~~.~.~.~~~~~-~-~~~-~-

Composition of Loan and Renter Families By Age of Youngest Child

Loan Group ,..408

aoI.~4----------------------'

DOl

a

301

2101

m

Old '" »»3 I ') »'),1 0qIea SGIe PIrW'III

fImIly S1atua

Renter Group N-187

aoI1~---------------------'

aoI

a

301

201·

m

OIJ } b'" b~""3

FMdIy Status D Under 5 years

&SJ 5 to 11 years

~11+yen

"'Tl (j) C JJ m ~ I\J

...... co

I ,I' 11'

I' .' " " f I I' a II 11\

IJ ,1\

i 'I' t

- 19 -

Table 2.2: Family composition of Capil and renter families at Wave 2, showing changes from Wave 1

Number at Wave 1 Out In Number at Wave 2

Number at Wave 1 Out In Number at Wave 2

Couples

201 7

31 225

Couples

77 8 6

75

CAPIL GROUP Sole parents

RENTERS Sole

205 31

7 181

parents

90 6 8

92

Out refers to 'left that marital status between Wave 1 and Wave 2' In refers to 'joined that marital status between Wave 1 and Wave 2'

The pattern of change was very different for renters. Among renters, only 7

per cent of one-parent families (6 out of 90 families) had become couple

families by Wave 2 and 10 per cent (8 out of 77 families) of couple families

had split up. The slightly smaller overall proportion (8 per cent or 14 of

the 167 families) of the renters who had changed their family status between

the two interviews can be attributed to the shorter gap (about 6 months on

average) between interviews for th~ renters as compared to the Capil group.

Firm conclusions cannot yet be made on the factors which have caused the

higher rates of partnering among the home buyer group. Moreover the

observed patterns of change in family status do not appear to have been

caused by losses from 'the samples.

Other Changes in Family Composition

There were also substantial changes in household composition associated with

births, and children moving into or out of home. There were 51 Capil

families (13 per cent) where a child was born between Wave 1 and Wave 2; a

substantially higher rate than among renter families (4 per cent). In 19

I I I I f I f I t

" I I I , I I I , t I

- 20 -

Capil families children moved in, and in 7 cases another relative moved in.

These changes in family composition increased household size in almost 20

per cent of Capil families.

Among renters there was a total of 17 instances of births, child returns and

other relatives moving in, affecting about 10 per cent of the 165 renter

families. These factors increasing household size were partially offset in

approximately one in ten of both Capil and renter families by one or more

children moving out. In five capil families and one renter family the child

had since returned to live with the respondent.

Changes in family composition can affect levels of economic well~being

.directly through an impact on household income, as well as indirectly

through increasing or decreasing the number of people dependent on family

income. The impact on family finances of children moving away from home or

moving back is difficult to assess however, as they mayor may not be

contributing to family income. Around 40 per cent of the children who left

home, however, were employed full or part-time, so reductions in family size

may, on balance, tend to reduce a household's repayment capacity.

Employm~nt

The period between the first and second interviews appears to be notable

also for a marked increase in employment, particularly among Capil group

families. Both married couples and sole parent Capil families show large

flows into and out of employment, with an overall net increase in employment

activity. Renter families also experienced a net increase in employment,

although to a lesser extent than Capil families.

Among couple families, the percentage with neither partner employed dropped

between Waves 1 and 2 from 65 per cent to 40 per cent for Capil families and

from 64 per cent to 54 percent for renter families (Table 2.3).

I I I' ., If I,

" I

" , I ,I t t 1\ \~ ;1' ,I' il' I

- 21 -

Table 2.3: Employment of Capil and renter families at Wave 1 and Wave 2 (per cent)

Capil Group Renter group W1 W2 W1 W2 , , , ,

Couples Both partners employed 5 25 13 19 Male employed 24 31 16 22 Female employed 6 4 7 5 Neither employed 65 40 64 54

TOTAL , 100 100 100 100 N 198 222 76 74

, Sole parents Employed full-time 7 19 2 9 Employed part-time 18 25 17 27 Not employed 75 56 81 64

TOTAL , 100 100 100 100 N 202 178 88 91

At the same time, the percentage of couples with both partners employed rose

from 5 to 25 per cent for Capil families and from 13 to 19 per cent for

renters. Similar increases in employment were evident between Waves 1 and 2

for sole parents, but the extent of change was about the same for Capil

families as for renters particularly considering the longer time interval

applying to Capil families.

This aggregate picture also applies for families who changed family status

between the two Waves. A change of family status was associated with

increased employment irrespective of the type of family change. For example,

among the 31 Capil sole parents at Wave 1 who had partnered by Wave 2, 24

had no work force participation at Wave 1 compared to only 6 at Wave 2.

Table 2.4 shows that Australian born Capil families were somewhat more

likely to be employed than those from Europe or Asia, while for one-parent

families proportions employed were similar.

I I, I I f' •• f'

'.,

I' ." t, t ,t

I t, I' t I1 I t .; I'

- 22 -

Table 2.4: Employment status of Capil families according to family type and. place of birth.

Place of Birth

Australian European Asian N , N , N ,

Couple families Adults both work 21 23.1 19 27.1 16 25.0 One adult only works 42 46.2 20 28.6 18 28.1 No adult works 28 30.8 31 44.3 30 46.9

Total 91 100.0 70 100.0 64 100.0

One-parent families Parent works full-time 23 19.2 10 19.6 2 25.0

Parent works part-time 29 24.2 14 27.5 1 12.5

Parent not working 68 56.7 27 52.9 5 62.5

Total 120 100.0 51 100.0 8 100.0

Considerable flows into and out of employment underpin the observed rises in

aggregate employment activity. Table 2.5 gives an indication of the extent

of turnover in employment activity and marital status between Wave 1 and

Wave 2. For example, of the 48 couples where the husband alone worked at

Wave 1, more than half had changed employment or marital status by Wave 2

(in 14 both parents were employed, in 2 the wife was employed instead of the

husband, in 6 neither was employed, and 3 had separated.)

I ,I, I: ,t f ·1 f I' II f I, 'I I .,' t' t 11'

I I

"

- 23 -

Table 2.5: Changes in employment and family status of Capil group, Wave 1 to Wave 2, (frequency distributions)

Couples

Wave 2 BE ME FE

Couples Both employed 5 14 3 Male employed 5 23 1 Female employed 2 4 Neither employed 6 3 Total 10 45 11

Sole parents Employed full-time 1 Employed part-time 1 Not employed 1 Total 3

?

Overall total 10 48 11

WAVE 1

NE Total FT

18 40 1 31 60

2 8 1 74 83

125 191 2

1 2 10 2 3 2 1 2 1 4 7 13

129 198 15

Sole parent

PT NE Total

3 11 15 2 6 8

1 2 6 6

5 24 31

7 15 32 15 24 41

9 88 98 31 127 171

36 151 202

Grand Total

55 68 10 89

222

34 44

100 178

400

Note: Couples - BE = both employed; ME = male employed; FE = female employed; NE = neither employed;

Sole-parents - FT = full-time; PT = part-time; NE = not employed

Similarly, of the 151 sole parents who were not employed at Wave 1, 26 per

cent were still single but had obtained employment while 16 per cent had

married, with half of these also taking up employment. On the other hand,

almost a quarter of the sole parents who worked at Wave 1 (10 of the 44 who

did not remarry) were not employed at Wave 2.

The picture is thus one of a sizeable turnover with the net result of

significant increased employment activity.

I I f t I

y

I t I i I ~

I f I , I t t a , ,

- 24 -

The increased employment activity of Capil families which occurred between

Wave 1 and 2 appears to be a continuation of a trend identified in the First

Evaluation Report, which noted changes in employment and income between time

of application for a loan and the Wave 1 interview.

'The number of Loan group couples in the workforce grew from 7 per cent

to 30 per cent with a corresponding reduction in the numbers of couples

in receipt of unemployment benefits. The proportion of sole parents in

the workforce grew from 4 to 16 per cent.'

(p 4, First Evaluation Report.)

Employment Preferences

This section examines the employment preferences of Capil group families.

Stated employment preferences are of assistance in assessing whether the

marked increases in employment which occurred between Wave 1 and Wave 2

indicate that most families have achieved their desired levels of labour

market involvement, or whether Capil group families desire to further'

increase their employment and incomes.

As the respondent's own preferences are more likely to be an accurate guide

to behaviour than the respondent's statement on the preferences of their

partner, only the views of respondents are analysed.

All three categories of respondents shown in Table 2.6 expressed a

preference to greatly increase their current involvement in paid employment.

Only 26 per cent of female sole parents preferred not to be working, a

substantially lower figure than the 56 per cent not working at the time of

the Wave 2 interview. Sole parents indicated a preference for incremental

increases in work activity. One third of those working part-time would have

preferred to work full-time, while one third of those not working would have

preferred to work part-time.

I ,I, t I' t a, t' I' ,1, t, I, t

I

- 25 -

Table 2.6: Current job status and preferred job status of Capil group, percentage distributions

Part- Not in Family and Full- time/ labour Total job status time Casual force N ,

Female sole parents Current 15 29 56 173 100 Preferred 31 43 26 173 100

Males in couple families Current 43 6 51 141 100 Preferred 73 6 21 141 100

Females in couple families Current 7 26 67 81 100 Preferred 16 41 43 81 100

Among the Capil couples, the husband was the survey respondent in 64 per

cent of cases and the wife in 36 percent. The male respondents expressed a

strong preference for full-time work; 73 per cent would have preferred to

work full-time compared to the current level of 43 per cent. Few men wished

to work part-time. The female respondents from couple families indicated the

lowest preference for additional work. Two-thirds preferred to continue

their present level of work force involvement and only 16 per cent expressed

a preference to work full-time.

It is interesting to note that there were substantial numbers who would like

a job but were not actively seeking work when interviewed. To the extent

that it is lack of labour market opportunities that discourage them from

seeking employment, these people could be expected to seek work if jobs

become available.

The employment preferences of couples where neither worked were examined in

more detail to see whether either or both parents wanted employment.

Information on 87 such couples shows that 55 of the men and 25 of the women

wanted employment. The preference of only 25 women (29 per cent) to be

employed is low compared with sole parents and other married women in the

Capil group. It is consistent, however, with other research findings

suggesting that a proportion of wives withdraw from the labour force if

their husbands become unemployed. In 30 families (35 per cent) where

I I t I "

a t, I "

t, I, I I , t , 'I

• I

"

U

- 26 -

neither parent was employed, the preference of both parents was to stay out

of the labour force. As discussed in the next section health problems were

frequently mentioned as the principal obstacle to employment by these

couples.

In the Wave 2 interview, respondents who were not working and not looking

for work were asked about perceived barriers to employment. This helps to

inform judgement about whether they are likely to be able to change their

employment in the way they want and may indicate what kinds of labour market

related programs will affect the employment levels of these families.

The presence of young children is a potential barrier to employment,

primarily for women. Among the Capil families, 70 per cent of wives were not

employed compared to 56 per cent of women who were sole parents (Table 2.7).

Table 2.7: Employment status by age of youngest child: Capil group, Wave 2

Employment status

Couples

Both employed

Male employed

Female employed

Neither employed

TOTAL ,

N

Sole parents

Employed full-time

Employed part-time

Not employed

TOTAL ,

N

Age of Youngest Child

Under 5 5-11 11+ , , ,

19

41

4

36

100

120

12

29

59

100

34

33

24

7

36

100

72

15

27

58

100

74

30

10

o

60

100

30

25

23 .

52

100

60

Total ,

25

31

5

39

100

222

18

26

56

100

168

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" t "

., I I I I

- 27 -

Surprisingly, the employment status of women in both couple and sole parent

families was not affected by the age of their youngest child. If anything,

those with children under the age of 5 were slightly more likely to be

working. Among working sole parents, however, those whose youngest child was

aged eleven or more were more likely to be working full-time. Age of

youngest child may therefore mainly affect the extent to which sole parents

work full or part-time and to have relatively little impact on whether or

not sole parents are employed.

Capil families who said they were not employed or seeking work were asked

whether each of the factors in Table 2.8 was very important, somewhat

important or not important at all as reasons for not working or looking for

work. The same questions were asked in respect of spouses who were not

working or looking for work. Respondents were also asked what was the most

important reason that they were not working and their spouse was not

working. These data are analysed in Tables 2.8 and 2.9 according to the sex

of the person to which the information applies. This means the reports are

not always self reports but reports of the spouse. Table 2.8 shows the

proportion of men and women for whom each separate factor was a very

important or somewhat important reason for not working. It shows that the

needs of children were the factor most often mentioned by all three groups

of women, with about 90 per cent mentioning this reason.

Table 2.8: Stated reasons for not working and not seeking work, Capil group, Wave 2

COUPLES

Women Women, SOLE with partner PARENTS

working not Stated reason Ken partners working for not working n = 40 n = 60 n = 80 n = 77

Needs of children 25 93 86 88 Child care problems 13 55 56 59 Health problems 85 33 57 45 Loss of social security 45 12 41 70 Lack of work 50 52 52 66 Lack of training 38 42 54 67 Other reason 18 12 11 9

I ,I I' t , ,I I' I a I

I "

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Health problems were the most often stated barrier to employment by men in

couples. other frequently mentioned barriers - particularly among sole

parents - were loss of social security pensions, lack of jobs and lack of

training. Availability of child care was seen as a problem by more than 50

per cent of women in all three groups.

, Table 2.9: Most important reason for not working and not seeking work, Capil group, Wave 2

Most important reason for not working

Needs of children Child care problems Health problems Loss of social security Lack of work Lack of training Other reason

TOTAL % N

Men

8 0

70 0 8 2

12

100 40

COUPLES

Women with

working partners

75 2 8 0 5 3 7

100 60

Women, SOLE partner PARENTS

not working Women

53 51 0 4

27 18 4 9 4 4 7 10 5 4

100 100 80 77

When Capil families were asked to specify the most important of these

barriers the needs of children and health problems became much more

predominant. Among women, those with a working partner were more likely than

other women not working to cite the needs of children while sole parents and

women whose partners were not working were more likely to cite health

reasons. Among men not working, the overwhelmingly most important reason

given was health problems. Lack of training or jobs and child care problems

were not often given as the main barrier to employment, although, as noted

earlier (Table 2.9) they are frequently contributing problems. Loss of

social security payments were the main barrier for only 9 per cent of the

sole parents.

This discussion indicates that the concerns of parents about their

children's needs and health problems among those not seeking work may

I ,', I I, t I, I' t I, I ,I I' I I 'I I I I I I

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prevent further major increases in employment among the Capil group unless

their concerns are addressed. These concerns are no doubt linked with

problems associated with child care, lack of job opportunities and lack of

training, but, as they are expressed as concerns over and above these

'traditional' barriers, a more far reaching approach may be required.

Incomes

Changes in 'Real' Income

To assess changes in real income, Capil and .renter families net incomes at

the time of the Wave 1 interview have been adjusted according to CPI

movements. Table 2.10 summarises the comparison between incomes at Waves 1

and 2.

,Table 2.10: Net weekly family income, Waves 1 and 2, Capil and renter groups (per cent)

Net weekly family income Capil Group Renter group $p.w. W1 W2 W1 W2

Less than 200 24.7 25.6 38.6 39.5

201-300 60.5 42.2 48.2 38.9

301-400 11.4 16.6 9.0 15.0

400+ 3.5 15.6 4.2 6.6

TOTAL , 100.0 100.0 100.0 100.0 N 405 398 166 167

Mean 242.31 284.62 229.87 246.61 Median 235.0 253.5 228.6 224.0

* Note 1: Wave 1 incomes adjusted, according to CPI movements, to price levels at Wave 2.

2: Family income is the income of husband and wife but not the income of any other person in the household

I I I I 'I I

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As shown for Capil families the mean income at Wave 2 was $285 per week, a

17.5 per cent increase since Wave 1. For renter families average income was

$247 per week, an increase of 7.3 per cent, which is partly the result of

the shorter gap between interview dates as discussed previously. Where the

Capil group does show it has gained to a greater degree than the renter

group is in the distribution of net weekly income. The Capil group had

about 26 per cent of families receiving less than $200 per week compared

with nearly 40 per cent of renter families. Similarly about 16 per cent of

Capil families received more than $400 per week compared with only 7 per

cent in the renter group.

It should be emphasised that both groups of families are still predominantly

a low income group. Nevertheless both groups have experienced gains in

income in real terms, the Capil group to a greater extent.

Income Changes in Relation to Average Weekly Earnings (AWE)

Comparing Capil and renter families' incomes to movements in average weekly

earnings (AWE) indicates the extent to which such families are 'keeping

pace' with earnings generally. Table 2.11 shows that both groups of

families improved their overall position relative to AWE since Wave 1.

Table 2.11: Family income as a proportion of AWE for Capil and renter families at Waves 1 and 2 (per cent)

Per cent Capil of AWE W1

0-25 1.7

26-50 60.2

51-75 33.1

76-100 3.7

101-150 1.2

150+

TOTAL % 100.0 N 405

Mean 50.0% Median 48.0%

Group W2

3.0

43.0

33.9

13.1

6.3

0.8

100.0 398

60.0% 54.0%

Renter W1

1.3

60.6

31.6

5.8

0.6

100.0 155

50.0% 48.0%

group W2

1.2

56.3

29.9

9.0

3.6

100.0 167

52.0% 48.0%

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The mean income of Capil families increased from 50 per cent to 60 per cent

of AWE, while renter families have experienced an increase from 50 per cent

to 52 per cent on average. In dollar terms, AWE was $471.60 for the last

quarter of 1987 and the average Wave 2 family income of Capil families was

$285 per week.

There has been some polarisation of Capi1 families as a slightly higher

proportion (3 per cent) now receive incomes at less than 25 per cent of AWE

and greater proportions receive incomes at 51-75 per cent, 76-100 per cent

and at more than 100 per cent of AWE. Capil families have experienced gains

in income greater than renter families with 54 per cent receiving more than

50 per cent of AWE compared with only 43 per cent of renter families.

Further indicators of relative incomes come from a national survey conducted

by the ABS in 1986. It found that around 64 per cent of couples with

children and 10 per cent of one-parent families had family incomes above

AWE. As set out in table 2.11, 7 per cent of Capil families and under 4 per

cent of renter families had Wave 2 family incomes above AWE.

Income Changes According to Birthplace

Analysed according to birthplace, the changes in income experienced by Capil

families show some differences. Table 2.12 shows that all family groups

experienced real gains by Wave 2 with the Asian group exhibiting the highest

mean level of income at $332. All groups showed a slight increase in the

proportion of families on the lowest incomes, at less than $200 per week and

all showed large increases in the proportions receiving more than $400 per

week.

I I I I 'I I I I ,I I , I I I I I I J I I

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Table 2.12: Net weekly family income of Capil families, Waves 1 and 2, according to place of birth (per cent)

Australian . European Asian Net weekly income $p.w. W1 W2 W1 W2 W1 W2

Less than 200 29.4 30.3 27.0 28.0 6.9 8.3

201-300 57.8 41.9 53.3 40.6 80.6 44.4

301-400 9.5 15.4 15.6 13.5 9.7 25.0

400+ 3.3 12.0 4.1 17.8 2.8 22.2

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 N 212 122 72

Mean 236.72 270.52 239.93 280.42 262.76 332.21 Median 226.0 233.5 229.8 249.0 261.6 290.0

At Wave 2 both the Australian and European group contained about 30 per cent

of families receiving less than $200 per week compared with only 8 per cent

of the Asian born group. Over 22 per cent of Asian born families received

more than $400 per week compared with 18 per cent of European born and 12

per cent of Australian born.

Examination of Table 2.13 shows that there were far greater proportions of

decreased incomes for European and Australian born families than for Asian

born, and only a slightly greater proportion of increased incomes for Asian

families. The greater size of flows in both d,irections for Australian and

European born families and the very small proportion of large decreases for

Asian born families explains the results summarised in Table 2.12.


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Table 2.13: Change in income Wave 1 to Wave 2 for Capil families, according to place of birth (per cent)

Change in income

Decrease greater than $50 per week

Decrease up to $50 per week

Increase up to $50 per week

Increase greater than $50 per week

TOTAL , N

Australian European Asian

13.0 17.8 4.2

30.0 24.6 33.3

22.7 24.6 23.6

34.3 33.1 38.9

100.0 100.0 100.0 212 122 72

As shown in Table 2.13, 57 per cent of Australia families experienced

increased incomes and 13 per cent had incomes that dropped by more than $50

per week; the European group comprised 58 per cent who experienced increases

and 18 per cent who lost more than $50 per week; while the Asian born group

comprised nearly 63 per cent with increased income and only 4 per cent who

lost more than $50 per week. The reasons for those outcomes lies largely in

the family composition of each grouping as described earlier. The following

analyses will demonstrate how family type and employment status are the main

determinants of such income movements.

Income Changes and Family Type

While the Capil group of families in particular, experienced gains in income

those gains have not been evenly distributed across the group. Table 2.14

shows the distribution of net income for both Capil and renter families,

according to family type .•


- 34 -

Table 2.14: Net weekly family income of Capil and renter families, Waves 1 and 2, according to family type (per cent)

Capil Group Renter Group Net weekly Couple One-parent Couple One-parent income families families families families $p.w. W1 W2 W1 W2 W1 W2 W1 W2

< 200 4.0 5.0 44.9 50.8 14.5 14.7 58.9 59.8

201-300 73.6 46.2 47.8 48.4 63.2 44.0 35.6 34.8

302-400 16.0 22.0 6.8 10.0 13.2 29.3 5.6 3.3

400+ 6.5 26.9 0.5 1.7 9.2 -12.0 2.2

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N 224 219 181 179 74 75 92 92

Mean 274.95 340.94 210.47 215.70 262.10 301.19 202.67 202.11 Median 258.5 300 206.8 200 250.3 279 187.8 188

As shown, couple families in both Capil and renter groups had increases in

real incomes, on average. Mean income for Capil couples rose to $341 per

week and to $301 per week for renters, respective increases of 24 per cent

and 15 per cent. However, for one-parent families there was virtually no

increase in average real income. Mean income for Capil one-parent families

increased by only 2.5 per cent and the proportion of families receiving less

than $200 per week increased from 45 per cent to 51 per cent. The median

income, or the amount which divides the whole group into halves, actually

declined between Wave 1 and Wave 2, reflecting an increase in the numbers on

the lowest levels of income.

At the same time, the proportion of one-parent families in the Capil group

that received higher incomes increased slightly while in the renter group it

stayed at about the same level (5.5 per cent) although some families moved

into the $400+ per week bracket. In contrast, couple families in both

sectors showed greatly increased proportions on higher incomes with Capil

families receiving more than $400 per week growing from 6.5 per cent to 27

per cent.

'Table 2.15 demonstrates the extent of increased and decreased incomes for

each family type.


- 35 -

Table 2.15: Change in income Wave 1 to Wave 2 for Capil and renter families, according to family type (per cent)

Change in income

Decrease greater than $50 per week

Decrease up to $50 per week

Increase up to $50 per week

Increase greater than $50 per week

TOTAL , N

CAPIL GROUP Couple

families

7.3

25.2

22.9

44.5

100.0 218

One-parent families

19.6

33.5

24.0

22.9

100.0 179

RENTER GROUP Couple

families

6.8

32.4

31.1

29.7

100.0 74

One-parent families

17.4

50.0

20.7

12.0

100.0 92

As shown, around two-thirds of couple families experienced increases in real

net income, with 67 per cent of the Capil group and 61 per cent of renter

couples showing gains. Forty-five per cent of couples in the Capil scheme

increased their income by more than $50 per week. A small part of this gain

is due to respondents (sole-parents at Wave 1), who by Wave 2 had married an

employed person.

By contrast, 53 per cent of one-parent families in the Capil group, and 67

per cent of those renting experienced declines in income, with nearly 20 per

cent of the Capil one-parent families losing more than $50 per week The

Capil group shows the greatest variation as, at the other end of the scale,

23 per cent experienced gains of more than $50 per week compared with only

12 per cent in the rental group.

Additional analysis of the losses in real income of one-parent families is

contained in Appendix A. It shows that decline in the value of social

security payments is part of the explanation of small losses of income with

larger losses being attributable to reduced employment, cessation of

maintenance income, changing from a two-parent to one-parent family and loss

of eligibility for sole parents pension.


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Table 2.16: Change in income Wave 1 to Wave 2 for Capil families, according to principal source of income at Wave 2 and family type (per cent)

Couple families One-parent families Principal source Net Net Net Net of income increase decrease Total increase decrease Total

Wages & salaries 83.2 16.8 100.0 78.7 21.3 100.0

Unemployment benefit 45.5 54.5 100.0 36.4 63.7 100.0

Supporting parent benefit n.a. n.a. n.a. 36.6 63.5 100.0

Widows pension n.a. n.a. n.a. 35.5 64.5 100.0

Invalid/sickness benefit 43.4 56.5 100.0 20.0 80.0 100.0

Table 2.16 looks at the principal source of income at Wave 2 of families who

had experienced gains or losses. As shown, those whose principle source of

income was wages and salaries gained in 83 per cent of cases for couples and

79 per cent for one-parent families.

In all cases where families were on social security payments at Wave 2 a

majority experienced reduced income. Fifty-five per cent of the couples on

unemployment benefit had a lower real income than at Wave 1 •. Around two

thirds of one-parent families had less income in real terms than at Wave 1.

These figures, of course, reflect both changes in the real incomes of

families on social security at both Wave 1 and Wave 2, and the change in

income which occurs when a family moves from employment to unemployment

benefits or supporting parents pension i.e. from wages at Wave 1 to social

security at Wave 2.


- 37 -

Income Change, Employment Status and Family Type

As discussed earlier Capil families experienced substantial increases in

employment between Waves 1 and 2. For couples in the Capil scheme, 60 per

cent had one or both adults working at Wave 2, while for one-parent families

only 19 per cent worked full-time and 56 per cent still had no employment,

although these figures represent increased labour market involvement

compared with the situation at Wave 1.

The income characteristics resulting from the interaction of family type and

employment status for Capil families are summarised in Table 2.19.

Table 2.17: Net weekly income of Capil families at Wave 2, according to employment status and family type (per cent)

Net weekly income ($ per week) Less

Family than 201- 301- Mean employment status N 200 300 400 400+ ($p.w. )

Couple families Both work 56 9.0 10.7 80.4 429 Male only works 70 1.5 32.4 46.1 20.0 341 Female only works 10 55.5 33.3 11.1 331 Neither works 89 11.2 78.6 10.1 247

One-parent families Full-time work 35 2.9 42.9 45.7 8.6 314 Part-time work 44 45.5 50.0 4.5 220 -Not working 100 70.7 29.3 179

Average income ranges from $429 per week for couples where both adults are

working to $179 per week for one-parent families with the parent not

working. As the largest group of one-parent families, 56 per cent, are of

this type and over 70 per cent of these receive less than $200 per week, it

is not surprising that Table 2.14 shows so little improvement in the incomes

of this group overall. By contrast, nearly 25 per cent of couple families

have both parents working and over 80 per cent of these receive incomes

greater than $400 per week, thereby contributing to the considerable gains

for this group shown in the same table.

I I I I· I I I I I I I I I I I I I I I I

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Summary

In summary two factors contributed to a substantial increase in the incomes

of many Capil families. Most importantly, there was a marked increase in

employment. The percentage of couples with both partners employed, for

example, rose from 5 to 25 per cent of married couples •.

Secondly, among Capil borrowers the incidence of sole parents repartnering

far exceeded the incidence of couples separating. Fifteen per cent of sole

parents repartnered while 3.5 per cent of couples separated. Repartnering

generally resulted in a rise in family income through increased labour force

participation and the income of the partner.

Both factors were more evident among Capil families than among renters.

The average income of Capil families thus increased both in real terms and

relative to Average Weekly Earnings. Changes in income and capacity to

repay were not uniform between groups, however, and some 13 per cent of

families - particularly sole parents - experienced a decline in real income

of more than $50 per week.


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Appendix A: Income Losses of Sole Parents

The circumstances of the 94 sole parents whose real incomes declined between

Wave 1 and Wave 2 were examined more closely to try to identify the reasons

for the change.

A major reason for a small decline in the incomes of all of the families

dependent on social security pensions relates to the timing of the first and

second waves of interviews. The second round of interviews with loan group

families took place in October, November and December 1987, thereby missing

the six monthly increase in indexed pensions and benefits which has been

paid each fortnight since December 25th. First round interviews, on the

other hand, were mostly undertaken in the first quarter of 1986, just after

an indexation increase.

The indexed increase in December 1987 was $3.95 per week for one-parent

families and $6.50 for couples. In comparison, the loss of real income

between February 1986 and November 1987 was $1.97 for sole parents with one

child and $2.77 for couples with one child. A sole parent with two children

would be recorded as losing 44.47 per week over the same period.

More significantly for sole parents, the second wave of interviews was also

largely completed just prior to the largest increase in payments for

pensioner children (a non-indexed payment) since they were introduced. In

December 1987, the 'family package' raised the weekly rate for children in

pensioner, beneficiary and low income working families from $17 to $22 for

each child under 13, and to 428 for those aged 13 to 15.

Decline in the value of social security payments thus accounts for some of

the declines in real income between Wave 1 and Wave 2, but not among those

whose real income declined by more than $50 per week. For this group,

causes of income change were broadly groups into those associated with a

change in family composition, reductions or cessation of income from

employment or maintenance, and reduction in social security payments due to

a change in eligibility rules. Estimates of the precise number affected by

these factors are difficult to make, however, as the level of income from

each source was not collected at Wave 1.

I I I I I I I I I I I I I I I I I I

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There were 35 sole parents at Wave 2 whose income, adjusted for price

change, was more than $50 below that at Wave 1 (see Appendix Table 1).

Change in marital status was associated with a drop in income for 4 sole

parents who were married at Wave 1 and therefore eligible for a higher rate

of pensions or had an employed spouse. A further 7 families had fewer

children at Wave 2 than Wave 1, while a number of others had children who

changed status from full-time student to employed or unemployed. Such

changes can result in a reduced income for the parent as payments may cease

(e.g. maintenance) or are paid directly to the young person (e.g. Austudy,

or Unemployment Benefit).

Income from employment fell for more than a .third of the sole parents (with

a large fall in real income) as 9 ceased employment and others reduced their

hours or took jobs with lower hourly rates. Maintenance from an ex-spouse

was recorded as a source of income of 8 sole parents at Wave 1: 4 at Wave 2.

As mentioned, in some instances reduction or cessation of maintenance may

have been in accord with an agreement about children leaving school, turning

18 etc.

A further reason for a substantial fall in the incomes of sole parents was a

change in the definition of eligibility for sole parent pension and Class A

widows pension. After September 1986 full-time students aged 16 and over no

longer enabled a parent to claim a sole parent or widows pension, so that,

apart form those groups protected by 'phasing in' provisions, some sole

parents lost $12 mothers/guardians allowance, $17 per child and $7.40 from

the rate difference between pensions and unemployment benefit. The harsher

income test for unemployment benefits can result in additional losses for

sole parents with income from maintenance or employment.

Seven of the loan group sole parents with an income decline of $50 or more

had a youngest child aged 16 or over and may thus have been affected by the

new eligibility rules, although estimates of the amounts they lost are

complicated by such factors as cessation of maintenance or employment (3),

and being on other payments at Wave 1 (Unemployment Benefit and Invalid

Pension).


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Appendix Table 1: Loss of income between Wave 1 and Wave 2 for Capil

families who were one~parent families at Wave 2

Change in income No.

Decrease of $100 or more 14

Decrease of $50 to $100 21


Decrease .of $10 to $20 13


TOTAL 94

Note: Loss of income is calculated by adjusting Wave 1 income by CPI change

since the quarter in which the interview was conducted and subtracting

it from income at Wave 2can result in additional losses for sole

parents with income from maintenance or employment.

Seven of the loan group sole parents with an income decline of $50 or more

had a youngest child aged 16 or over and may thus have been affected by the

new eligibility rules', although estimates of the amounts they lost are

complicated by such factors as cessation of maintenance or employment (3),

and being on other payments at Wave 1 (Unemployment Benefit and Invalid

Pension).

Appendix Table 1: Loss of income


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CHAPTER 3

EXAMINING HOUSING REPAYMENTS AND COSTS UNDER THE CAPIL SCHEME - T. Barton

Introduction

Under the Capil Scheme, the mortgage is structured such that loan repayments

are pegged to 25 per cent of family income. It is expected that loan

repayments will be adjusted in line with changes in family income. This

means that in the event of family income increasing or decreasing, the

proportion of family income outlayed on mortgage payments should remain the

same.

This chapter looks at how well this aspect of Capil is working. The issues

addressed in this Chapter are:

what proportion of their income Capil families are actually spending on repayments

- who are the families spending more or less than 25 per cent of their income on their loan

the impact on mortgage repayment of income level and changes in real family income

- the differential impact on mortgage of family type and ethnicity

- the contrast in housing costs for Capil families compared to those for renters

Mortgage Repayments

Since Capil loan repayments are pegged to no more than 25 per cent of family

income, it is not surprising that the average percentage of income spent on

mortgage repayments for the Capil group as a whole is 24%. This average,


- 43 -

however, hides much variation. OVer 16 percent of Capil recipients are

spending a not inconsiderable percentage of income on their loan repayments.

Table 3.1: Mortgage as percentage of family income; Capil group Wave 2

Percentage of Income pw

0-15%

16-20%

21-25%

26-30%

31% +

TOTAL

Proportion of Capil group N %

56 14.1

71 17.8

127 31.9

78 19.6

66 16.6

398 100.0

As Table 3.1 shows, while the majority of families are paying around 25 per

cent or less of their family income per week on their repayments, with a

significant proportion (14%) paying only 15 per cent or less, one sixth of

the sample are spending over 30 per cent per week. Fully half the Capil

group indicated they were paying 21 to 30 per cent of their incomes on Capil

repayments.

Further analysis by family type reveals one-parent families are more likely

than couples to be paying more than 25 per cent of income on


- 44 -

their mortgage. Married couple families, on the other hand, are twice as

likely as one-parent families to be paying 15 per cent or less of their

weekly income on mortgage repayments. (See Figure 3.1).

In Figure 3.2, mortgage as a percentage of income is compared for the three

ethnic groups in the capil scheme. OVer two-thirds of the Australian born

families are paying 25 per cent or less of their income on mortgage

repayments, with 14 per cent paying 15 per cent or less. The pattern is

very similar for capil's European born families.

For Asian born families, however, the distribution is markedly different.

The Asian born families are more likely to be spending higher proportions of

their family income on their repayments than either the Australian or

European born families. Nearly half the Asian born families (46%) are

making repayments of more than 25 per cent of their family income, and half

of those are outlaying more than 30 per cent per week. (See Figure 3.2).

For the Capil group as a whole then, while the average Capil mortgage

repayment (24\ of family income) is almost consistent with the Ministry's

policy for repayments of 25 per cent of income, the data reveal that couples

tend to spend lower proportions of their income on repayments than do one

parent families, while Asian born families are much more likely to be paying

a higher proportion of their income on repayments than either the Australian

or European born families. In terms of cash weekly repayments Asian born

families had the highest average weekly repayment for the three groups,

$81.00 per week, followed by European born families ($64.00 per week) and

Australian families ($59.00 per week). The average repayment in dollar terms

for the capil group as a whole was $64.00 per week.

The question arises as to why there is such variation in the proportion of

family income spent on mortgage repayments? How has this situation arisen?

To explain these variations, it is useful to look at patterns of repayment

by current net family income. In addition, the relationship between the

- - - - - - - -' - - - - - - - - - - - -

CD .!! ·e tl. c CD

.9 '0 & J! 55

l

Mortgage as a Percentage of Income by Family Status Loan Group

4OX~-------------------------------------------------------------------.

30%

20%

10X

D Sole Parents

ox" I). ).~ '" ). ~ L ). ~ ). ~ ). ~ I~CouP'es 0-15% 16-20% 21-25% 26-30% 31%+

Mortgage Repayments a8 a Percentage of Income

" (j) C JJ m ~

11:=> lJ1

- - - - - - - -, - - - - - - - - - - - -

fI)

.!! 'e If c CD

.9 "0 &

j

Mortgage as a Percentage of Income by Ethnicity Loan Group .

40%------------------------------------------------------------------,

30%

20%

10%

D Australian

OX" '" ~ • """'" DElropean ),~ ~ ), ~ ), ~ ,~Asian

0-15% 16-20% 21-25% 26-30% 31%+

Mortgage Repayments as a Percentage of Income

11 (j) c ::n m fA I\)

~ 0'\


- 47 -

changes in real family income incurred by Capil families and repayment

levels at Wave 2 is aiso investigated. Before proceeding to these issues,

Figure 3.3 presents a summary of average weekly income levels for selected

Capil groups.

Average Weekly Family Income Levels

OVer half (56 per cent) of Capil families derive their major source of

family income from government benefits, while 44 per cent of families

receive income in the form of salary or wages (see Chapter 2). One-parent

families were almost twice as likely as married couple families to be in

receipt of a benefit (74 per cent and 42 per cent respectively).

consequently, as shown in Figure 3.3, it is not surprising that one-parent

families averaged a lower weekly family income than couple families ($216.00

compared to $341.00). (See Figure 3.3).

Also shown is the high level of average weekly income for Asian born

families compared to European and Australian born families and for capil as

a whole. This explains somewhat their high average weekly repayment ($81.00

per week), compared to European and Australian born families ($64.00 and

$59.00 per week respectively.)

Further examination of current family income reveals nearly two-fifths of

those families with income over $300 per week were paying 15 per cent or

less of their income on mortgage repayments. Conversely, among those

families with weekly income of $200 or under, just under one third were

paying over 30 per cent of their income on repayments. (See Table 3.2)

------------,--------Average Weekly Income Levels of Selected Capil Groups

Couples

Sole Parents

Australian

European

Asian

Total Gapil Group

. . • • . $0 $50 $100 $150 $200 $250

Average Weekly Income Level

-

• $300

. $350 $400

11 (j) C :0 m ~ CA)

"'co


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Table 3.2: Family income by percentage of income spent on mortgage repayments

Net family income Wave 2 ($ )

Percentage of income on mortgage

0-15%

16-20%

21-25%

26-30%

30% +

TOTAL % N

$200 &

less

1.0

8.8

29.4

30.4

30.4

100.0 102

$201-$250

2.2

17.2

52.7

20.4

7.5

100.0 93

statistically significant at P<.OOOl

$251-$300

5.3

18.7

48.0

18.7

9.3

100.0 75

$301 &

over

38.3

25.0

9.4

10.9

16.4

100.0 128

Percent all Capil N %

56 14.1

71 17.8

127 31.9

78 19.6

66 16.6

100.0 398

Given Capil's policy pegging payments to 25 per cent of income, it could be

expected that a far greater majority of recipients would be paying 21 to 25

per cent of income on mortgage, regardless of income level, than appear

across all four income groupings.

Overall, families on incomes of $200 or less per week were more than twice

as likely as families with incomes over $300 per week to be paying more than

25 per cent of their weekly income on mortgage repayments (61 per cent

compared to 27 per cent). Families with the lowest incomes were also almost

twice as likely as families on the highest incomes to be paying more than 30

per cent per week on repayments. The data reveal then, an inverse

relationship between level of family income and the proportion of income

spent on loan repayments. It would therefore appear that mortgage

repayments are not being adjusted or maintained in accordance with income

levels.

1 ,I

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Figure 3.4 provides a composite of characteristics of Capil families paying

15 per cent or less of their income on their loan. As shown these families

are much more likely to be married couple families than one-parent families.

The most striking characteristic shown in Figure 3.4 is the relatively high

proportion (nearly two-fifths) of those families with income over $300 per

week who are in this group (mostly couples). (See Figure 3.4).

They are also substantially more likely to be wage or salary earners than

government beneficiaries. Asian born families, were the least likely of the

ethnic groups to be paying 15 per cent or less of income on mortgage

payments.

On the whole, the families paying the smaller proportion of family income on

their loan repayments tend to be married couple families of European or

Australian background. They are also more likely to be employed and

receiving the higher levels of weekly income.

In contrast, for those families who are spending higher proportions of

their income on mortgage, the picture is somewhat different and more complex

than for those paying the lowest proportions. As Figure 3.5 shows,

proportionately more one-parent families than couples are to be found in

this group. Again the most striking characteristic to emerge is that for

weekly income. Nearly a third of families with income of $200 or less per

week were spending a high proportion of income on their loan (mostly one

parent families). However, a significant number of families with income

over $300 per week were also making these high repayments (mostly couples).

There was little difference between the proportion of wage and salary

earners and the proportion of government beneficiaries to be found in this

group. Figure 3.5 reveals then, that among those families paying a high

proportion of income on mortgage are those on the lowest incomes dependant

on government benefits, especially one-parent families. (See Figure 3.5).

On the other hand, this high repayment group also includes Asian born

families (mainly couples) who were the most likely of the ethnic groups to

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FIGURE 3.4

Mortgage as a Proportion of Income Who is paying 15 per cent or less?

One Paren Families ~79)

Couple Families (219)

Australian Families 208)

European Families ~1E ~

Asian Familkrs (72)

<$200 Weekly Income ~02)

>$300 Weekly Income (128)

Wage or Salary ~75)

~overnment Benefits (223)

Total capil Group (~98)

• • 0% 10% 20% 40%

Percentage paying 15% or less

Number in brackets refers to number of cases percentage was based on

I ,I

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FIGURE 3.5

Mortgage as a Proportion of Income Who is making the high repayments (30% plus)?

One Parent Families (179)

Couple Families (21~)

Australian Families 208)

European Families (118)

Asian Families (72)

<$200 Weekly Income (102)

>$300 Weekly Income (128)

wage or Salary (175)

Government Benefrts ~23)

Total cap/I Group (398

• • • 0% 10% 20% 30% 40%

Percentage paying over 30%


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- 53 -

report they were paying more than 30 per cent of income on their loan

repayments. As previously noted, these families are also more likely to be

employed and have the higher average incomes.

On the whole then, families paying a high proportion of income on loan

repayments tend to be, a) families on the lower income levels, one-parent

families and on government benefits and b) Asian born families, employed and

on higher income levels •

Changes in Family Incomes and Impact on Mortgage Repayments

OVerall, 58 per cent of Capil families had experienced an increase in real

family income since last interviewed. Over two-thirds of couple families

(67%) compared to less than half (47%) of one-parent families had increased

their real family income. Again, the question arises as to whether these

increases or decreases in real family income translated into changes in

mortgage repayments? Table 3.3 reveals a strong association between change

in real income and the proportion of income spent on mortgage.

Table 3.3: Change in real family income since Wave 1, according to percentage of income spent on mortgage repayments

Percentage of income on mortgage

0-15%

16-20%

21-25%

25-30%

30% +

TOTAL % N

Total N=397

Decrease of $50 or

more per week

3.9

2.0

31.4

23.5

39.2

100.0 51

CHANGE IN REAL FAMILY INCOME

Decrease of up to $50 pw

2.6

12.2

40.0

27.8

17.4

100.0 115

Increase of up to $50 pw

7.5

17.2

49.5

19.4

6.5

100.0 93

Statistically significant at P<.OOOl

Increase of $50 or

more per week

31.2

29.0

13.8

11.6

14 .5

100.0 138

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- 54 -

Just under one-third of those families who had experienced a large increase

in real family income ($50.00 or more per week) were outlaying 15 per cent

or less of their income on loan repayments. On the other hand, almost two

fifths of families whose real income had decreased by over $50.00 per week,

were paying more than 30 per cent of income on their mortgage.

overall, two-thirds of families with the larger decrease in real family

income (decrease of $50.00 or more per week) were paying more than 25 per

cent of family income on repayments. This was so for only just over one

quarter of those families who had experienced an increase in real income of

over $50.00 per week.

As with level of income, once again the data reveal an inverse relationship

between a change in income and the proportion .of family income outlayed on

loan repayments. Clearly, an increase in real income resulted in lowering

the proportion of income spent on mortgage payments. Likewise, a decrease

in real income increased the proportion of income outlayed on loan

repayments.

These data strongly suggest that for a number of Capil families, repayments

are not adjusted in line with income changes. It seems one-parent families,

with lower incomes, are those least likely to have experienced larger

increases in income since Wave 1. Consequently, they tend to be paying a

higher proportion of income on mortgage than couple families. With the

exception of Asian born families, for couples increased employment (Chapter

2), greater increases in income levels and a higher average income suggest

again, mortgage repayments are not adjusted in line with these changes,

resulting in decreased proportions of income devoted to mortgage. Clearly

family type, especially for Australian and European born families, is an

important factor in explaining the distribution of mortgage repayments as a

proportion of income.

For Asian born families the picture is somewhat different. Although nearly

all Asian families consisted of married couples, on above average income,

only a small number of families tended to pay less than the expected

I I f I t I , I I I I I I f I I , I I t

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proportions of their income on mortgage repayments. Unlike other couples,

Asian couples appear to be re-adjusting their repayments to pay a higher

proportion of their income on their loan. Thus, it appears Asian families

are attempting to reduce their loan commitment more quickly than other Capil

families.

Comparison of Housing Costs: Capil and Renter Groups

This section looks at how Capil families compare with the renter group

families in terms of their weekly outlay on accommodation.· Entry into home

ownership brings with it added housing costs such as rates and house

insurance, two mandatory items of housing costs that need to be taken into

consideration when comparing the proportion of family income spent in

homeownership and rent where these costs are often hidden. (For the Capil

group, 'housing costs' within this section refers to weekly mortgage plus

weekly cost of rates and house insurance.)

As previously noted, the average mortgage payment for the Capil group as a

whole was $64.00 per week. However, when rates and house insurance costs

are added, the average weekly cost of housing rises to $75.81 per week. On

average, these costs add approximately 5 per cent to housing costs for the

Capil group.

The average proportion of income spent on rent for the renter group as a

whole is 20 per cent of family income for Ministry of Housing tenants, 34

per cent for private renters and 23 per cent for the renter group as a

whole. In dollar terms, the average weekly rent payment was $83.00. Table

3.4 shows both the percent distribution of weekly housing/rent costs and

average weekly payment in dollar terms for both the Capil and renter groups,

according to tenancy.

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Table 3.4: Weekly Housing Costs: Capil and Renters by tenancy.

Average Average Average Weekly weekly MOH weekly Private weekly payment Capil payment Renter payment Renter payment

$ % $ % $ % $

$50 or less 15.1 46.07 71.0 35.24 23.8 29.43

$51-$75 52.6 63.98 25.8 60.63 11.9 67.25

$76-$100 16.5 83.73 3.2 84.25 35.7 89.17

$101 + 15.8 135.23 28.6 126.38

(Average (Average (Average $75.81 $43.37 $82.96

TOTAL % 100.0 100.0 100.0 N 406 124 42

The majority (53 per cent) of Capil families are paying between $51 and $75

per week on housing costs, with 15 per cent outlaying $50 per week or less.

Nearly three quarters of Ministry of Housing tenants are outlaying $50.00 or

less per week on accommodation compared to just under one-quarter of private

renters.

On the other hand, private renters were twice as likely to be paying over

$100 per week accommodation than were Capil recipients, while no Ministry

tenants reported accommodation costs this high. Overall, the average weekly

housing costs for Capil families, with rates and house insurance included,

most closely resemble accommodation costs for private renters.

Another way of looking at how these groups compare is to examine housing and

rent costs as a proportion of family income.

For example, Table 3.5 shows the percent distribution of housing costs as a

proportion of income for Capil families and rent as a proportion o~ income

for renters.

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Table 3.5: Weekly housing costs as a percentage of income at Wave 2: Capil and Renters

CAPIL - ,Mort, Rates, Ins) RENTERS - ,rent} One- All One- All

Percentage Couples parent Capil Couples parent Renters of income , , , , , ,

15 & less 11.9 4.5 8.5 18.7 15.4 16.9

16-20 9.1 5.0 7.3 34.7 37.4 36.1

21-25 20.1 20.1 20.1 18.7 19.8 19.3

26-30 29.2 31.3 30.2 13.3 11.0 12.0

30 + 29.7 39.1 33.9 14.7 16.5 15.6

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 N 219 179 398 75 91 166

A higher proportion of Capil families as a whole pay more of their income on

housing costs than do the control group of renters. Nearly three quarters·

of the renter group spend 25 per cent or less per week on housing costs

compared to just over one third of Capil recipients. Capil families are

more than twice as likely to be spending over 30 per cent of their income on

housing costs than are the renter group. It would seem then, that once

mandatory housing costs such as rates and insurance are added to mortgage

costs, it has the effect of nearly doubling the percentage of Capil families

paying a high proportion (over 25') of income on housing.

For the Capil group, while housing costs echo the differences between

couples and one parent families shown in mortgage repayments, it becomes

more pronounced for one-parent families at the more expensive level of

housing costs. The same pattern is not revealed for the rental group.

There is little difference between couple and one-parent families at all

levels of housing costs as a percentage of income. On the whole, the rental

group appear to be paying substantially lower proportions of their income on

housing costs than do the average Capil family. However, further analysis

of the renter group provides significant differences within this group when

controlling for tenancy.

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Figure 3.6 shows the levels of percentage of income spent on housing costs

(with rates and house insurance included) for the Capil group as a whole,

compared with Ministry of Housing tenants and private rental tenants. It is

obvious that the high proportion of renter families paying less than 25 per

cent of their income on housing costs is due to the high proportion of

Ministry tenants in the renter sample. Well over three-quarters of Ministry

tenants pay 25 per cent or less of income on rent, compared to two-fifths of

private renters.

In contrast, nearly half of the private renters (45%) are paying over 30 per

cent of income on housing costs, compared to just 6 per cent of Ministry

tenants. OVerall, the proportion of income spent on housing costs for the

Capil group more closely resemble rental costs for private renters than for

Ministry tenants. (See Figure 3.6).

Further examination of the two rental groups by family type, reveals little

difference for those families in Ministry accommodation in the proportions

of one parent (84%) and couple families (82%) paying 25 per cent or less in

housing costs. Only 7 per cent of Ministry couple families and 4 per cent

of Ministry one-parent families were paying over 30 per cent of their income

on rent. (See Table 3.6)

Table 3.6: Rent as a proportion of family income, renter group by tenancy and family type

MOH tenants Private renters One- One-

Rent as a Couples parent Couples parent percentage of income % % % %

0-15% 20.0 19.1 15.8 4.3

15-20% 40.0 44.1 15.8 17.4

21-25% 21.8 20.6 10.5 17.4

26-30% 10.9 11.8 21.1 8.7

30%+ 7.3 4.4 36.9 52.1

TOTAL % 100.0 100.0 100.0 100.0 N 68 55 19 23

~.- •• -.~--~-~ •••• -.~

0; °e 3!. o

f

:-;)

Housing/Rental Costs as a Percentage of Income by Tenancy Loan and Control Groups

5O%w---------------------------------------------------------------~

40%

30%

20%

10% DLoanGroup

D MOH. Ranters

0% .. 1 ), 1\),),),) h »,),;),1 ), 1),),),)1 ), L),),'" ), """ 1 ~ PrIvate Ranters

0-15% 16-20% 21-25% 26-30% 31%+

Housing Costs as a Percentage of Income

HousIng costs includes mortgage. rates and inSlJ'ance costs

"Tl (j) C JJ m

!» (j)

Ul U)

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For private renters however, although couples are only slightly more likely

(42%) than one-parent families (39%) to be paying 25 per cent or less of

their income on rental, more than one-half (52%) of all one-parent families

are paying more than 30 per cent of their income on housing compared to

approximately one third (37%) of couple families, (and compared to 39 per

cent of Capil one-parent families, see Table 3.5).

These data suggest that a Capil loan may have the most impact on reducing

housing costs for those families renting in the private sector, and this is

especially so for one-parent families, usually on lower incomes.

This section also reveals that Capil families overall, tend to spend a

higher proportion of their income on housing than do renters; with the

exception of one-parent families in private rental, over half of whom are

paying over 30 per cent of their income on rent. On the whole, average

housing costs (when mortgage, rates and house insurance are added together)

in dollar terms are on a par or slightly higher than for renters in the

private sector, while Ministry renters had the lowest housing costs of all

three groups. Obviously, the 'trade off' for Capil families incurring these

higher costs lies in the accumulation of equity in an asset unavailable to

Ministry and Private renters •

Disposable Income After Housing Costs

Families incur gains or losses in income mainly because of changes in

employment or family composition. The Capil scheme is designed to assist

low income families by reducing the 'loss' to net income attributable to

high costs of accommodation where such families seek to be housed in the

private ownership sector. An important measure of the success or otherwise

of Capil is the extent to which participating families experience increased

disposable incomes after housing costs have been deducted.

For the remainder of this chapter analysis will concentrate on the

characteristics of after housing costs disposable income, hereafter 'simply

referred to as 'after housing income'.

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Table 3.7 shows the distribution of after housing income for families in

both the Capil and the renter groups. As shown, after housing costs have

been taken into consideration, 61 per cent and 64 per cent respectively of

both the Capil and renter group families have disposable incomes of $200 or

less.

Table 3.7: Disposable income after housing costs, Wave 2: Capil and Renter groups by family type

Capil Renters

After Housing One- All One- All Income Couples parent Capil Couples parent Renters

% % % % % %

$150 & less· 11 55 31 15 59 39

$151-200 32 28 30 24 25 25

$201-300 30 14 23 41 13 26

$301 + 27 3 16 20 3 11

TOTAL % 100.0 100.0 100.0 100.0 100.0 100.0 N 219 179 398 75 92 167

Note: percentages rounded

On average, rental families receive lower after housing incomes. For both

the Capil group and the renter groups, one-parent families are almost twice

as likely to have after housing incomes of $200 per week or less. OVer half

of one-parent families in both the Capil group (55%) and the renter group

(59%) reported after housing incomes of $150 per week or, less. In both

groups a significant proportion of couples have disposable incomes higher

than $300 per week, almost 30 per cent in Capil and one-fifth in the renter

group. Again, examination of the Capil group and the renter group,

according to nature of tenancy, reveals some diversity within the ~enter

group.

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Table 3.8: Disposable income after housing costs, Wave 2: Capil and Renter

groups, by tenancy

CAPIL RENTERS

Income after ALL MoH Private All Renters housing ($) , , , ,

$150 & less 31 37 45 39

$151-200 30 27 17 25

$201-300 23 27 21 26

$300 + 16 9 17 11

TOTAL , 100.00 100.0 100.0 100.0 N 398 124 42 166


In Table 3.8, the Capil group is compared with the private and Ministry

renters. There is little difference in the proportions of all groups

reporting after housing income of $200 or less. However, private renters

were much more likely to report after housing income of $150 or less,

followed by Ministry tenants and the Capil group. This reflects the high

proportion of private tenants paying over 30 per cent of their income in

rent. Private tenants were only slightly more likely to indicate after

housing income of over $300 than Capil recipients, and much more likely to

do so than Ministry tenants.

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Table 3.9: Disposable income after housing costs, according to family type: capil and Renters

Income after housing ($)

$150 & less

$151-200

$201-300

$300 +

TOTAL ,

N

CAPIL

Couples ,

11

32

30

27

100

219

Oneparent ,

55

28

14

3

100

179

MOH

Couples ,

16

24

42

18

100

55

RENTERS

Oneparent ,

54

30

15

1

100

69

PRIVATE

OneCouples parent , ,

11 74

26

37

26

100

19

9

9

9

100

23

Further analysis by family type (Table 3.9) for the renter group revealed

that compared to one-parent families in the Capil group and one-parent

families in Ministry rental accommodation, one-parent families renting in

the private sector were much more likely to have very low disposable income.

Nearly three-quarters (74') of these families had after housing income of

$150 or less, with the remainder evenly distributed over the other income

levels. Couples in private rental more closely resembled the Capil group

couples, while Ministry couples in the renter group were relatively over

represented at the lowest income level and under-represented at the highest.

One-parent families in both Capi1 and the renter group are much more likely

than couples to have lower after housing income, reflecting their lower

income levels. This has the most impact for one-parent families in the

private rental sector, where they are more likely to be paying higher

proportions of their income on rent than one-parent families renting in the

public sector. While couples in private rental are also more likely than

their Ministry counterparts to report higher proportions of income spent on

I J I I I I I I 1 , I 1 I I t I t J I J

- 64 -

rental, the difference is not as dramatic. This suggests a Capil loan would

probably have most impact on the after housing disposable incomes of one

parent families in the rental sector.

Figure 3.7 presents the distribution of after housing income for the Capil

group according to place of birth. On the whole, Australian and European

born families were much more likely than Asian born families to report lower

levels of after housing income. This was particularly true for Australian

born families where over two-thirds of families were in this category. The

higher percentages of Asian born families with higher levels of after

housing income reflects again the higher level of ·family income of this

ethnic group. (See Figure 3.7).

Summary and Conclusions

While Capil policy is to peg mortgage repayments to 25 per cent of family

income, this chapter clearly shows that a number of Capil families, for one

reason or another, are not complying with this policy. Increases in real

income have not always translated into increases in mortgage repayments or,

conversely, a decrease into lower repayments. Indeed those families

spending the lowest proportions of income, tend to be couple families,

employed and on relatively higher income levels. On the other hand,

families spending the higher proportions of their income on loan repayments,

tend in the main to be one-parent families, in the lower Capil income levels

and dependant on government benefits.

The exception here are Asian couple families, employed and with higher than

Capil average incomes, who are much more likely to be paying a high

proportion of income on mortgage than similar families of Australian or

European background. Clearly, family type and its relationship to income

levels has an impact on the proportion of income outlayed on mortgage by

Capil families, especially for those families of Australian and European

background. In the main, Asian families, mainly couples, appear to be

adjusting their loan repayments in line with their increases in income,

thereby facilitating a speedier payout of their mortgage commitment. For

other Capil families, mortgage repayments are obviously not being adjusted

in line with income changes.

~-.~~~-.~~~.~ •• -~~.~

.1 °e tf a. e CJ c

.9 '0 &

I

After Housing Disposable Income by Ethnicity Wave Two. Loan Group

~%-'------------------------------------------------------I

30%

20%

10%

D Australian

D ElJ'OP8an

0% .J L '\. ~'\.'t '\. IQ'~ I '\. '''''''''' ... '\. IQ",,"" I ~ Asian $150& Less $151-$200 $201-$300 $301+

After Housing Disposable Income

'"':l 1-'.

\.Q ~ ti ro W

--.J

~

U1

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After allowing for mortgage repayments, rates and insurance, the majority of

both the Capil and renter group families have disposable incomes of $200 per

week or less. OVerall, however, renter group families average lower

disposable incomes after housing costs and for both the capil and renter

groups, one parent families are almost twice as likely to have disposable

incomes of $200 or less. In the main, Australian and. European born families

were more likely to have lower disposable income than Asian born families.

Capil families overall, tend to spend a higher proportion of their income on

housing, than do renters; with the exception of one-parent families in

private rental, over half of whom are paying over 30 per cent of their

income on rent. On the whole, for Capil families, average housing costs

(when mortgage, rates and house insurance are added together) in dollar

terms are on a par or slightly higher than for renters in the private

sector, while Ministry renters had the lowest housing costs of all three

groups. Obviously, the 'trade off' for Capil families incurring these higher

costs lies in the accumulation of equity in an asset unavailable to both

Ministry and private renters.

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CHAPTER 4

COPING FINANCIALLY AS A CAPIL FAMILY - F. Kaas

If the Capil scheme is to be judged successful, recipients of loans must be

better off financially and feel that the non-financial benefits of home

purchase outweigh the additional responsibilities entailed (e.g. repairs,

rates, etc).

Financially, families in the long term should be able to accumulate capital

which would otherwise have been 'lost' within the private rental sector. In

the short to medium term, Capital Indexed Loans seek to ease the burden

placed on house purchasers in the early stages of repayment by the

traditional credit foncier mechanism. For low income families inability to

meet repayments in the early years can prevent purchase of a house, or can

make repayments a major financial burden. When repayments are set at a

fixed level, lower income families often have little disposable income after

meeting their repayments. The Capil instrument aims to make home purchase

available to lower income groups and to reduce the burden of high repayments

by setting them at 25 per cent of family income. Capil families should then

be able to meet other living costs more readily than those paying off a

traditional housing loan because they have more disposable income.

This section of the report examines the extent to which Capil families are

coping financially, and where relevant, compares loan group families with

families in rental accommodation. The measures incorporated in this part of

the evaluation are:

reported difficulties with meeting various costs such as credit payments, mortgage repayments or rent, and daily living costs;

respondents,' assessments of their current financial circumstances such as the ability to save or spending more each week than the level of income received;

respondents' perception of their current financial status compared with a year ago; and

I I I I I I , , I I I 1 I I I I I I I I

- 68 -

respondents' estimation of their likely financial circumstances within a year's time.

It is intended that this information will be supplemented at a later date

with analysis of the financial circumstances of families who have sold their

homes and left the Capil scheme and of the level of equity in their homes

achieved by capil families still in the scheme.

The above indicators for both Capil participants and renter group members

are analysed according to a number of factors some of which may be

attributable to being involved in the Capil scheme and others which may be

argued to affect families regardless of their tenure status. Those factors

which may be attributable to participation in the Capil scheme relate to

mortgage and other housing costs. Therefore, financial coping measures have

been analysed according to the level of mortgage and total housing costs as

a proportion of income, and by the level of disposable income once mortgage

and housing costs have been deducted.

Factors which may not be directly related to participation in Capil but

which do influence the level of financial coping through their impact on

family income include changes in employment and in family status.

Consequently financial coping indicators have also been analysed according

to changes in disposable income, changes in employment and/or family status

and by principal source of income.

Experience of Financial Difficulties

The first indicator of how well families are coping financially is the

extent to which they have difficulty meeting the ordinary costs of living.

Table 4.1 shows the proportion of families that reported they had frequent

or occasional difficulty with 7 goods or services. It appears that one

parent families were more likely to have experienced difficulties than

couples, particularly in paying for clothes, food and entertainment.

I I

I I I,

t· 'I I I I,

" I I I I I I

I

- 69 -

Table 4.1: Financial difficulties experienced since Wave 1 by loan and renter groups, per cent of each group responding 'frequently' or

'occasionally'

Difficulty experienced

Mortgage/rental arrears

frequently occasionally

Insufficient money for food


Insufficient money to pay bills


Obtaining credit frequently occasionally

Meeting credit payments


Insufficient money for clothes


Insufficient money for entertainment, pleasure, etc


CAPIL GROUP One

Couple n=225

8 23

7 25

11 45

7 9

9 26

18 35

38 28

parent n=181

6 27

13 29

18 43

7 9

12 27

37 30

48 35

PRIVATE RENTERS One

Couple n=19

11 11

11 37

11 68

16 11

16 21

21 53

42 37

parent n=23

9 9

13 48

22 57

13 4

4 35

30 44

44 44

MOH TENANTS One

Couple n=55

6 20

2 26

6 44

9 11

11 22

13 35

33 38

parent n=69

3 23

13 35

15 58

12 10

12 22

38 38

65 19

* Other respondents either had no difficulty obtaining credit or meeting payments or have never sought credit.

One third of loan families have experienced frequent or occasional

difficulties with mortgage arrears and food, and more than half have had


- 70 -

difficulties paying for clothes, bills or entertainment. Life is still a

struggle for many loan group families with 13 per cent of sole parents

stating they frequently had insufficient money for food. The proportion of

sole parents frequently having insufficient money for food was identical for

the other tenure groups.

Among couples, almost half of private renter couples had experienced

frequent or occasional difficulties paying for food, compared with 32 per

cent of Capil couples and 28 per cent of couples in ~inistry of Housing

rental accommodation. ' A similar pattern emerged for frequent mortgage and

rental arrears, although slightly more Capil and Ministry of Housing

families reported occasional arrears difficulties than did private renters.

This may reflect less secure tenure in the private sector. One-parent

families in the loan group also experienced a lower incidence of difficulty

in most areas compared with similar families in private rental. On many

measures, capil sole parents seemed in a similar or better financial

position to Ministry of Housing sole parents.

It is in the area of meeting daily living costs that the experience of one

parent families contrasts most sharply with that of couple families. As

described above, the problem of frequently having insufficient money for

food was almost twice as common among Capil one parent families as couples

(13% compared to 7%) and was also markedly higher for sole parent renters.

For mortgage arrears this pattern does not hold across the tenure groups,

sole parents reported a lower incidence of difficulties than couples.

(Perhaps sole parents trade off expenditure on food and housing differently

to couples).

Sole parents reported more difficulties than couples in paying bills, buying

clothes and spending on entertainment. For couple families about 20 per

cent frequently experienced insufficient money for clothes and about 10 per

cent frequently could not pay bills. For one-parent families more than a

third frequently experienced having insufficient money for clothes and about

18 per cent frequently had difficulty paying bills.

I I I I I I I , I I I I I I I I I I I I

- 71 -

All families reported very highincidences of not having enough money at

some stage for meeting the costs of entertainment and leisure activities.

Again, however, sole parents more frequently reported difficulty finding

money for this expenditure.

The picture is thus one of ongoing struggle for low income families

regardless of housing tenure, although modified by low housing costs

significantly reducing difficulties for Ministry tenants and Capil families.

For those buying their homes through the capil scheme at least a third have

experienced mortgage arrears, more than a third of families have not had

enough money for food at some time, more than half have not been able to buy

clothes and two-thirds have been unable to spend money on leisure or

entertainment activities.

Housing tenure does seem to make a difference, however, in that couples and

one-parent families in the private rental sector report even higher

incidences of such difficulties than those in the Capil scheme. It appears

then that Capil and Ministry tenancy do" reduce the financial difficulties

experienced by low income families to some degree.

Comparing the experiences of families according to their place of birth, as

shown in Table 4.2, similar proportions of Australian and European

background experienced difficulties frequently or occasionally with such

items as meeting credit payments (42 per cent) and arrears in housing

payments (35 per cent). However they were different in regard to living

costs such as food, (38 per cent compared with 50 per cent), and clothing,

(64 per cent compared with 77 per cent).

I I I I I I

I I I I I I I I I I I I

- 72 -

Table 4.2: Financial difficulties experienced by Capil group families since Wave 1 according to place of birth, per cent who have occasionally or frequently experienced difficulty


Difficulty meeting credit payments

Mortgage arrears

Difficul ty in obtaining credit






Australians

n = 212

42

35

19

38

64

65

82

Europeans n = 122

43

35

17

50

77

69

86

Total all Asians Capil group n = 72 n = 406

14 37

19 32

6 16

10 37

14 59

19 58

30 74

A very different experience of financial difficulties is reported by

families of Asian origin, with much lower proportions in all categories.

Only 10 per cent reported frequent or occasional difficulty in finding money

for food, 14 per cent for clothing, and 19 per cent for housing payments or

bills. The predominance of couple families among this group is an important

factor in reducing the level of difficulty experienced. As noted earlier,

one-parent families have not'experienced increases in income to the same

extent as couple families and have experienced reductions in income to a far

greater degree than couples.

Financial Difficulties and Change in Income

As shown in Table 4.3, families experiencing the largest decreases in

incomes reported the highest incidence of financial difficulty on all items.

For example, 44 per cent of those in the loan group who had large decreases

I I I I I' I I I I· I' I I I I I I I I I I

- 73 -

in income also had mortgage arrears at some stage compared with 28 per cent

of those with large increases in income. Nearly 75 per cent of the group

with the largest decrease in income had experienced frequent or occasional

difficulty in buying clothes compared with 51 per cent of those with large

increases in income.

Table 4.3: Financial difficulties experienced since Wave 1 interview by change in real family income - Wave 1 to Wave 2 for Capil group


Difficulty meeting credit payments

Mortgage arrears

Difficulty obtaining credit





Other

Decrease Decrease Increase Increase greater up to up to greater

than $50 $50 $50 than $50 n=50 n=115 n=93 n=138

49.0 32.2 35.5 37.0

44.0 30.4 32.3 28.3

16.7 15.7 22.8 10.9

49.0 40.9 43.0 24.8

74.5 58.3 62.4 51.4

66.7 63.5 58.1 50.0

90.2 70.8 79.3 66.7

9.8 12.2 10.8 6.5

Total n=396

N %

146 36.8

126 31.8

62 15.8

146 36.9

234 58.9

230 57.9

291 73.9

38 9.6

A potential advantage of the Capil scheme for families is that repayments

are reduced if family income falls, thereby reducing at least one dimension

of financial difficulty. (In practice, however, repayments are often not

adjusted when income falls). In addition, the housing security of a family

is not threatened as would be the case in the private rental sector or under

traditional foncier financing.

I I I I I I I I I· I I I I I I I I I I I

- 74 -

Families with Arrears Agreements

About 10 per cent of Capil families entered into an agreement with the

Ministry to continue repaying their loan at an appropriate rate and to repay

arrears when savings were available for this purpose. Both couple and one

parent families were involved in these agreements in similar proportions,

but differed in an unusual way. As shown in Table 4.4, 17 out of 38 of

those with agreements had experienced increases in income greater than $50

per week - a much higher proportion than families without arrears

agreements.

Table 4.4: Families with MOH arrears agreements, according to family type and level of change in income

Change in income

Decrease greater than $50 pw

Decrease up to $50

Increase up to $50

Increase greater than $50 pw

TOTAL

pw

pw

Statistically significant at

Couple families

N

2

2

5

12

21

p<.02

One-parent families

N

5

4

3

5

17

While for one-parent families those with arrears agreements were roughly

evenly spread across the groups according to income change, 17 out of 21

families had experienced an increase in income.

This counter-intuitive association may indicate that for some families

increased levels of income do not .necessarily make coping with difficult

financial circumstances any easier or may suggest that arrears and the

establishment of an arrears agreement stimulates (or pressures) families to

find ways to increase their incomes and maintain their payments. The


- 75 -

longitudinal nature,of the evaluation will enable the longer term effects of

changes in income and cost structures to be examined thereby determining

whether permanent increases in income result in more settled patterns of

financial management to occur, for example.

Coping With Mortgage Repayments

Capi1 families were also asked how difficult or easy it was to meet monthly

mortgage repayments. As shown in the Table 4.5, about half the families

felt they were 'just managing'. Sixteen per cent of couple families and 11

per cent of one-parent families said they found it difficult to meet their

repayments, with the remaining 30 per cent of one-parent families and of

couples reporting that meeting the mortgage was 'easy'.

Table 4.5: Difficulty currently experienced in meeting mortgage payments, according to family type

Difficulty/ease in meeting Couple One-parent mortgage payments families families Total

Difficult 16.0 11.0 13.8

Just managing 48.0 58.6 52.7

Easy 36.0 30.4 33.5

TOTAL \ 100.0 100.0 100.0 N 225 181 406

Differences are not statistically significant

Although Capi1 repayments are initially set at about 25 per cent of family

income, the second stage interviews found that there was considerable

variation around that level. When the level of difficulty in meeting

repayments was analysed, a relationship was found between ease of meeting

mortgage payments and the ratio of mortgage to income. Those families

paying more than 30 per cent of their income reported a high incidence of

difficulty, those spending smaller proportions of their income on mortgage

repayments being less likely to report difficulty meeting payments.


- 76 -

Table 4.6: Difficulty of currently meeting mortgage payments, according to percentage of income spent on repayments

Per cent spent on mortgage payments

Difficulty/ease in meeting mortgage payments

Difficult

Just managing

Easy

TOTAL % N (Total 398)

Less than

15

5

36

59

100 56

16-20

9

55

37

100 71

Statistically significant at p<.OOl


21-25

13

56

31

100 127

26-30

15

54

31

100 78

More than

30

24

56

20

100 66

As shown in Table 4.6, 24 per cent of families paying more than 30 per cent

report difficulty compared with only 5 per cent for those whose mortgage

payments were less than 15 per cent of their income. Nevertheless, at all

levels of payment except less than 15 per cent, more than half of the

families said they were 'just managing'

Families Financial Situation at Time of Wave 2 Interview

Families in both loan and renter groups were asked to describe their usual

financial situation in terms of whether they were able to save. Those

families who experienced the greatest extent of difficulty in meeting costs

of various kinds described themselves as in the worst financial situations.

As indicated in the bottom row of Table 4.7, the vast majority of families

were grouped into the two categories of either 'no money left' (35%) or

'money left goes on bills' (42%). Only about 13 per cent were able to save

while 11 per cent were spending more than they received, or 'dissaving'.

The rest of Table 4.7 shows the proportion of each of these groups.

(dissavers etc.) who reported frequent or occasional difficulty paying for

food, clothes and other services. The dissavers had experienced financial

difficulties of major dimensions, with nearly 90 per cent reporting that at

some time since the last interview they had no money to pay bills, 82 per


- 77 -

cent with insufficient money for clothes, 61 per cent unable to afford food

and 62 per cent unable to pay mortgage commitments. The proportion

experiencing these difficulties is less among those in a better financial

position.

Table 4.7: Financial difficulties experienced by loan group families, according to financial situation at Wave 2, per cent of each group who responded 'frequently' or 'occasionally'


Mortgage arrears


Insufficient money for bills

Obtaining credit

Making credit payments


Insufficient money for entertainment, pleasure,etc.

TOTAL

Able to save n=51

22.0

11.8

29.4

2.0

19.6

35.3

45.1

12.6

Financial Situation

Money left, goes on bills

n=169

23.1

22.5

46.7

10.8

30.2

45.6

70.4

41.6

No money left n=142

37.3

55.6

72 .5

24.3

40.8

76.8

85.6

35.0

(All) statistically significant at p<.OOl

Spend more than receive

n=44

61.4

60.5

88.6

25.0

72.7

81.8

84.1

10.8

At the other end of the spectrum the savers reported that 12 per cent had

insufficient money for food at some time since the last interview, 35 per

cent were unable to afford clothes and 22 per cent had been in mortgage

arrears.

When the spending situation of families is analysed according to family type

and the loan and rent er groups are compared at Waves 1 and 2, several

important outcomes emerge. (See Table 4.8).

.. _ ...... - _"_"1_"_" __ "- 78 - - -

Table 4.8: Financial situation of Capil and renter group families at Wave 1 and Wave2, according to family type

Able to save

Some money left, goes on bills

No money left at end of week

Spend more than receive

TOTAL % N

LOAN Couple

families

Wave 1

25.3

46.2

21.3

7.1

100.0 225

Wave

12.4

44.9

33.3

9.3

100.0

2

Statistically significant at p<.Ol

GROUP One-parent

families

Wave 1 Wave 2

13.9 12.8

45.0 37.8

32.8 36.7

8.3 12.8

100.0 100.0 180

PUBLIC RENTERS PRIVATE Couple One-parent Couple

families families families

Wave 1 Wave 2 Wave 1 Wave 2 Wave 1 Wave

9.3 12.7 7.2 7.2 15.8 31.6

38.9 49.1 37.7 37.7 36.8 36.8

35.2 34.5 39.1 36.2 31.6 31.6

16.7 3.6 15.9 18.8 15.8

100.0 100.0 100.0 100.0 100.0 100.0 55 69 19

RENTERS One-parent

families

2 Wave 1 Wave 2

13.0 8.7

21.7 47.8

39.1 34.8

26.1 8.7

100.0 100.0 23


- 79 -

Comparing Capil group families' financial situation at the Wave 2 interview

with that at the first interview shows that couple families report a

dramatically reduced proportion of savers, a substantially increased group

with no money left at the end of the week and a slightly enlarged group of

dissavers. One-parent families report a slightly reduced savers group and a

substantially increased proportion of those who spend more than they

receive.

Comparing the two family types, couple families report a substantial

reduction in the number who are saving while for one-parent families the

outcome of most concern is the increase in the proportion of dissavers.

Both family types now report similar proportions of those able to save. It

should be noted that investment in home purchase is an important form of

saving.

For families in the renter group, trends for couple families were very much

in the opposite direction. Couple families able to save increased as a

proportion and those dissaving were substantially reduced, particularly

those in private rental. For one-parent families there was much less

change. There was a substantial fall in the proportion of those in private

rental able to save while there was no change for those in the public

sector. Conversely, the proportion of those dissaving in the private sector

fell dramatically while it rose slightly for those in the public rental.

Financial Situation According to Place of Birth

When the Capil group is examined according to place of birth clearly

different patterns emerge. Again the Australian and European groups show

similar patterns, as shown in Table 4.9, although the Australians feature

the highest proportion of dissavers.


- 80 -

Table 4.9: Financial situation of Capil group families at Waves 1 and 2, according to place of birth

Able to save

Some money left, goes on bills

No money left at end of week

Spend more receive

TOTAL , N

than

Australian

Wave Wave 1 2

15 10

46 35

31 40

8 15

100 100 212

Place of birth European

Wave Wave 1 2

17 12

47 49

27 30

9 8

100 100 121

Statistically significant at p<.OOl

Asian

Wave Wave 1 2

43 19

43 49

10 29

4 3

100 100 72

A dramatic difference emerges for the Asian born group, however, with the

proportion of savers more than halved from 43 per cent to 19 per cent.

Such factors, particularly where families have substantially increased their

income and have chosen to undertake additional expenditures, mean that

increased dissaving cannot be simplistically equated with a deterioration in

financial circumstances.

Better Or Worse Off Than A Year Ago?

Respondents in both the Capil and the renter groups were asked if they felt

they were financially better or worse off than a year ago. Despite the

changes in their savings position (discussed in the previous section),

families in the Capil group were mainly of the view that they were better

off now or at least 'the same' as a year ago. Table 4.10 compares the

situation as reported by families in both Capil andrenter groups.


- 81 -

Table 4.10: Change in financial position over previous year, loan and renter groups according to family type

Change in financial position

Better now

The same

Worse now

Don't know

TOTAL , N

Capil group

Couple

48.0

27.1

24.0

0.9

100.0 225

One-parent

50.8

24.3

23.8

1.1

100.0 181

Total

49.3

25.9

23.9

1.0

100.0 406

renter Group

Couple

35.1

48.6

16.2

100.0 74

One-parent

27.2

39.1

33.7

100.0 92

Total

30.7

43.4

25.9

100.0 166

Families in the Capil scheme feature a higher proportion reporting that they

were better off, 49.3 per cent, than those in the renter group, 30.7 per

cent, and a lower proportion saying they were worse off, 23.9 per cent

compared with 25.9 per cent in the rental sector. The contrast between

family types is even greater with one-parent families in the Capil group

comprising the highest level of those who saw themselves as better off (50.8

per cent) and the same family type in the renter group having the highest

proportion who felt they were worse off, 33.7 per cent.

Couple families in the Capil group were more polarised than those in the

renter group. Forty-eight per cent of the Capil group couples felt they

were better off, compared with 35.1 per cent in the renter group, while. 24

per cent felt they were worse off compared with only 16 per cent of the

renter couples.

The difference is almost entirely due to differing circumstances of capil

group couples and couples renting from the Ministry of Housing. As table

4.11 shows, couples in the private rental sector exhibit an almost identical

pattern to couples in the Capil scheme, whereas couples renting in the

public sector feature less proportions who are either better or worse off

and correspondingly, twice the proportion that regard themselves as

financially 'the same' as in the previous year. One-parent families in the

public sector exhibit a similar, less polarised pattern to couples, again in

contrast to one-parent families in the private rental sector.


- 82 -

Table 4.11: Perceived change in financial position over previous year, renter group according to nature of tenancy and family type

Perceived * ** change in Ministry of Housing Private Rental financial position Couple One-parent Total Couple One-parent Total

Better now 30.9 26.1 28.2 47.4 30.4 38.1

The same 56.4 42.0 48.4 26.3 30.4 28.6

Worse now 12.7 31.9 23.4 26.3 39.1 33.3

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 N 55 69 124 19 23 42

* Statistically significant at p<.05 ** Differences not statistically significant

When analysed according to place of birth, each group of Capil families

exhibits a similar pattern, as shown in Table 4.12.

Table 4.12: Change in financial position over previous year, Capil group according to place of birth

Change in financial position

Better now

The same

Worse now

TOTAL , N

Australians

50.0

24.3

25.7

100.0 210

Europeans

47.9

28.1

24.0

100.0 121

Differences not statistically significant

Asians

52.1

28.2

19.7

100.0 71

Total

49.8

26.1

24.1

100.0 402

Families of Asian background have the highest rate of those who said they

are better off (51.4 per cent), and the lowest rate of those who see

themselves as worse off, (19.4 per cent).


- 83 -

Factors strongly associated with families' assessment as to whether they are

better or worse off include changes in employment status, changes in income

and the proportion of income devoted to meeting housing costs.

Perceived Change in Financial Position and Changed

Employment Status

Table 4.13 shows the differing perceptions of families according to their

changed employment status since the last interview. As those who

experienced reductions in employment amounted to no more than 7 per cent of

case responses, particular family types were not distinguished and are not

included in the table. Nevertheless, of all those with reduced employment, : ~ ..

43 per cent reported that they were better off, while only 11 per cent felt

that they were worse off.

Table 4.13: Perceived change in financial position over previous year, Capil group according to change in employment and family type

Perceived change in financial Couples, position no change

Better now 40.9

The same 30.4

Worse now 28.7

TOTAL % 100.0 N 116

Change in Employment status

One-parent families, no change

49.1

24.6

26.3

100.0 115

Couples, increased employment

56.0

23.1

20.9

100.0 68

One-parent families: differences not statistically significant Couples: statistically significant at p<.02

One-parent families, increased employment

62.5

14.6

22.9

100.0 46

As shown in Table 4.13, those to report the highest proportion who felt they

were better off were one-parent families who had increased their employment,

while about 24 per cent felt they were worse off. Couple families with

increased employment reported 56 per cent better off and only 16 per cent

worse off. Of those who had experienced no change in their employment

status, one-parent families reported a higher proportion than couples who

I I I I I I 'I I I I I I I I I I I I I I

'I

- 84 -

were better off, 49 per cent compared with 41 per cent, while 26 per cent

reported that they were worse off compared with 28 per cent of couple

families.

consequently, it seems that an increase in employment is strongly related to

families' perceptions of being better off financially, and those to be most

positive about this were one-parent families.

Perceived Change in Financial Position and Change in Income

Improved employment is commensurate with increased income and the

relationship between higher income and the perception of being better off

financially is evident in the data. Table 4.14 shows the relationship

between changed income and perceived change in financial position.

Table 4.14: Perceived change in financial position over previous year, Capil and renter groups according to change in income

Change in Income

Decrease greater than Decrease Increase

$50 pw up to $50 pw up to $50 pw

Capil Renter Capil Renter Capil Renter

Better now 45.1 14.3 48.7 24.3 40.9 28.6

The same 31.4 28.6 26.5 45.7 33.3 59.5

Worse now 23.5 57.1 24.8 30.0 25.8 11.9

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 N 51 21 113 70 93 42

For Capil group: differences not statistically different For Renter group: statistically significant at p<.OOOl

Increase greater than

$50 pw

Capil Renter

58.1 57.6

20.6 27.3

21.3 15.2

100.0 100.0 136 33

Not surprisingly, those families in both Capil and renter groups to report

the highest proportions as better off were those who had experienced the

greatest gains in income. Those who had enjoyed increases of more than $50

per week reported nearly 60 per cent as better off for both Capil and renter


- 85 -

groups. The groups where quite different perceptions exist between capil

and renter group families, are those where income has fallen. In the renter

group families who see themselves as worse off outnumber those who see

themselves as better off, with nearly 60 per cent of those whose incomes

have declined by more than $50 per week saying they were worse off. By

contrast, among Capil group families only 23.5 per cent of those with the

greatest drops in income regard themselves as worse off while nearly twice

as many, 45 per cent, still say they are better off.

Perceived Change in Financial Position and Proportion of Income Devoted to

Mortgage

A further factor associated with perceived change in well-being is the

percentage of income devoted to mortgage repayments. Table 4.15 shows the

relationship between mortgages as a proportion of income and perception of

changed financial position for families in the Capil group.

Table 4.15: Change in financial position over previous year, Capil group families according to proportion of income committed to mortgage payments

Proportion Change in Financial Position of income committed to Better The Worse mortgage (%) now same now No.

less than 15 Couple families 77 .5 12.5 10.0 40 One-parent families 50.0 25.0 25.0 16

16-20 Couple famili~s 41.5 34.1 22.0 41 One-parent families 60.0 6.7 33.3 30

21-25 Couple families 43.3 28.4 28~4 67 One-parent families 51.7 26.7 20.0 60

26-30 Couple families 38.5 38.5 20.5 39 One-parent families 46.2 35.9 17.9 39

more than 30 Couple families 40.6 25.0 34.4 36 One-parent families 47.1 23.5 26.5 34

Again, a high proportion of families regard themselves as better off even

when mortgage repayments comprise more than 30 per cent of income. At this


- 86 -

level of repayments 41 per cent of couples report that they are better off

while 47 per cent of one-parent families regard themselves similarly. Not

surprisingly, nearly 80 per cent of those couple families whose mortgage

represents less than 15 per cent of income say they are better off, while

only 50 per cent of one-parent families at that level say the same. This

result may reflect a more cautious approach on the part of those families.

Overall it seems that Capil participants regard themselves as better off

financially than a year ago. Those to be most satisfied in this respect

were those with increased employment, the largest increases in income and

the smallest proportions of income devoted to repayments. Generally, one

parent families reported higher proportions as better off.

Better Or Worse Off In The Year To Come?

When asked to predict the state of their financial position over the coming

year both Capil and renter families expressed much greater optimism than

pessimism with Capil participants again recording higher proportions than

those in the rental sector. Table 4.16 shows the responses to this question

according to family type.

Table 4.16: Predicted change in financial position over coming year, Capil and renter groups according to family type

Predicted change Capil group. Renter Group •• in financial position Couple One-parent Total couple One-parent Total

Better off then 57.0 46.9 52.4 50.0 31.8 39.9

The same 37.2 48.6 42.4 45.5 51.1 48.7

Worse off then 5.8 4.6 5.2 4.5 17.0 11.4

TOTAL , 100.0 100.0 100.0 100.0 100.0 100.0 N 207 175 382 70 88 158

• statistically significant at p<.05 •• statistically significant at p<.Ol

As shown, couple families in the Capil group recorded the highest proportion

predicting they would be better off in a year, at 52 per cent. One-parent.


- 87 -

families were more cautious but not nearly as much as those families in the

renter group. One-parent families renting were the least optimistic of all

groups, only 30 per cent saying they would be better off, and the most

pessimistic with 16 per cent predicting they would be worse off. No other

family type registered much more than 5 per cent making similar predictions.

Those who are paying a high proportion of their income in mortgage

repayments are nevertheless optimistic about the forthcoming year. Fifty

per cent of those in the Capil group paying 30 per cent or more of their

incomes consider they will be better off compared with only 39 per cent of

those paying a similar rate as rent. Not surprisingly, a higher proportion

of those paying a relatively low proportion of their incomes toward their

mortgage felt they would be better off with 70 per cent of couple families

paying less than 15 per cent of income in mortgage commitments, recording

the highest rate of optimism.

The measure to show the greatest amount of variation within the Capil group

was that to do with changed employment status. For both couple and one

parent families with increased levels of employment about 62 per cent felt

they would be better off while only 41.6 per cent of those who had

experienced no change in their employment situation were as optimistic.

Nevertheless, only 5.6 per cent of these predicted they would be worse off

with 47 per cent saying they would be 'the same'. This result is mirrored

in the outcome measured according to disposable income where only 42 per

cent of Capil families receiving $200 per week or less predicted they would

be better off compared with 69 per cent of those receiving $400 per week or

more.

Summary

Overall the picture that emerges for families in the Capil scheme is one of

a continuing struggle to manage on low incomes. Many families have

experienced financial difficulty at some time in meeting the cost of basic

goods and services. One-parent families, in particular, occasionally or

frequently experience financial difficulty in paying for food, mortgage

arrears and clothing.

I I I I I I I I I I ~

I I I I I I I I I I

- 88 -

Those families having the most difficulty are those whose incomes are still

low, whose incomes have dropped and whose housing payments constitute a high

proportion of their income. It will be important for these families to

receive assistance in the form of reduced mortgage commitments, as intended

in the Capil approach. One-parent families are most in need in this regard.

Nevertheless, when compared with families in the renter group, especially in

the private rental sector, Capil families, especially one-parent families,

report fewer financial difficulties in their financial position over their

previous situation and are, on the whole, more optimistic about their

financial position in the foreseeable future.

Approximately one third of loan families had at some stage had mortgage

arrears or had insufficient money for food. Just under 10 per cent of

families said they frequently had difficulty with these expenses.

Consistent with their lower incomes, one~parent families were more likely to

have experienced frequent difficulties than couples, particularly in paying

for clothes, food and entertainment.

Difficulty in meeting mortgage payments was also related to proportion of

income spent on repayments - 24 per cent of the families spending more than

30 per cent of their income on the mortgage were finding payments difficult,

compared with 5 per cent of those spending less than 15 per cent of their

income.

Nonetheless, loan families generally felt they were better off financially

than a year ago and expected further improvement in the year ahead. Half of

both the one and two parent groups said they were better off and another

quarter said their financial position was much the same as a year ago.

Renters, particularly one-parent families, were much less likely to feel

they were better off and more likely to say they were worse off.


- 89 -

CHAPTER 5

DETERMINANTS OF HOUSING SATISFACTION AMONG CAPIL RESPONDENTS - M. Wulff

Introduction:

This chapter explores the question of-the housing satisfaction of Capil

clients. If we accept that an objective of the Capil housing policy goes

beyond the provision of shelter per se to offering low-income families an

acceptable and satisfying environment, then government policy evaluation

must take into account the elements beyond bricks and mortar that comprise a

satisfying housing environment. How satisfied are the Capil clients with

their housing situation? What makes for housing satisfaction under the Capil

scheme?

The Capil scheme offers eligible low-income families the opportunity to move

out of the private or public sector and into the ranks of home-owners. Quite

clearly in Australia, owning a home is considered to be part of the Great

Australian Dream and something that nearly all families strive for.

Moreover, in a society in which nearly 70 percent of the population own

their home, the inability to attain homeownership is not only a serious

disappointment to families, but indicative of the economic and social gap

between those who "have" and those who "have not" made it in Australia.

The Wave 1 interviews with the Capil clients vividly illustrated the meaning

of homeownership to these families. The following are some of the responses

to the open-ended question: " I wonder if you could tell me what receiving

this loan from the Ministry of Housing has meant to you and your family"?

Now we feel very secure and happy. We have something to work for and know that everything we do around the house is for our benefit ••••• we now have a sense of purpose. unemployed 37 year old married father of three teenagers,

Security, a roof over our heads. No other way of achieving the same. Gives us something to look forward to in life. widowed 31 year old mother of an 11 year old son.

I I I I I I

I I I I I I I I I I I I I

- 90 -

It's made me more secure. Much happier as a family ••• I'm on top of the world. I have security for myself and my children ••• the children are happy. 43 year old widowed mother of two children.

Like winning Tattslotto. OWn a bit of land. Independence. Something that will become ours and when we go, it goes to the kids •••• it's basically what you live for, to own your home and pass it on. 24 year old married father of one child, seasonal worker.

These comments reflect the general sentiment of Australians that owning a

home provides security, independence, privacy and something to pass on to

children.

While tempting to view the entry into home-ownership as automatically

resulting in great satisfaction for the families, it must be kept in mind

that home-ownership also brings with it additional responsibilities

(maintaining leaking roofs and sagging floor-boards) and costs. The Capil

scheme does not necessarily produce all satisfied customers: difficulties in

finding a home in the desired location; the financial limitations on the

cost of housing; inadequate understanding of the Capil scheme; or unexpected

repair costs can all dampen the families pleasure with their new home.

Furthermore, Capil clients may differ not only in their level of

satisfaction with their new dwelling, but in the aspects of their

residential environment that either please or displease them. For these

reasons, it is necessary to look more closely at the issue of housing

satisfaction. Now that the Capil respondents have been in their homes for up

to two years, the glow of "new homeownership" may have dimmed in the light

of rising housing costs, housing repairs and general housing expenditures.

This chapter examines the reaction of Capil respondents to various elements

of their housing environment and seeks to explain why some families are less

satisfied than others.

During the interview, respondents were asked to provide their subjective

assessment on a scale of 1 to 5 of their pleasure or displeasure with a

series of sixteen items related to their housing situation.

I I I I I I

I I I I I I I I I I I I I I

- 91 -

Table 5.1 shows the proportion of respondents who report that they are

either satisfied or very satisfied with each of the specific items listed.

Table 5.1: Satisfaction with housing items by tenure status, , satisfied or very satisfied

Items related to dwelling Size General condition Amount of natural light Amount of privacy Space for self Space for children Outdoor space

Items related to location Closeness to public transport Closeness to shops Closeness to schools General location Quality of neighbourhood

Items relating to housing costs Size of mortgage or rent payment Rates Fuel bills Repairs costs

CAPIL n=406

70.7 69.2 80.5 81.5 77.1 67.5 85.2

74.4 79.8 77 .1 78.8 78.6

66.5 47.8 41.6 54.4

MOH n=122

64.5 62.1 87.9 63.7 62.9 57.4 78.6

84.4 79.8 82.6 75.6 64.5

79.0

34.4

Private renters

n=41

50.0 45.2 61.9 52.4 54.8 42.9 69.0

78.0 82.9 87.8 59.5 71.4

63.4

31.0

Over two-thirds of Capil respondents report that they are satisfied with

every aspect of their home, with the exception of items related to housing

costs. They tend to be more satisfied with items related to the dwelling

than are the Ministry of Housing tenants or private renters. Private

renters reveal the lowest levels of satisfaction with each of these items.

Three quarters or more of Capil families are satisfied with all aspects of

their location. In general, their levels of satisfaction compare favourably

with renters. Public renters are particularly satisfied with the

accessibility of their locations as indicated in the items referring to

I I I I I I I I I I I I I I I I I I I i

- 92 -

closeness to public transport, shops, and school, but are somewhat less

satisfied with the quality of the neighbourhood (the latter is likely to be

a judgement of the quality of the surrounding estate). Private renters

also report high satisfaction with most items related to the location.

Although all items related to housing costs are not strictly comparable

between the Capil group and renters, it is here that most differences appear

among the tenure groups. Two thirds of the Capil families report that they

are satisfied with mortgage payments, but considerably fewer families report

satisfaction with the related aspects of owning a home: namely rates, fuel

bills and repair costs. Public tenants display a high level of satisfaction

with their rent, but a low level of satisfaction with fuel bills. Private

renters are much less satisfied with rent than those in the public sector.

Many studies have shown that satisfaction is best viewed as a multi

dimensional concept and not determined solely on the basis of a single

indicator, such as the size of the dwelling or the general condition of the

house. For much of the analysis in this chapter, the sixteen individual

items are combined into three main areas of satisfaction: satisfaction with

the dwelling; satisfaction with housing costs (rates, mortgage repayments,

fuel bills); and satisfaction with location (including the neighborhood and

access to local services). The issue of satisfaction with the costs of

repairs is taken up in the chapter discussing repairs and home improvements

undertaken by the capil families.

Housing Satisfaction at Wave 2: Comparing the Capil Loan Group with Private

and Public Renters

Figure 5.1 compares the general satisfaction levels of Capil families with

public and private renters on three elements: the dwelling, location, and

their mortgage or rent payments. (See Figure 5.1)

While Capi1 families, on the whole, tend to be more satisfied with their

dwellings than the renters, the public renters by far outstrip the Capil

group in their satisfaction with location and rent payments. Indeed, the

Capil group have a level of satisfaction with location and costs that is

similar to private renters. The obviously higher satisfaction level of the

~-----~----~~~------

i ! c7J -is l

Overall Satisfaction with Dwelling, Location and Costs: Capil Loan Group and Public and Private Renters

80%, i< <

70%

60%

50% I 1"-.. "J 1"-.. "-..~ '" "-.. ~ 40%

30%

20%

1

D capil Group

D Public Aenters

10% .. " • " "vs),'>)."'-] I " • " h'\V\X'>'V1 b ~ 1.Y\"""Yi I ~ Private Ranters

Dwelling * Location ** Costs

* the variable "dwelling" takes into account seven individual items relating specifically to the house

* * "location" takes into account five individual items relating specificall yto location

The percentages indicated refer to the proportion of each group responding "satisfied" or "very satisfied" on each and every item comprising either "dwelling" or "location".

.J

I-rj 1-'-0 C ti CD

Ul

......

"" w

I I I I I I


- 94 -

MOH tenants says much for the central location and accessibility of Ministry

flats and for the relatively small proportions' of income spent on housing

costs in the public sector. On the other hand, the Capil families appreciate

their dwellings to a greater extent than do tenants and most tenants would

prefer a Capil home, as evidenced by their presence on the Capil waiting

list.

Family status does make a difference to the overall level of housing

satisfaction. (See Figure 5.2).

• In the Capil group, relatively more respondents in one-parent families

report that they are satisfied with the various elements of their housing

environment than respondents in married couple families. The same pattern

does not occur for public renters; instead, married couple families are

slightly more satisfied with their location and rent payments than are sole

parents. This reversal in the pattern of satisfaction leads to the tentative

suggestion that receiving a Capil loan has had relatively more impact on the

housing satisfaction of sole parents than on married respondents. Private

renters (and numbers do not permit disaggregating by family status)

generally rank lower on each element of housing satisfaction. They tend to

be more dissatisfied with their dwellings and location than their rent

payments.

The Impact of Ethnicity on Housing Satisfaction

Ethnic background also plays a strong part in explaining the housing

satisfaction of the Capil families. As the following figures show, the Asian

born families are considerably less satisfied with all aspects of their

housing environment than are the Australian or European born. (Note: the

small number of Asian families in the Control group (8) does not merit a

statistical analysis, yet the general pattern of lowered satisfaction does

not appear to hold true.)

In the following figures the changing level of housing satisfaction over the

course of the Capil study is shown for each ethnic group. Quite clearly, the

ethnic background of the respondents, particularly in the way it impacts on

housing experience and housing expectations, exerts a strong influence on

levels of housing satisfaction~ (See Figure 5.3)

~.~-.--~~~~~~~~-~~---

,--_ .. _-----_._._--------- ---------------_.,- ---------------_._--_._--_._---_ .. , Comparison of Capil Loan Group & Public & Private Renters I On Elements of Residential Satisfaction By Family Status % Satisfied With ...

100%·------------------------------------------------------~

90%

80%

70%

60%

50%

40%

30%

20%

10%

D CepII Couples

D Clpil Sole PInInIs

1S3 NIIIo COUples

~ N)IIo Sole rw.rta

0% L-I '" J'\. '\. ~~ " ),L. " ~~ '\. f\ '\. ~~,,~ I ~ Total PrIvat8 AIn1ar

Dwelling Location Mortgage-Rent

L ________ _ ... __ . ________________________ ..J

'"':I 1--''Q s:: Ii CD

U1

"->

1.0 VI

.. ; __ ....... -...... _f ' .... ' .. ' .. M' ... __ .. ~. ~

Changing Levels of Satisfaction By Ethnicity Dwelling

DPreGapil

DWave1

.. " ), I), ), ), ),1 1 ), ), I)')'" J " ), """" 1 1 0 Wave 2 Asian

Ethnicity Note: For comparability with Wave 1 , dwelling satisfaction is measured by three items: "amount of privacy", "amount of space for self", and "amount of space for

children"

!-rj ~.

lQ C ti (1)

U1

w

(0 0'1

I I I I I I -I I I I I I I I I I I I I I

- 97 -

Figure 5.3 presents the respondents' assessment of their level of

satisfaction with their pre-Capil residence; with their Capil dwelling at

the time of the first interview (wave 1); and again with their Capil

dwelling at the most recent follow-up interview (wave 2).

Not surprisingly, Capil clients at Wave 1, all recent home-owners, rated

their housing satisfaction as dramatically higher than that experienced in

their former residences. This. was true of all three ethnic groups. Nearly 90

percent of each group rated their housing satisfaction, immediately post

Capil, as high. A "honeymoon effect", that is, the initial excitement of

finally being in a home of their own, appears to be operating. Two-thirds

of both the Australian-born and European-born groups continued to express

satisfaction with their house at Wave 2; less than half the Asian-born

group, however, remained satisfied with their house.

A similar "honeymoon effect" appears in Figure 5.4, which examines changing

levels of satisfaction with housing costs (mortgage repayments, rates, fuel

bills). Satisfaction with housing costs increased for most Capil clients,

regardless of ethnicity, immediately post-Capil. One to two years in

homeownership (the length of time between the Wave 1 and Wave 2 interviews)

has significantly dampened the respondents' satisfaction with the costs of

owning a home. Indeed, overall the respondents' satisfaction with what they

are paying for housing is well below pre-Capil levels. This is particularly

true for Asian born clients, whose satisfaction with housing costs is less

than one-third of what it was before they purchased a Capil home. For

Australian born clients the drop in satisfaction is to about two-fifths of

pre-Capil levels. (See Figure 5.4)

Overall, the respondents are satisfied with the location of their new Capil

homes and the dramatic declines in satisfaction levels evidenced for the

dwelling do not appear (see Figure 5.5). At Wave 1, satisfaction with

location was at a high level for all ethnic groups with over 85 percent of

Capil respondents expressing satisfaction with their location. By Wave 2,

however, this satisfaction had diminished for each ethnic group. For the

Australian-born and European-born clients, the satisfaction with their

location was still higher, however, than that expressed at their pre-Capil

residence. For the Asian-born respondents, however, their satisfaction level

had dropped at Wave 2 to about the same as it was at the pre-Capil period.

(See Figure 5.5)

~-~~~-~-~~~~~~~~--~-

100%

90%

80%

! 70%

8 60% Q c Oil ::::J 50% 0 ~ .c 40% -~ 'tJ 30% :! (I) +J 20% c71 -c 10% ~ l. 0%

Changing Levels of Satisfaction By Ethnicity Housing Costs (Mortgage, Rates, Fuel Bills)

DPreC8pil

DWave1

"', "' """'""" , , , "" " , 1>",' , ~ Wave 2 Australian European Asian

Ethnicity

I-tj 1-'. lQ C 11 CD

U1

~

~

00

~~-.~-~~~.~~~-~~.~~-

c: 0 +0 ID ()

.9

.c: -~ '0 CD -= fIJ +0

c7l 1: CD e a?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Changing Levels of Satisfaction By Ethnicity Location

o PreGapil

DWave1 .. > >, > > > >. , > > > > > D > D > > >, I ~ Wave 2


Ethnicity

Note: For comparability with wave 1, location is measured by one item, "the location of your home"

t-tj 1-'lQ C 11 CD

U1

U1

~ ~

I I I I t'

" I 'I ,11

I 1, , J ,-1\ "

I I 'I' I·

- 100 -

Thus ethnic background does appear to exert an impact on levels of housing

satisfaction. For each element of satisfaction (i.e. dwelling, housing

costs, and location), the Asian-born group express a lower level of

satisfaction. As well, they experienced relatively greater declines in

satisfaction from Wave 1 to Wave 2 than did the other two ethnic groups.

Average Declines in Satisfaction Levels, Wave 1 to Wave 2

Given the overall changes in the level of residential satisfaction between

the initial and the most recent interviews, it is useful to look more

closely at the characteristics of respondents whose satisfaction level

either decreased, stayed the same, or increased. For this analysis, each

respondent was given an "average satisfaction score", a figure which takes

into account their satisfaction on the individual items comprising location,

housing costs and the house itself. Over half the Capil respondents (56

percent) reported a lower level of housing satisfaction at Wave 2 than they

did at Wave 1. For one-third of the sample (33 percent), their reported

level of satisfaction stayed the same and only a minority of respondents

(under 11 percent) reported increased levels of satisfaction with their

Capil home.

Further analysis on the factors associated with changing level of

satisfaction indicated that diminished housing satisfaction is not the

result of the loss of employment between the first interview and Wave 2 or a

drop in income. Nor is it related to family disruption that may have been

experienced such as divorce or separation. Instead, the families most

likely to have experienced an overall decrease in housing satisfaction were

Asian-born, had experienced difficulty in coping financially since Wave I,

and consequently had to cut back on social occasions. (See Figure 5.6)

On the other hand, those least likely to have experienced a decline in

satisfaction tended to be the "long-distance movers". Increased levels of

satisfaction were reported by those families who, in selecting a Capil home

two years previously, had moved a considerable distance from their former

residence (the very group likely to report low levels of satisfaction at

Wave 1). As they became more familiar with their new environment, the

disruption experienced by the initial move lessened and their overall level

of satisfaction increased.

~'~ ~. ~i_~ ~~_I __ ~'. _~ ~ ~ ~_ Decline in Overall Residential Satisfaction By Selected Characteristics of Capil Loan Group % of Families with a Decline in Residential Satisfaction

. Frnancial Coping Decreased (66)

Asian Born Families (66)

Cut Back on Social Occasions (122)

Long Distance Movers (30)

TotalCapil Families (406)

• • • • • • • 0% 10% 20% 30% 40% 50% 60% 70%

Number In bracket refers to the number of cases percentage Is based on

80% '"Xj 1-'

I.Q ~ Ii CD

U1

0'\

I-' o I-'

I I I I I I I I I t I t "

I I I I I I I I

- 102 -

While half the Australian born Capil clients at Wave 2 reported a lower

level of residential satisfaction than they had at the first interview, the

satisfaction level of fully 60 percent of the European born respondents and

70 percent of the Asian born respondents had declined.

The respondent's perceived ability to cope financially made a considerable

impact on their overall level of housing satisfaction. seventy-two percent

of respondents who reported at Wave 2 more difficulty coping financially

than they had at Wave 1 also expressed a lower level of satisfaction with

their housing. On the other hand, respondents coping better financially at

Wave 2 tended to either maintain the same level of satisfaction or increase

it.

Determinants of Housing Satisfaction

This section of the chapter now examines more closely the determinants of

satisfaction; in particular, what are the factors which most explain

satisfaction with their Capil dwelling or with housing costs. (Given the

uniformly high levels of satisfaction with location, that issue is not

pursued in this section.) This type of question goes beyond merely

describing levels of satisfaction to attempting to explain residential

satisfaction. Without a working knowledge of the contributing factors to

housing satisfaction, little action can be taken by the Ministry to raise

the satisfaction levels of Capil clients.

Regression analysis is the most appropriate statistical technique for

ascertaining the differential impact of several factors on the level of

housing satisfaction. A combination of family, housing, income, and life

satisfaction variables have been incorporated into the regression analyses

(see Appendix for a description of all variables employed in the regression

analyses). A step-wise regression technique was used and only the variables

which emerged as statistically significant are included in the model. The

following briefly summarizes the results of the two regression models: the

first to explain satisfaction with the house itself (keeping in mind that

just over half the Capil sample report that they are "satisfied" or "very

satisfied" with the Capil house), and satisfaction with housing costs

(reported satisfaction with mortgage payments, fuel bills, and rates are

combined in this score).

I ,I,

I I,

t I,

I I I,

t ,I I' ,I

I I' ,I,

- 103 -

Explaining Housing Satisfaction

Model 1 graphically. presents the key factors related to housing satisfaction

of the Capil clients. All the variables described in the model are

statistically associated with housing satisfaction and the positive or

negative sign next to the beta score indicates the direction of the

relationship. The beta score denotes the strength of the relationship.

Model 1: Regression Model Explaining Satisfaction with Housing Beta Scores and R-Square

INDIVIDUAL AND FAMILY CHARACTERISTICS

Family income -....... -.21

Asian born

HOUSING CHARACTERISTICS SATISFACTION WITH DWELLING

Crowding index ~ ~.18

Age of dwelling""""'---

GENERAL LIFE SATISFACTION .31

Sense of purpose in 1ife~ .17

Satisfaction with standard of livingl

* All variables are significantly related at .00 level

-R-square = .251

N = 386

Asian-born respondents are statistically more likely to report a lower level

of satisfaction with their Capil house than Australian or European born

respondents. This not unexpected pattern also was shown in the previous

analysis. What is different about the regression analysis is that it

suggests that lowered satisfaction levels among the Asian born hold true,

even when other factors are controlled such as general life satisfaction or

other housing characteristics.

I I I I t I I I I ., I t I I I I I I , I

- 104 -

Family income is inversely associated with housing satisfaction, suggesting

that the lower the family income, the higher the level of satisfaction. This

suggests that some element of housing expectations is intervening in terms

of level of satisfaction: the lower income families, possibly expecting

less, tend to be more satisfied with the houses they have purchased. It is

also related to the type of families who, on the whole, have lower incomes:

that. is, the sole parent families. As noted previously, there are relatively

more satisfied respondents among sole parent than married couple families.

(Note: Family type was not included in the regression models because of it's

high (.51) correlation with family income).

Nonetheless, this inverse relationship between family income and housing

satisfaction is not one that is found in most studies of housing

satisfaction. Perhaps this is because most studies of residential

satisfaction are carried out on a population of private home purchasers. The

Capil sample, on the other hand, drawn from the waiting list of the Ministry

of Housing, may be significantly different in this aspect from a random

'sample of private home-purchasers. The underlying factor may be housing

expectations: the lower the family income, the lower the housing

expectations with the outcome that a Capil house is more than satisfactory.

On the contrary, for the better off of the Capil families, their higher

housing expectations may not be met with a Capil home loan.

With regard to the dwelling itself, two features affect reported

satisfaction: the extent of crowding experienced by the family and the age

of the dwelling. Being crowded, (measured in terms of the the number of

bedrooms for the size of the family), not surprisingly decreases a family's

satisfaction with their dwelling. Moreover, purchase of an older dwelling

tends to further diminish satisfaction: as the negative beta score of -.18

shows, the older the dwelling, the less satisfied the family. As the next

chapter on repairs and improvements reveals, older dwellings bring with them

extra and often unexpected repair costs.

The level of housing satisfaction expressed by a respondent is clearly

related to overall subjective well-being. Those respondents who in general

ranked their sense of purpose in life as high and appeared satisfied with

their standard of living tended to be satisfied with their house. Although

this finding does not appear startling, it serves as a useful reminder that

housing satisfaction stems, at least in part, from subjective factors quite

unrelated to the dwelling or to the socio-demographic characteristics of

families.

I I I I , I I I I I I I I J I I I I I I

- 105 -

Explaining Satisfaction with Housing Costs

On the whole, at the Wave 2 interviews the Capil families reported a sharp

drop in the level of satisfaction with housing costs from that described at

their initial Capil interview two years previously. Moreover, the general

level of satisfaction with housing costs was considerably below that

reported with respect to their pre-Capil rental residences. What are the

characteristics associated with satisfaction (or the opposite,

dissatisfaction) with housing costs? "Housing costs" in this regression

model is a combined score on satisfaction with mortgage payments, rates, and

fuel bills.

The following variables emerged as significantly related to satisfaction

with housing costs.

Model 2: Regression Model Explaining Satisfaction with Housing Costs Beta Scores and R-square

INDIVIDUAL AND FAMILY CHARACTERISTICS

Australian born ~12

Family income,,-.20

HOUSING CHARACTERISTICS

No significant variables

GENERAL LIFE SATISFACTION

SATISFACTION WITH HOUSING COSTS

/ .45

Satisfaction with standard of living/

* All variables are significantly related at .00 level of significance

N = 387

R-square = .248

Australian-born respondents were statistically more likely to report that

they were satisfied with their housing costs than were overseas born, in

this case including both European and Asian migrants. Family income shows

the same relationship to housing cost satisfaction as it did in the previous

I I I I t I I I I I I I I I I I I I I I

- 106 -

regression model, that is, those families on lower incomes are more likely

to be satisfied with their costs than are the better off families in the

sample.

There are no particular features of the dwelling itself that explain

satisfaction with housing costs. In other words, this analysis suggests that

families do not base their assessment of the housing costs they have

incurred in their Capil home on whether they have a new or old dwelling or

whether they are relatively crowded or not. What is much more important in

understanding their level of satisfaction with housing costs is the overall

satisfaction the respondents feel about their standard of living. Thus, the

families that tend to be satisfied with their standard of living, be they

rich or poor, in a new house or old, are more satisfied with their housing

costs.


For the Capil clients, satisfaction with one's residential environment rests

on a variety of factors, ranging from specific features of the dwelling to

characteristics of the respondents' themselves. Moreover, actual housing

conditions are not the only factors to influence satisfaction; cultural

values and attitudes, previous housing experience and future housing

expectations all play a role in the overall level of satisfaction with the

environment.

As seen in this chapter, the majority of Capil clients report that they are

satisfied with almost all aspects of their housing environment. The notable

exception to this pattern is the associated costs of owning a home, such as

rates, fuel bills and repair costs. Housing satisfaction generally has

diminished over the past two years for over half the Capil families, perhaps

in part due to a fading away of the euphoria of new homeownership

experienced at the time of the initial interviews, and partly a growing

dissatisfaction with housing costs.

In brief, the main influences on the level of housing satisfaction seem to

be both cultural and subjective, rather than specific to the physical

dwellings per se. The cultural influence is evidenced by the strong impact

of ethnic origin on nearly every aspect of housing satisfaction. That the


- 107 -

Asian born Capil families are considerably less satisfied than others is of

concern and suggests their inadequate understanding of the scheme itself or

the costs of home-ownership. Just around one-quarter of the Asian families

are satisfied with the rates and fuel bills they must pay.

The importance of subjective factors can be seen in a number of ways: first,

the quite clear contribution of general life satisfaction variables on

housing satisfaction, indicating that respondents with a generally positive

outlook on life tend to be positive about their housing environment as well;

second, the fact that within the capil group the low income families

generally report higher housing satisfaction than the relatively better off

Capil families, suggesting that the housing satisfaction is a function of

expectations, and third, the general finding that particular features of the

dwelling tend not to be associated with housing satisfaction.

The housing satisfaction of the control group of renters rests almost

completely on whether they are private or public sector tenants. Public

renters report higher housing satisfaction with their location and their

rent payments than do either Capil families or private renters.

The general decline in satisfaction experienced by the Capil group of

homeowners since the first wave of interviews reflects a pattern not unlike

any new group of homeowners: great satisfaction in the early days (as

evidenced in the initial interviews) which moderates over time and

increasing dissatisfaction with the costs associated with homeownership.

These findings suggest that residential satisfaction, in large part, rests

on factors beyond the Ministry's direct control. One policy relevant area,

however, suggested by the analysis is the area of satisfaction with housing

costs. As satisfaction is so closely related to expectations, the Ministry

could undertake to inform families fully at the outset of the loan

application process of the costs of owning a home, costs that are likely to

be unexpectedly high in the first few years of homeownership. These programs

may be particularly useful for overseas born clients who may be faced with

living in a home-owning society for the first time.

I I I I I I I I I I I I I , I I I I I I

- 108 -

In sum, while satisfaction is not the only measure by which to evaluate the

Capi1 program, it does offer insights into how the capil scheme is working

for families. Based on the results of this analysis, it appears that the

majority of Capil families people are satisfied with their dwellings and the

locations they have chosen. But the area of least satisfaction is housing

costs. As a mainstay of the Capil scheme is homeownership at affordable

repayments, this message does not appear to be conveyed to the majority of

Capil families. The concept of equity growth (which offers a reason for

paying a mortgage rather than rent) appears not to be part of the

respondents' assessment of the acceptability of their housing costs.

Moreover, the considerably lower levels of housing satisfaction expressed by

the Asian-born respondents suggests that for this group of Capil clients,

the difficulty they face in other aspects of their lives which detracts

from their general life satisfactions, coupled with an inadequate

understanding of the nature of the Capil loan, diminishes their general

enjoyment of home-ownership.

I I I I I I I I I 'I I I I I I I 'I I I' I

- 109 -

Appendix

Variables and Variable Coding Used in Regression Models

Variable Name

DEMOGRAPHIC VARIABLES

Age of Respondent

Australian-born

Asian-Born

Age of Youngest Child

HOUSING VARIABLES

Age of Dwelling

Previous Housing Tenure

Crowding Index

Total Repair Costs

FAMILY ECONOMIC FACTORS

Family Income

Major Family Income Source

Financial Coping

Coding

Age in single years

O=Born Elsewhere l=Australian-born

O=Born Elsewhere l=Asian-born

Age in single years

Continuous variable (in single years)

O=former private renter l=former MOH tenant

Number of persons in the household divided by number of bedrooms in dwelling

Total dollars (' 00 dollars) spent on repairs, home maintenance and home improvements reported at Wave 2.

Total net weekly income (after taxes) of respondent and partner (in '00 dollars)

O=government benefits l=wages and salary

O=not able to save l=able to save

I I I I I I I I I I I I I I I I

I I I

WELL-BEING MEASURES

Sense of purpose in life

Satisfaction with standard of living

- 110 -

Computed variable ranging from 3 (very dissatisfied) to 15 (very satisfied) based on the respondent'ssubjective assessment of three items: how doyou feel about "your life as a whole", "what you are accomplishing in your life" and the "sense of purpose and meaning in your life".

Computed variable with scores ranging from 2 (very dissatisfied) to 10 (very satisfied) based on respondent's subjective assessment of two items: how do you feel about "your standard of living" and "your income".

HOUSING SATISFACTION VARIABLES

House satisfaction

Housing Cost Satisfaction

Computed variable ranging from 7 (very dissatisfied) to 35 (very satisfied) based on respondent's assessment of 7 items: how satisfied are you with "the size of your house"; the "outdoor space"; "amount of privacy"; "space for yourself"; "space for children"; "the condition of your house"; and "the amount of natural light".

Computed variable ranging from 3 (very dissatisfied) to 15 (very satisfied) based on respondent's assessment of 3 items: how satisfied are you with "the size of your mortgage", "the rates"; and "fuel bills".


- 111 -

CHAPTER 6

REPAIRS, RENOVATIONS & HOME IMPROVEMENTS AMONG CAPIL FAMILIES- M. Wulff

A great deal of housing activity has occurred between the Wave 1 and Wave 2

interviews centering around repairing and improving the homes. About two

thirds of Capil families have made some form of repair, alteration or

addition to their home, at a cost ranging between a low of $30.00 to a high

of $14,000.

The desire of a new home-owner to immediately make some alteration to the

home is not uncommon, yet most Capil families live within quite constrained

financial circumstances. Repairing and improving the home can have several

meanings: repairs necessitated by the run-down condition of the house;

improvements motivated by a wish to put a personal touch into the house;

extensions or additions necessitated by increases in the size of the family.

While the costs incurred in this process, on the one hand, drain the

family's after housing disposable income, on the other hand they can be

viewed as adding to the overall value of the home, thus increasing the home

owner's equity.

While most families said that they were aware prior to purchasing the house

that the work needed to be done, nearly a quarter of the families reported

that although they knew some repairs were required, they were unaware of the

extent, and another quarter were quite unprepared for the work they felt

they had to carry out. Less than four per cent of the families who undertook

repairs or improvements felt that it was non-essential, or "cosmetic" as one

respondent described it.

The types of repairs undertaken varied greatly, to the extent that the

original twenty-one categories proved insufficient to capture all the

specific work reported. Some families reported specific repairs such as re

wiring the house or constructing a garden shed (the latter a very popular

activity), while others spoke in general terms about renovating a kitchen or

a bathroom. The housing activity carried out by the families can best be


- 112 -

summarized in six categories: heating, plumbing, basic or structural (re

wiring, stumping, roofing etc.), general renovation, extensions, and outside

improvements.

It is extremely difficult to make the distinction between "choice" and

"necessity" in much of the work described by the families. To some extent,

however, the first three categories can be viewed as necessary, while the

last three fall more into the area of discretionary expenditure on home

improvements. But these distinctions must be made with caution because what

are sometimes categorized as "general renovations and improvements" were

necessitated by the sub-standard condition of the home.

This chapter will examine the level of expenditure on repairs and home

improvements, the nature of repairs undertaken, and the ways in which

families financed these repairs.

Home Repairers and Improvers

A wide range of families undertook repairs and improvements; nonetheless,

certain types of families were more likely than others to do so. For

example, as shown in Figure 6.1, European-born or Australian families were

more likely to have carried out repairs and renovations than Asian families.

Over two-thirds of European and Australian-born did repairs, compared with

only half of the Asian families. (See Figure 6.1)

Couples, on the whole, were more likely than sole parents to have carried

out repairs. This is likely a result of the greater labour force

participation and the higher average family incomes of couples. As also

indicated in Figure 6.1, families with a wage and salary earner were more

likely than those on benefits to do repairs, and those families on higher

incomes (for example, over $400 per week) were statistically more likely

than those on lower family incomes to do repairs.

Figure 6.2 suggests that doing repairs is a result of both opportunity

(provided by adequate income) and necessity (fueled by the run-down nature

of the house). In other words, it is not only that income allows the

opportunity for repairs and improvements, but that certain houses stand in

need of considerable repair. (See Figure 6.2)


- 113 -FIGURE 6.1

Characteristics of Repairers and Home Improvers

X Who Undertook Repairs and Improvements Between Wave 1 & Wave 2

Australian (208)

European (118)

Asian (71)

Couples (218)

Sole Parents (179)

Wage & Salary Earners (172)

Benefits (225)

Family Income <$200 (100)

Family Income $200-$300 (166)

Family Income $300-$400 (65)

Family Income $400+ (60)

Total Capil Families (39n

• • • • • • • Oi. 10i. 207. 30i. 40i. 50i. 6Oi. 70i. 80i.

Number in bracket refers to the number of cases percentage is based on


- 114 -FIGURE 6.2

Characteristics of Dwellings Repaired and Improved

% Repaired and Improved Between Wave 1 and Wave 2

Built Less Than 10 yrs (103)

Built Between 1960-1976 (123)

Built Post-war to 1960 (101)

Built Pre-war (59)

Solid Brick (16n

Concrete (35)

Fibro Cement (4n

Timber (148)

Total Dwellings (39n

• • • • • • • 07. 10% 20% 30% 40% 50% 60% 707. 80%



- 115 -

There is a definite pattern to the type of dwellings in which repairs were

carried out. Older dwellings, particularly those constructed prior to the

Second World War and those built right after the war were statistically more

likely to have had repairs than more recently constructed dwellings. In

addition, timber houses received more repairs than did those constructed of

solid brick. Thus, while income allows the opportunity for repairs, families

who purchased either an older dwelling or a timber dwelling were likely

faced with more required work.

Types of Repairs and Improvements

Figure 6.3 presents the proportion of "repairers", that is, families

undertaking repairs, who carried out a particular type of repair or

improvement. The average cost of these jobs is also included in the Figure.

General home renovations were the most popular category of repair and

covered many activities from reports of painting the interior of the house

to renovating a kitchen or bathroom or putting new floor coverings down.

Over sixty per cent of the repairers stated that they had done a general

home improvement or renovation since the last interview. Although the cost

of these general improvements varied greatly, the average cost was $958.

(See Figure 6.3)

O~tside improvements ranged from the construction of garden sheds, putting

up new fences (relatively common activity) or landscaping the garden or some

part of the outside area. Just under half of all repairers engaged in this

kind of housing improvement between the Wave 1 and Wave 2 interviews. Such

work was also expensive at an average cost of just over $900.

Just under thirty per cent of repairers carried out basic or structural work

(for example, restumping, replastering, rewiring, rising damp, new roof).

These, on average, were less expensive than home renovations and outside

improvements and averaged around $681.

Plumbing was, on average, the least expensive repair to carry out at $478.

About thirty per cent of repairers reported work related to plumbing.

Expenses related to heating were. the most costly at $1200 on average. This

perhaps explains why only about 12 per cent of repairers installed heating.

-------------~--~-~-

Types of Repairs and Improvements % of Repairers Who Did the Following ...

Home Renovations ($958)

Outside Improvements ($908)

Basic Structural ($681)

Plumbing ($478)

Heating ($1,225)

Extem 'ons ($3,476)

• • • • • • 0% 10% 20% 30% 40% 50% 60% 70%

l N=263 J Number in brackets refers to average amount spent on that item

'---------------------------

'Tl G) C :0 m O'l

(.V

, I

~

~ 0'1


- 117 -

Another expensive repair is an extension to a home, at nearly $3,500.

Extensions or additions specifically refer to adding a new room to the

house, be it a family room, extra bedroom, etc. Only five per cent of

repairers added on to their homes in this way.

Level of Expenditure on Repairs

A substantial minority of families (37 per cent) did not undertake any

repairs or improvements between the Wave 1 and Wave 2 interviews. As

described previously, although all types of families undertook repairs,

families on lower incomes, Asian born families, and sole parents were less

likely to undertake repairs than others. (See Figure 6.4)

But as Figure 6.4 reveals, those families who undertook repairs spent

considerable amounts of money. While some families spent less than $500,

many families expended much greater amounts. Indeed, about twenty per cent

spent over $2000 including a minority of families (4.5 per cent) who spent

over $5000.

In looking further at the amounts expended on repairs, certain types of

families were more likely to spend more than others. For example, among

repairers, couples spent relatively more on repairs and improvements than

did sole parents. (See Figure 6.5)

While about 36 per cent of couples undertaking repairs spent more than

$2000, only 23 per cent of sole parents did so. About one third of sole

parent repairers spent between $1000 and $2000. These differences, however,

did not emerge as statistically significant.

Table 6.1 presents the expenditure on repairs by place of birth. Australian

born repairers spent relatively less than the overseas born on repairs.

Interestingly, the Asian families, although less likely to undertake repairs

in the first place, when they did so they tended to have the highest

expenditures. Nearly 40 per cent (38.9 per cent) of Asian repairers spent

over $2000.

--------------~-~---I

level of Expenditure on Repairs and Home Improvements

(N = 406)

$5.000+ 4.61

$2.001-$5,000 14.81

$1.001-$2.000 18.8X

$500-$1.000 18.8X

No Expenditure S7.81

Less than $500 13.41

."

cv C JJ m 0>

~

~

t-' co

--------------------Level of Expenditure on Repairs and Home Improvements By Family Type of Wave Two Repairers

~8


Sole Parents N-108

Expenditure

o Less than $500

CS] $500 - $1,000

~ $1,001- $2.000

~ $2,001- $5,000

~ Over $5,000

"Tl

G) C ::0 m C1>

<..T1

I-' I-' \D


- 120 -

Table 6.1: Level of expenditure on repairs and home improvements by birthplace of Wave 2 repairers

Level of expenditure Australia

Less than $500 27.4

$500-$1000 20.0

$1001-$2000 27.4

$2001-$5000 18.5

over $5000 6.7

TOTAL , 100.0 N 135

statistically significant at

Birthplace

Europe

17.9

21.8

24.4

24.4

11.5

100.0 78

.02

Asia

5.6

27.B

27.B

38.9

100.0 36

Expenditure on repairs is, in part, dictated by the family's financial

situation. Figure 6.6 compares the expenditure levels of repairers with less

than $200 per week net with those having net incomes over $400. Those

families on lower incomes were far more likely to report spending less than

$1000 than those on the higher net incomes. Half of those families with over

$400 per week spent above $2000 compared with one-quarter of the lower

income group. (See Fig.ure 6.6)

Dwellings built prior to World War II required substantially more expensive

repairs than those built in the last ten year. About forty per cent of

families living in pre WWII dwellings outlayed more than $2000 on repairs

compared with 19 per cent of those in more recently constructed homes. (See

Figure 6.7)

Metropolitan dwellings received more expensive repairs than those outside

the metropolitan area. About thirty per cent of homes in non-metropolitan

areas received repairs costing less than $500 compared with only 14 per cent

of those in the metropolitan area. About thirty seven per cent of

metropolitan dwellings had repairs worth over $2000 compared with twenty-two

per cent of non-metropolitan homes •. A minority of repairers in both the city

and the country spent over $5000 on their homes: 9 per cent in the city and

five per cent in the country. (See Figure 6.B)

--------------------Level of Expenditure on Repairs and Home Improvements By Net Weekly Family Income of Wave Two Repairers

Family Income Le .. Than $200 Weekly

N=53

Statistically significant at .09

Family Income Greater Than $400 Weekly

N=48

Expenditure

D Less than $500

[SJ $500 - $1,000

o $1.001- $2,000

~ $2.001- $5,000

~ Over $5,000

-,

"'Tl (j) c :n m 0>

0>

I-' N I-'

--------------------I

Level of Expenditure on Repairs and Home Improvements By Age of Dwelling of Wave Two Repairers

I "',. 16%

DwelII~ Built In Laat Ten V .....

NaSS

~-

l __ Statistically significant at .02

Dwelling Built pre World War TWo

N=41

Expenditure

D Less than $500

Q $500 - $1,000

o $1,001- $2,000

~ $2,Q01- $5,000

~ Over $5,000

I

T1 (j) C JJ m 0>

~

I-' IV IV

--------------------Level of Expenditure on Repairs and Home Improvements By Location of Wave Two Repairers

I I

Metropolitan Loc8tIon

M=14O


r- ---,

Non-Metropolitan Location

N=109

30%

Expenditure

o Less than $500

CS] $500 - $1,000

o $1.001- $2,000

~ $2,Q01- $5,000

~ Over $5,000

"I

11 (j) C JJ m ?> 00

f--' N W


- 124 -

Sources of Finance for Repairs and Improvements

Given the levels of money being put into the Capil homes, how did families

finance such outlays?

It is surprising the extent to which families relied on their own savings or

funds to meet the costs of repairs and improvements. Seventy per cent of the

families drew on their own financial resources in order to cover the repairs

costs. (Although most of this group relied on carefully acquired savings,

several reported other sources of family funds such as wins at the TAB,

worker's compensation payouts, Tattslotto wins etc.) (See Figure 6.9)

Only about thirteen per cent of repairers actually took out a loan from a

bank or finance company. (A small number of families in this category put it

on the gas bill or SEC bill or even the credit card.) Friends or family

provided a loan to cover the expenses for about 16 per cent of the families.

There is no particular pattern to financing repairs by family status,

although couples were slightly more likely than sole parent to use savings

and sole parents to use loans from family or friends, but these differences

are not statistically significant.

Table 6.2: Source of finance for repairs and improvements by family status of Wave 2 repairers.

Family funds

Bank or Finance Co

Loans from family or friends

TOTAL , N

Family type

Couples

72.0

12.7

15.3

100.0 150

Differences are not statistically different

Sole parents

67.9

13.8

18.3

100.0 109

What is statistically significant, however, are the differences that appear

for the three ethnic groups. Nearly all the Asian families relied on their

- 125 -

I I FIGURE 6.9

I I

tn

I .... c: (J) "0 Cl) c

E ~

I ~N

~ E~ ~R

I Q.

E -I "'C~ C:CI)

I ca ... .-~ca .- Co

I ca Cl) Q.a: 0) Cl) LO

a:O C\.I 11

I O~ z

I LLCI) Cl) >

~~ I c: .-LL

I 'I-0 c 8 tn .9 Cl)

I Cl) ~ g e "e ~

~ u:: ::::J In ~

I 0 i~ ~N tn ·c cO ~a u. .....

I I I I


- 126 -

own family funds to cover repair costs; indeed none used bank loans and only

three families (8.1 per cent) had a loan from family or friends. Australian

and European born respondents, however, drew on similar sources for their

repairs: mainly family funds or savings, with some using bank loans and

loans from other family members or friends.

Table 6.3: Source of finance for repairs and improvements by birthplace of Wave 2 repairers

Source of finance

Family funds or savings

Bank or Finance

Loan from family or friends

TOTAL % N

Co

Australia

66.2

16.5

17.3

100.0 139

Significant at .02 level

Birthplace

Europe

67.5

13.3

19.3

100.0 83

Asia

91.9

8.1

100.0 37

Family income, to some extent, determined the ability to use family savings.

Among repairers, those families on the lowest incomes were far more likely

to call upon family or friends for a loan than those on the higher weekly

income levels. For example, nearly one-quarter (23.2 per cent) of those

families having less than $200 per week income acquired a loan from family

or friends compared with only 6.7 per cent of those families with over $400

per week.

I I I I I I I I I I I I

I I I I I I

- 127 -

Table 6.4: Source of finance for repairs and improvements by net weekly family income of repairers

source of finance

Family funds or savings

Bank or Finance

Loan from family or friends

TOTAL , N

Co

Up to $200

62.5

14.3

23.2

100 •• 0 56

Net weekly family income

$201-$300

71.6

9.2

19.3

100.0 109

$301-$400

73.8

16.7

9.5

100.0 42


Over $400

75.6

17.8

6.7

100.0 45

Borrowing from family and friends was not an easy option, nor without

consequences for the families. Figure 6.10 shows a clear relationship

between borrowing from family and friends and dissatisfaction with the costs

of the repair work as well as difficulty in raising the money. Sixty per

cent of those families that relied on family and friends to finance their

house repairs reported that they were dissatisfied with the costs of

repairs. In addition, close to half this group said that it was "very

difficult" to raise the money. In contrast, families who were able to rely

on their own saving or personal funds for the repairs were, on the whole,

satisfied with repair costs and did not report great difficulty in raising

the money. (See Figure 6.10)

As shown in Figure 6.11, however, there is a steady decline in the ability

to rely primarily on family savings or personal funds as repair costs rise.

Although 80 per cent of those repairers outlaying less than $500 relied on

their own funds, less than sixty per cent of those spend over $5000 were

able to do so. Family funds could not be stretched sufficiently to meet some

of the more expensive repairs. (See Figure 6.11)

Part of the difficulty is that many repairs required highly paid

professional involvement. Despite much evidence of the owners' willingness

to put "sweat equity" into their homes, many, for one reason or another,

- - - - ~ - :- -".- - - -' - (- - - ~ - - -Impact of Financial Source on Difficulty in Raising Repair Money & Satisfaction With Repair Costs

Percent Say "Dissatisfied With Repair Costs"

FrIende family Loan (.ta)

Bank « FInInce CCl CM)

FemOyFundll 78)

01 101 201301401 60Z IlOl 701

StatisticaOy significant at .000 level Number In brackets refers to number of cases percentage was based on

Percent Say nvery Difficult to Raise Repair Moneyn

FrIenda-Fam11y Loan (~ .)

Bank«. __ r-Co. CM}

family fUI ~ (178)

01 101 201 301 401 50S eoz 70Z

11 G) C JJ m

0)

o

f-' N 00

- - - - -. -- - - -, - - --- - - -' - ~ -Use of Family Funds and Savings to Meet Repair Costs By Level of Expenditure on Repairs % Who Used Family Funds or Savings

90%~~------------------------------------------------------------~ (N=53)

80% (N=54)

(N=65)

70%

60% (N=18)

50%

40%

30%

20%

10%

0% .. " '\ '\ ~ '\ '\" ,,'\ '\ ) '\ '\ ,\1 ... '\ '\ ") '\ '\ ,\1 L '\ '\ ..... '\ '\ '\ 1 l '\ '\ 4. '\ '\ '\ 1

Less than $500 $500-$1,000 $1,001-$2,000 $2,001-$5,000 Over $5,000

Level of Expenditure


" G) C JJ m 0)

I-' IV I.D


I I I I

- 130 -

were unable to do so and had to call in professional help. In over half the

repairs undertaken, professional help was involved. The owner, either on

his/her own or with friends was responsible for the repairs in about forty

per cent of cases. The owner worked with the professional or brought in

professional help for only part of the project in 27 per cent of cases. In

other words, nearly three-quarters of the repairers were putting their own

effort into carrying out the repairs and improvements. Work was carried out

solely by professional labour in only thirty per cent of the cases. (See

Figure 6.12)

Figure 6.13 shows that sole parents were considerably more likely to rely on

professional assistance than couple families. Very few sole parents, 10 per

cent, did the repairs on their own, but many, 36 per cent, called upon

friends to assist. In contrast, over one-quarter of the couples (27 per

cent) did the repairs or improvements themselves, and many were involved

with a professional in carrying out the work. On the whole, Figure 6.13

suggests that couples have not only their higher average incomes to rely on

for repairs, but greater ability to do the repairs on their own. (See Figure

6.13)

Different patterns of doing repairs and improvements are apparent for the

three ethnic groups as well. While Australians had a greater capacity for

calling on friends to help with the repairs (or even doing the repairs

themselves), overseas born families relied more on professional help. Asian

families were even more likely to use professional assistance than European

born and they relied very little on the involvement of friends. This is

likely a reflection of their considerably shorter time in Australia and

their lack of networks to help with repairs. This reliance on professional

assistance also explains their relatively higher expenditure on repairs and

improvements discussed previously. (See Figure 6.14)

Figure 6.15 suggests the types of repair jobs where professional help was

most likely to be used. In three-quarters or more of the heating and

plumbing repairs, professional help was relied on.

Seventy per cent of families undertaking structural repairs called on

professional assistance, while just over sixty per cent of those doing

extensions did so. General home improvements and outside improvements needed

professional assistance in about half the families. It is in these latter

two areas that owners are most self-reliant on getting the jobs done. Home

---~~-~--~~--~~-~---

Responsibility for Carrying Out Repairs & Improvements

N=256

Owner & Friends 22.4%

Owner 19.9%

Professional 30.4%

Owner & Professions 27.3%

"'Tl G) c :n m 0>

I\)

I-' W I-'

--~~~~--~~~~~~~~~~~-

Responsibility for Carrying Out Repairs & Improvements By Family Status of Wave Two Repairers .

CoupI .. N-161

13%

27%

24%

36%

Sole Parents N-111

38%

~ ~< 35% 1 110

% ~ "'> Y' 16%


D ~lCrlll'Otl"

CS] awn.,. PrcnIIIGI.r

rs:sJawn. ~ awn.,. RIIndI

"ll G) C JJ m CJ)

w

I-' W N

---~~~~-~~---~----~-

Responsibility for Carrying Out Repairs & Improvements By Birthplace of Wave Two Repairers

50%~-------------------------------------------------------------~

N=142 N=83 N=37

40%

30%

20%

10%

0'" .. > ,> > > "'>>>>1 > ,> > »»», > ~ awn. 6 ""'"-000. 'AI " )" )" 1).,"")1 I ~ "_NIl


Statistically significant at .Q2

11 (j) C ::0 m 0>

~

....... w w


- 134 -

improvements and outside improvements perhaps are areas where doing the work

is at the discretion of the owner, rather than demanded by the condition of

the house. (See Figure 6.15)

Limited income also necessitates doing repairs on your own or calling upon

the help of friends, as indicated in Figure 6.16.

While about half the families on incomes less than $300 per week carried out

the repairs themselves or with friends, far fewer families on relatively

higher weekly incomes did so. This suggests that many families use their own

labour and that of friends as a result of limited income.

Looking Back: Home Repairers and Improvers Since Entry into Capil Home

Many Capil families have been actively repairing and improving their homes

since the early days of moving in. Indeed, 47 per cent of the families could

be described as "chronic repairers", that is, they reported carrying out

repairs at the Wave 1 interview and continued doing repairs up to Wave 2.

(See Figure 6.17)

Figure 6.17 presents a typology of repairers based upon their home repair

and improvement activity since the Wave 1 interview. About thirteen per cent

of the Capil families have not undertaken any repairs whatsoever. About one

quarter of the families could be termed "early repairers", that is, they

reported doing repairs at the Wave 1 interview, but had ceased doing any

further work after that. The "late starters", on the other hand, (about 16.5

per cent of the families) embarked on repairs somewhere between the Wave I

and Wave 2 interviews. The largest category, however, are the "chronic

repairers" who have steadily been improving their homes since they first

purchased a home under Capil.

Figure 6.17 also presents the total average expenditures on repairs

(including both Wave 1 and Wave 2 reported costS) outlayed by each of these

groups. What these average expenditures indicate is that steady involvement

in home repairs and improvements is expensive. Early repairers spent the

smallest amount, an average of $703.00. Late starters on average spent

double that amount, $1610, and the chronic repairers nearly double again

($2902).

.. - - ... ' .. , - - ...... - .... - .. ' - - .. -Use of Professional Help by Nature of Repair % Who Used Professional Help

Heating (29)

Plumbing (69)

Structural (70)

Extensions (16)

Home Improvements (161)

Outside Improvements (122)

• ' . • • • • • 0% 10% 20% 30% 40% 50% 60% 70%


80%

T1 {j) C :IJ m (j)

U1

I-' W U1

~--~--~-~~--~--~--~-

X of Owners who Carried Out Repairs Themselves or with Friends By Family Income of Wave Two Repairers

6O%w_--------------------------------------------------------------~

N=58 N=110 N=42 N=45

50%

40%

30%

20%

10%

ox- . > ') ') ') ') ') >1 ., ') ') ') ') ') ') ] ') ') ') ') ') ') ') h ') ') ') ') ') ') ,.

<$200 $201-$300 $301-$400 $401+

Family Income

Statistically significant at D1

11 G) C ::0 m (j)

(j)

I-' W 0\

----~-------~--~~~~-

Typology of Capil Home Repairers and Improvers Wave One and Wave Two

Chronic Repairers 47.0%

($2902)

N=406

Mean expenditure Is given In brackets

Non-Repairers 12.8%

Early Repairers 23.6%

($703)

late Starters 16.5%

(.t>1 61 0)

T1 (j) C JJ m ?> -..J

I-' W -....J

I

I I I I I' I,

I I I

" I I I I I

I

- 138 -

The question has been raised in other parts of this report as to whether

home repairs are draining money away from repayments to the Ministry of

Housing. Table 6.5 provides some evidence that it is the non-repairers and

the early repairers who tend to be repaying high proportions of their family

incomes to the Ministry.

Table 6.5: Typology of repairers by percentage of income spent on mortgage repayments

Typology of Repairers

Percent Non- Early Late Chronic repayment repairer repairer starter repairer

0-15\ 7.8 11.5 15.4 16.7

16-20\ 17.6 16.7 15.4 19.4

21-25\ 29.4 32.3 35.4 31.2

26-30\ 21.6 16.7 26.2 18.3

30+\ 23.5 22.9 7.7 14.5

TOTAL \ 100.0 100.0 100.0 100.0 N 51 96 65 186

Differences not statistically significant

Although the pattern is not statistically significant, a far greater

proportion of non-repairers and early repairers are paying over the

requisite amount on repayments. Non-repairers are more likely than any other

group to be spending over 26 per cent of their incomes on mortgage

repayments. This may explain why they undertake fewer repairs than the other

groups. Chronic repairers, on the other hand, have the greatest proportion

spending less than 20 per cent of their incomes on repayments. About 36 per

cent of chronic repairers are repaying less than twenty per cent of their

income compared with about one-quarter of non-repairers and early repairers,

and thirty per cent of late starters. Although this is speculative, it may

well be that chronic repairers view home improvements as a better way to

build equity in their homes than increasing repayments.


- 139 -


Two-thirds of Capi1 families have engaged in home repairs and improvements

since the Wave 1 interview. Indeed, half the families have been steadily

repairing their homes since they first moved in. A considerable amount of

money and of personal effort has gone into improving the homes, shown by the

level of expenditure of the families and the proportion of owners that

personally became involved in carrying out the work. Of the stock of homes

purchased under Capil, older dwellings, particularly pre WWII, and timber

dwellings were more likely to receive repairs.

Families tended to draw on personal savings or funds to carry out repairs,

rather than take out bank loans or borrow from family or friends. Borrowing

from family and friends tended to be the most difficult way to raise money

for the repairs and cause the greatest dissatisfaction with the cost of

repairs.

For some families, home repairs and improvements may be a preferred means of

increasing the value of their homes, as opposed to paying back larger

amounts to the Ministry in the way of mortgage. For other families, repairs

are necessitated by the condition of the home. The extent to which this

pattern of involvement in repairs and improvements is a reflection of

finally having "a home of one's own" or is an on-going drain on family

finances is an. issue that can be investigated in the next follow-up of

families.


- 140 -

CHAPTER 7

RESPONDENTS' PERCEPTIONS OF THE CAPIL LOAN SCHEME - M. Wulff

Clearly many families are grappling with trying to understand the

complexities of the Capil scheme. The opportunity for access into home

ownership is attractive, as are the low initial repayments. But the

stumbling block appears to be that the nominal increases in repayments are

perceived as real, despite the Ministry's attempts to convince the families

otherwise. Coupled with this is a balance statement that shows the amount

outstanding rising. For many families, it is difficult to separate out the

expectations of mortgage repayments that are experienced by the bulk of

Australian mortgagees, that is, initial repayments, however high, that

nonetheless appear to decline in real terms over the life of the loan, from

the unique aspects of Capil: low repayments which rise only with the

Consumer Price Index adjustment or increases in family income. Despite the

Ministry's attempts to emphasize the notion of "equity growth", the analysis

in this chapter suggests that for many families this is a remote and

confusing concept.

During the interviews with the Capil families, the respondents were reminded

that "on a Capil loan the amount outstanding increases in the first few

years of the loan". The respondents were then asked to assess how well they

understood this aspect of how the loan works. (See Figure 7.1)

It is clear from Figure 7.1 that one-quarter of the Capil families said they

had "great difficulty" understanding how the Capil loan works. An additional

28 percent of the families admitted to "some difficulty" in understanding

this aspect of the loan, making it a total of well over half the Capil

families not understanding the loan very well. About thirty percent of the

families judged themselves as having a fair understanding, while only a

minority of families (less than one-fifth) thought they had a good

understanding.

- - .-. - - - - - - ....... - - - - - -Capil Families Understanding of Loan Balance

N =406

Good Understanding 17.2%

Fair Understanding 29.6%

Great Difficulty 24.9%

Some Difficulty 28.3%

~------------------------------------------------------~

11 G) C :D m -..t

......

"'" ......


- 142 -

Clearly the factor most associated with understanding the loan scheme is

ethnicity. While about 17 percent of Australian born respondents rated

themselves as having "great difficulty" in understanding how the Capil loan

works, 27 percent percent of the European born and fully 42 percent of the

Asian born did so. Indeed only 7 percent of the Asian born families felt

they had a good understanding of the scheme. (See Figure 7.2)

Although ethnicity is most associated with difficulty in understanding the

scheme, Figure 7.3 reveals that there are other explanatory factors as well.

In particular, those with only a primary school education are the most

likely to experience difficulty in understanding the scheme. Nearly three

quarters of those with primary school education had at least some difficulty

understanding the scheme. In contrast, about one third of those with post

secondary education experienced difficulty, still a not inconsiderable

proportion suggesting that even the more highly educated among the Capil

families are grappling with its' financial complexities. (See Figure 7.3)

Other characteristics point to certain groups having difficulty

understanding the scheme, although they are not statistically significant as

are ethnicity and educational level. Sole parents, for example, are

slightly more likely than married couples to express difficulty in

understanding the scheme, pensioners more than wage-earners, and those with

family incomes less than $200 per week compared with those on higher

incomes. The latter variables, of course, are correlated, but do point to

the picture of the lower income pensioner families having the most

difficulty in understanding the scheme. Younger respondents, more than older

respondents, also express difficulty in understanding the scheme.

Implications of Lack of Understanding of the Capil Scheme

A lack of understanding of the Capil scheme has several implications:

namely, a decline in satisfaction with housing costs in general, greater

dissatisfaction with the Capil loan scheme on the whole, and greater

tendency to question the worthwhileness of the Capil scheme.

For example, Figure 7.4 suggests that the better the understanding of the

Capil loan scheme the more satisfied with housing costs. While only 16

percent of those expressing great difficulty understanding the scheme are

~---~-------~-~~~~~~

(I)

Capil Families Understanding of Loan Balance By Ethnicity

50%~.--------------------------------------------------~

40%

30%

.!!! 20% E {f 15 CD Cl

~ CD e :.

10% o Australian

fSSJ European

0% .. I», ~ ». I\»'»'»'»'J I ». ~ >I\».».,\"\.'I I > ». "),,,,\'».'1 t. ». ), ",».».),),'1 I ~ Asian ~ 4i ~

Great Difficulty Some Difficulty Fair Understanding Good Understanding

11 (j) C ::0 m -.,J

I\)

t-'

"'" w

.' .. ' - - - -... - - - ...... -. - - ...... Who Has Difficulty Understanding Capil Loan Balance? Selected Characteristics % Having Great or Some Difficulty

Primary School Education (52) I Post-Secondary Education (64) I Married Couples (225) I Sole Parents (181) I Wage Earners (175) I Pensioners (231) I Familiy Income <$200 (102) I !

Family Income over $400 (62) I I

Aged less than 35 (176) I, I

Aged 35 and over (230) J I ,

Total Gapil Group (406) J i • • • • • • • •

0% 10% 20% 30% 40% 50% 60% 70% 80%

Number in bracket refers to the number of cases percenta~ is based on

~

" (j) C :D m -..j

w

I-'

""" """


- 145 -

satisfied with housing costs, nearly a third of those with a good

understanding are satisfied with housing costs. (See Figure 7.4)

On the other hand, those most dissatisfied with the Capil scheme tend to be

those who understand it least.

Half of the respondents expressing great difficulty in understanding their

Capil loan balance were dissatisfied (or neutral) about the entire Capil

scheme. The proportion dissatisfied with the Capil scheme tends to decline

as their understanding of the loan balance increases. (See Figure 7.5)

Respondents were asked towards the end of their interviews to assess " on

balance, how worthwhile an investment do they feel home ownership is under

Capil, considering all the expenses related to owning a home". While on the

whole, three-quarters of the sample felt home ownership under Capil was a

worthwhile investment, the 'proportion who feel so declines markedly if they

do not understand the Capil loan balance. (See Figure 7.6)

What the Capil families say about the scheme

The capil respondents were given an opportunity to say how they felt about

the scheme in an open-ended way. At the same time, they were asked what

changes they would like to see made that would make Capil "more workable for

you and your family".

Just over half the sample responded that Capil was working well for them. Of

this group, most made no comments or recommendations for change to the

scheme, and about ten percent even included positive comments about the

financial security it brought or the fact that it was cheaper than rent.

(See Figure 7.7)

It has enabled me to buy a house I would not have been able to buy otherwise. I never thought of any changes.

Another group of respondents could be described as saying that overall they

were satisfied, but had reservations about some aspect of the scheme. This

"happy, but" group overwhelmingly mentioned something to do with the

outstanding loan balance increasing. Some typical comments are:

-----------~~---~---

I I Satisfaction With Housing Costs

By Understanding of the Loan Balance X Satisfied With Housing Costs

. Total Gapil Group (406) I

Great Difficulty (96)

Some Difficulty (113) I

Fair Understanding (116)

--

Good Understanding (6n

- • • • 0% 10% 20% 30%


• 40% 50%

~I

_ ... J

" (j) C J.J m -.J .po.

I-'

""" 0"\

-. - .! - - - - -. - - - - .. - .. - - - .. -I I I

I

Dissatisfaction With Capil Loan Scheme By Understanding of the Loan Balance % Dissatisfied or Neutral About Capil Scheme


Some Difficulty (115)


Good Understanding (70)

• • • • • 0% 10% 20% 30% 40% 50%


l I

I I

60%

"'Tl (j) C JJ m -.J

U1

I-' .I::> -J

--------------------

L._. __

Whether Homeownership Under Capil is Worthwhile By Understanding of the Loan Scheme % Undecided Or Say Capil Is Not a Worthwhile Investment


I

Some Difficulty (115) ,


Good Understanding (70)

-. • • • 0% 10% 20% 30% 40% 50%


----.----.~ ._-----_._._--_._------------_.

"Tl G) c :n m "-.J . 0>

~ ,j::.

co

-----------------~--r----I --I Open-ended Responses to

"How well do you think this loan scheme is working for you?"

Not Working Well 8O.8J

Working Wel~ But _ 18.41

L--________ _

(N = 406)

Working Well 51.01

11 (j) C JJ m -.J

-.J

~

"'" \.0


- 150 -

Good idea, but ••• It's not fair that the mortgage keeps increasing even though you're paying it back. You'll never own the house.

It will work very well after some years, but now I must pay more or else I will never pay it off.

I am happy with it. The only thing I don't understand is that we're given a set interest rate, and then the CPI increase goes on it every three months, and you think you're getting somewhere with your payments and all of a sudden you're $2000 higher than your initial loan. It's very depressing. I feel as though I am getting nowhere.

Fairly well. If the CPI came down. The CPI is going to make the house harder to payoff. I didn't know I would have to pay it when I took the loan. The woman did not tell me about the CPI, only about the low interest. I rang the Ministry when I got the first statement, because I got a fright when I saw the statement •••. Apart from the CPI, I am quite happy.

It's great, but for low income earners it's hard because prices on other things go up all the time. In fact, when I started work I was worse off - I had to pay for child-care; I lost my pension benefits and I also had higher mortgage payments!

Some families mentioned that it was working well, but that they felt overly

tied to the house:

Working really well. Only thing wrong is we have to stay here. If my husband gets a job somewhere else, which he did, he can't move. And he lost that job.

About thirty percent were unhappy with the scheme and usually told the

interviewer what it was that they were unhappy with and what they would

recommend to change the scheme. Two-thirds of this group of respondents

mentioned, not surprisingly, their confusion with the structure of the Capil

loan, lack of either initial or on-going information about the scheme

provided by the Ministry, or what they viewed as "unfair" about this aspect

of the loan:

Shocko ••• it was just the fact that the CPI business wasn't impressed upon you. You were thinking you were getting a low interest loan and the next minute the interest rate had jumped to goodness knows what


- 151 -

This respondent went on to say that she and her husband went to the local

bank manager for some clarification on the loan:

We even went to the Bank to see what we could do because we got such a shock. The bank manager said he was going to send it into Choice magazine for the best gobbledygook award! He was totally amazed and he said that the government had been regulating them and he said that if he tried to put a contract like that on a person he'd be in jail. He could not make up a contract like that and not tell people how much they were going to repay.

Another dissatisfied client •••

I had to get the man next door to explain why the amount outstanding increased. He explained it a lot better than the Ministry •••• I did ring the Ministry once. You can't get information on the phone ••• they pass you from one person to another.

A small number of families were unhappy with Capil because they felt they

had lost the ability to move houses if their family circumstances changed.

The did not have the flexibility that home owners with more conventional

mortgages had.

Not working well. We don't have the option to sell. We're trapped here for the next thirty years.

And from another respondent •••

If I need to relocate myself for study, it would help if I could rent the house rather than sell it.

Do families see Capil as a worthwhile investment?

As many of the above comments indicate, many families because of their

limited understanding of the Capil scheme have difficulty seeing it as an

investment opportunity. As shown in Figure 7.6 while two-fifths of the

respondents who have great difficulty understanding the Capil scheme are

undecided or dissatisfied with Capil as an investment, the proportion

declines significantly if people feel they have a good understanding of the


- 152 -

way the loan scheme works. This sections now looks at other factors that

impact on whether families view Capil as an investment, both immediate

factors such as meeting monthly mortgage payments, and long-term factors

such as the growth in equity in their homes.

Mortgage Repayments and Perceiving Capil as Worthwhile Investment

It appears that families judge the Capil scheme as an investment on the

criteria of their immediate capacity to repay. As Table 7.1 reveals, while

nearly 90 percent of families with repayments consisting of less than 15

percent of their family income view Capil as worthwhile, the proportion

declines to 66 percent of those families paying over thirty percent of their

income. Nearly one-quarter of those families paying over the requisite

amount, that is over 25 percent of their income, are undecided or negative

about Capil as an investment.

Table 7.1: Perceptions of Capil as worthwhile investment by proportion of family income spent on mortgage repayments

Is Capil a worthwhile investment?

No

Undecided

Yes

TOTAL , N

Significant at .1

0-15

3.6

7.1

89.3

100.0 56

Percentage

16-20

5.6

19.7

74.6

100.0 71

of family

21-25

9.4

13.4

77 .2

100.0 127

income

26-30

6.4

23.1

70.5

100.0 78

30+

10.8

23.1

66.2

100.0 65

Another indicator of how Capil's investment value is viewed is shown in

Table 7.2, where the ease or difficulty of meeting mortgage repayments is

directly related to the perception of Capil as worthwhile.


- 153 -

Table 7.2: Perception of Capi1 as worthwhile investment by ability to meet mortgage payments

Is Capi1 a worthwhile investment?

No

Undecided

Yes

TOTAL , N

Significant at .000

Ability to

Difficult

17.9

35.7

46.4

100.0 32

meet mortgage payments

Just managing

7.0

15.5

77.5

100.0 69

Easy

5.1

11.8

83.1

100.0 304

The proportion of families viewing Capil as worthwhile increases

dramatically with reported ease of meeting mortgage repayments. While 46

percent of families having difficulty meeting repayments state that Capil is

a good investment, 77 percent of families "just managing" to meet payments

and fully 83 percent.of families finding it easy to meet repayments state

that it is worthwhile.

Location and capil as a Worthwhile Investment-

Since the potential of Capil as an investment stems in part from increases

in property value, location with it's consequent impact on market values of

housing, makes a difference to the investment potential of dwellings

purchased under Capil.

Figure 7.8 looks at the proportion of families who bought homes· in different

areas by whether they think Capil is a worthwhile investment. Differences do

appear by region.

Although trends in property values would indicate that the metropolitan

housing market is a better investment than the country, it is the country

respondents who, on the whole, think Capil is a good investment. Almost all

the country respondents rate Capil as a good investment compared with just

--------------------

L __ .

Percentage Who Think Capil is a Worthwhile Investment By Region

Country (74)

Other Metropolitan (24)

Eastern Metropolitan un

Western Metropolitan (12n

Westernport (103)

-

. • • • • ---y-

0% 10% 20% 30% 40% 50% 60%


J

l

• • 70% 80%

-----._-_._----_.

• 90% 100%

--.--

"T1 G) C ::D m -..I

00

I-' U1 ,j::>.


- 155 -

over 60 percent of the Westernport families. To what extent the respondents

perceptions of the investment value of their homes are accurate (or indeed

to what extent respondents are even aware of the value of housing in their

areas) are not examined in this report, but are issues which can be taken up

in the next round of interviews. Nevertheless, it does appear that location

does not play a strong part in the families' perception of their

"investment".

For example, those families who purchased a less expensive home with their

Capil loan (a home under the mean price for the sample as a whole, $56,600

in 1985) tend to think Capil is a good investment more than families who

purchased a dwelling above the mean price.

Table 7.3: Perception of Capil as a worthwhile investment by original purchase price

Purchase Purchase Is Capil a cost cost worthwhile below mean above mean investment? < >

No 7.0 8.9

Undecided 10.7 24.1

Yes 82.2 67.0

TOTAL , 100.0 100.0 N 214 191

Significant at .000

While 82 percent of families who paid less than the mean housing price rated

Capil as worthwhile, only 67 percent of families paying above the mean

housing price did so. Again, this suggests a tendency to see the

worthwhileness of Capil in terms of immediate financial outlay, rather than

long-term benefits.

The purchase price of the dwelling, on the whole, tends to have a stronger

impact on the perception of Capil as worthwhile than does location. (See

Figure 7.9)

--------------------% Perceive Capil as Worthwhile Investment By Purchase Price and Location

Metro.,olitan Familie.

Below X&S.OOO (tU)

Above t6S.OOO (tU)

Non-Metropolitan Familie.

!Below S48.OOO (97)

Above S48.OOO (80)

I

OZ 20Z <40% eoz 80J 100% OZ 20Z 40Z eoz 80% 100%

Mean Purchase PrIce Is $53.000 Mean Purchase PrIce Is $49,000

Number In brackets refers to number of cases percentage is based on

11 G) C JJ m -.,J

CD

I-' U1 0'1


- 157 -

As shown in Figure 7.9, whether in the metropolitan or non-metropolitan

area, those families paying less than the mean price for their housing

tended to view Capil as worthwhile more than those who paid above the mean.

Of course, as with location, whether they are correct in the long run is at

this stage unknown. The issue of growth in equity in the home, and the

impact of location and original purchase price, will be pursued in the next

follow-up of Capil.


For the most part, families have difficulty understanding the Capil scheme,

particularly the reasons why they see their "balance outstanding"

increasing, and especially when they, however mistakenly, consider that they

are paying more this year than they did last. Their reference group for

judging their mortgage repayments seems to be mortgagees on conventional

finance whose repayments "look like" they are staying the same, while for

the Capil group repayments "look like" they are increasing. As this analysis

shows, a better understanding of this aspect of the loan scheme would

improve overall satisfaction with their housing costs and with the scheme

itself •

There is little evidence in this analysis that the families have a notion of

"equity growth" in mind when they judge the worthwhileness of Capil as an

investment. Rather than equity growth (which in large part requires a long

term view), the families rank Capil as a good investment if they have

relatively low repayments (less than 15 percent of their family income) that

are easy to meet. Such low repayments, in fact, are what are causing their

"balance outstanding" to increase and their dissatisfaction with Capil to

mount! The original purchase price of their home, more than the location

where they bought, also relates to their perception of Capil as an

investment.

In sum, clearer and more accessible information on how the Capil scheme

works would improve client satisfaction. Families also need to understand

more clearly the factors that make Capil a "good investment", that is, the

relationship between the appreciating property values of their homes and

their outstanding debt, (i.e. their equity) and the effect of various

repayment levels on this overall ratio.


- 158 -

CHAPTER 8

CAPIL HOME OWNERSHIP - P. Napper

General Satisfaction With Capil Itself

Overall, two thirds of the loan group indicated they were satisfied with

Capil. Table 8.1 shows that two parent families were marginally more likely

to be dissatisfied with Capil and that a slightly greater proportion of sole

parents were satisfied with Capil.

Table 8.1: Satisfaction with Capil by family status

One-parent Couple Total

Dissatisfied 35 51 86 19.3 22.7 21.2

Neither satisfied/ dissatisfied 21 31 52

11.6 13.8 12.8

Satisfied 125 143 268 69.1 63.6 66.0

TOTAL N 181 225 406 44.6 55.4 100.0

Ethnic background had an influence on families' satisfaction with the Capil

scheme. Australian born families were more satisfied with the Capil scheme

(see Table 8.2). European born families had higher levels of

dissatisfaction than Australian and Asian families, however, nearly 20 per

cent of Asian born families were more ambivalent about the Capil scheme,

being neither satisfied or d.issatisfied at this stage.

I I I I I I I I I I

I I I I I I I I I

- 159 -

Table 8.2: Satisfaction with Capil by ethnicity

Australia Europe Asia Total

Dissatisfied 41 30 14 85 19.3 25.4 19.4 21.1

Neither satisfied/ dissatisfied 22 16 14 52

10.4 13.6 19.4 12.9

satisfied 149 72 44 265 70.3 61.0 61.1 66.0

TOTAL N 212 118 72 402 52.7 29.3 18.0 100.0

It could be hypothesised that families who had experienced 'real' increases

in income since Wave' 1 may be more satisfied with Capil because of their

enhanced capacity to afford the extra costs of home ownership and, possibly,

increase their mortgage payments in order to increase their equity in their

property. Similarly, families who have experienced reductions in income in

real terms since Wave 1 might be expected to register higher levels of

dissatisfaction with the Capil scheme.

Table 8.3 shows that families with 'high' real increases in weekly income

($50 or more per week) had the highest proportion who were dissatisfied with

the Capil scheme (25% of 'high gain' families) and the lowest proportion

(64%) who were satisfied with Capil. Twenty-two per cent of families with

high real losses of weekly income $50 or more per week were also

dissatisfied with Capil, but they were also the groups with the highest

number satisfied with the Capil scheme.

I I I I I I I I I I I

I I I I I I I I

- 160 -

Table 8.3: Satisfaction with Capil by income change

Decrease Increase of $50 Decrease Increase of $50 or more upto $50 upto $50 or more

per week per week per week per week Total

Dissatisfied 11 19 18 34 82 21.6 16.5 20.2 24.6

Neither satisfied/ dissatisfied 2 19 12 16 49

4.0 16.5 13.5 11.6

Satisfied 38 77 59 88 262 74.4 67.0 66.3 63.8

TOTAL N 51 115 89 138 393 13.0 29.3 22.6 35.1 100.0

Similarly, families on low incomes might be expected to feel less satisfied

about Capil because of their restricted ability to meet household costs. In

fact families with incomes under $250 were marginally more likely to be

satisfied with the Capil scheme (see Table 8.4). Workforce participation

was not a significant factor in influencing families' satisfaction with

Capil as couples and singles in and out of the workforce had similar

satisfaction levels, the more significant differentiating factor was family

status, with single parents, either working or not working, having higher

satisfaction levels than couples, in or out of the work force (see Table

8.5).


- 161 -

Table 8.4: Satisfaction with Capil by Income

Dissatisfied

Neither satisfied/ dissatisfied

Satisfied

TOTAL N

Under 250

39 20.0

22 11.3

134 68.7

195 49.0

Over 250

44 21.7

29 14.3

130 64.0

203 51.0

Total

83 20.8

51 12.8

264 66.3

398 100.0

Table 8.5: Satisfaction with Capil by work force participation

couple One-parent Couple not One-parent not

working working working working

Dissatisfied 31 20 16 19 22.8 22.5 20.3 19.0

Neither satisfied/ dissatisfied 18 13 8 2

13.2 14.6 10.1 12.0

Satisfied 87 56 55 69 64.0 63.0 69.6 69.0

TOTAL N 136 89 79 100 33.7 22.0 19.6 24.7

Total

86 21.3

51 12.6·

267 66.1

404 100.0

Table 8.6 shows that respondents with lower educational levels (i.e. primary

school qualifications) had the lowest levels of general satisfaction with

the Capil scheme. Interestingly, respondents with lower secondary

I I I I I I I I I

I I I I I I I I I I

- 162 -

qualifications recorded the highest level of satisfaction, and respondents

with higher (upper secondary, tertiary) levels of education. recorded similar

levels of dissatisfaction with the Capil scheme to the lowest education

group, and had relatively low levels of satisfaction with the Capil scheme.

There does not appear, therefore, to be a clear pattern of relationship

between education levels and overall satisfaction with Capi1.

Table 8.6: Satisfaction with Capil by level of education

Lower Upper primary secondary secondary Tertiary Total

Dissatisfied 15 10 38 17 BO 2B.3 9.0 25.B 27.0 21.3


15.1 14.3 12.2 11.0 13.1

Satisfied 30 86 91 39 246 56.6 76.7 62.0 62.0 65.6

TOTAL N 53 112 147 63 375 14.1 30.0 39.2 16.7 100.0

When families were asked to subjectively assess their financial situation,

those who were able to save money each week had the highest satisfaction

rating with Capil and, correspondingly, the lowest dissatisfaction ratirig.

Those families who reported that they 'spent more than they made' or 'had no

money at the end of the week' were more dissatisfied with the Capil scheme

(see Table B.7).


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Table 8.7: Satisfaction with Capil by financial situation

Spend No Money more money left Able than at end goes to make of week on bills save Total

Dissatisfied 9 29 41 7 86 20.4 20.4 24.3 13.7 21.2


16.0 14.8 10.0 13.7 12.8

Satisfied 28 92 111 37 268 63.6 64.8 65.7 72.6 66.0

TOTAL N 44 142 169 51 406 10.8 35.0 41.6 12.6 100.0

Capil and disadvantages of home ownership

Capil families were asked what they thought the major advantages and

disadvantages of home ownership were, now that they were established in

their own homes and had a perspective of ownership which was less influenced

by the immediacy of the move into ownership which may have affected their

opinions at Wave 1.

In identifying the advantages of home ownership, three main themes emerge

from families' responses:

i the independence and security of ownership

ii the economic advantages of home ownership: home ownership as an investment, and freedom from high rental

iii qualitative aspects of ownership - mainly privacy and space (see Table 8.8)

One-parent families more frequently cited the issues of independence and

security as major advantages while married couples were more likely to

identify the economic advantages of home ownership (see Table 8.8).


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Table 8.8: Major advantages of home ownership by family status

One-parent Couples Total

Independence & security 59.7 53.3 56.2

Economic advantages 27.6 33.8 31.0

Privacy/space 6.6 7.1 6.9

other 6.1 5.8 5.9

TOTAL , 100.0 100.0 100.0 N 181 225 406

Australian born families were more likely to identify the economic

advantage~ of ownership, while European born families more frequently

identified the issues of privacy and space. The advantages identified most

frequently by all ethnic groups, however, were the independence and security

of home ownership (see Table 8.9).

Table 8.9: Major advantages of home ownership by ethnicity

Australia Europe Asia

Independence & security 57.1 56.6 52.8

Economic advantages 34.9 27.0 26.4

Privacy/space 4.2 12.3 5.6

Other 3.8 4.1 15.3

TOTAL , 100.0 100.0 100.0 N 212 122 72

Other factors such as family income and financial coping did not, in

general, significantly impact on the types of advantages identified.

Total

56.2

31.0

6.9

5.9

100.0 406


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When families were asked to identify major disadvantages with home

ownership, three main areas of dissatisfaction with home ownership can be

identified:

i the financial costs associated with home ownership, for example

rates, repairs and general maintenance

ii characteristics of the capil loan itself, such as the increasing

loan balance or CPI adjustments to payments

iii geographic or social isolation or a lack of mobility; in these

cases, responses indicated either that home ownership had involved a

physical move which had left families with inadequate access to

services or social/family networks. For others, ownership meant

they were unable to move to take up job opportunities or to a

preferred location. They were unwilling to sell their property and

stated that the Ministry of Housing would not permit them to rent

out their dwelling.

In addition, a significant proportion of the loan group could not identify

any major disadvantage of home ownership (see Table 8.10).

Married couple families were more likely to identify problems with the capil

loan, while single parents more frequently identified financial costs as a

major disadvantage. (see Table 8.10).

Table 8.10: Major disadvantages of home ownership by family status

One-parent Couples Total

No disadvantages 36.5 38~2 37.4

Financial costs 48.6 44.4 46.3

Loan characteristics 3.3 8.0 5.9

Lack mobility/isolation 5.0 6.7 5.9

Other 6.6 2.7 4.4

TOTAL , 100.0 100.0 100.0 N 181 225 406


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Australian born families were more likely to state there were no

disadvantages of ownership while Asian and European born families more

frequently had concerns about the financial costs of home ownership, as well

as aspects of the Capil loan (see Table 8.11).

Table 8.11: Major disadvantages of home ownership by ethnicity

Australia Europe Asia Total

No disadvantages, 42.9 30.3 33.3 37.4

Financial costs 43.9 49.2 48.6 46.3

Loan characteristics 2.4 8.2 12.5 5.9

Lack mobility/isolation 7.1 4.9 4.2 5.9

Other 3.8 7.4 1.4 4.4

TOTAL , 100.0 100.0 100.0 100.0 N 212 122 72 406

Families' subjective rating of their financial coping did affect their

perceptions of the disadvantages of home ownership. Families who were

'financial copers' - they were able to save money each week, were far more

likely to see no disadvantages with home ownership and far less likely to

identify the financial costs of ownership as a disadvantage.


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CHAPTER 9

CONCLUDING COMMENTS - F. Maas

The capi1 scheme is aimed at allowing low income families to have access to

home ownership, thereby accumulating equity, and at the same time to enable

them to cope with the extra responsibilities and costs that accompany such a

move. The key to Capil being successful in these twin aims lies in the

capacity to adjust the level of mortgage repayments to changes in family

income.

Monitoring of the Capil and renter groups over the three years 1984 to 1987

has been mainly characterised by clear gains in employment and by the

resultant increased levels of income. This has been particularly so for

couple families although one-parent families have also increased their

labour market activity considerably.

At the same time, large numbers of families have experienced no change in

their employment or family circumstances and many of these have suffered

declines in incomes, as have those who have lost employment.

These changes are reflected in the patterns of financial coping evident in

the Capil group. Those who are coping best are those who have experienced

the greatest gains in income and those who are struggling most are those who

have suffered losses in income. An important finding is that significant

proportions of such families living on very low incomes are nevertheless

paying high proportions of income in housing costs. If the Capil instrument

is to provide a buffer against further hardship for these families, loan

repayments need to be adjusted to allow for recovery from adverse economic

circumstances.

Gains in income appear to provide some families with an opportunity to

reduce the outstanding balance of their mortgage and for others, extra

capacity to repair or improve properties.

The operation of the Capil scheme appears to have been of considerable

benefit to those families who would otherwise have been accommodated in the


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private rental sector. Even those Capil one-parent families who are in

receipt of the lowest levels of income, are financially better off than

their counterparts in private rental. This is affirmed in these families'

assessment of their financial position and in the projections for the

future.

To this stage, Capil has operated differentially for couple families

compared with one-parent families. These families have been able to move

into home ownership at a time when traditionally they might not have been

able to. Couples have enjoyed greater gains in employment and income and

have the highest hopes for their financial future.

For one-parent families, the move into Capil has been associated with less

gains in income and employment. For those still on low incomes financial

difficulties.are considerable, yet compared with. similar families in the

private rental sector, they are better off and are strongly assertive of

that perception. These families have been able to consolidate their housing

tenure at a time when they experience significant barriers to employment

associated with parenthood. They nevertheless have the opportunity to

increase their employment in the future and to build on the foundation

provided by participating in the Capil scheme.

The next phase of the evaluation will take place in 1989. By this time most

families will have been in their homes for 5 years and a fuller assessment

of many factors will be possible. An important area for assessment will be

the extent to which Capil properties have appreciated in value and the

extent to which families have been able to establish a share of the equity

in their homes. At that stage more comprehensive assessments will be

possible regarding the economic outcomes for participants, an important

aspect of longer term objectives for the scheme. In the meantime it will be

important to fine tune some of the operational procedures of the scheme so

that the short to medium term goals of allowing affordable access to home

ownership may be more fully achieved.

Documents

AUSTRALIAN INSTITUTE OF FAMILY STUDIES · I I I \1 I , I I , I I -, I I' 'I I , I I' I-LIST OF CONTRIBUTORS Within the Australian Institute of Family Studies, the following members