Risk-assessment practices in the private rental sector : implications for low-income renters (Final Report)

This report focuses on risk-assessment practices in the private rental market, with particular consideration of their impact on low-income renters. It is based on the fieldwork undertaken in the second stage of the research process that followed completion of the Positioning Paper. The key research question this study addressed was: What are the various factors included in ‘risk-assessments’ by real estate agents in allocating ‘affordable’ tenancies? How are these risks quantified and managed? What are the key outcomes of their decision-making? The study builds on previous research demonstrating that a relatively large proportion of low-cost private rental accommodation is occupied by moderate- to high-income households (Wulff and Yates 2001; Seelig 2001; Yates et al. 2004). This is occurring in an environment where the private rental sector is now the de facto main provider of rental housing for lower-income households across Australia (Seelig et al. 2005) and where a number of factors are implicated in patterns of ‘income–rent mismatching’. These include ongoing shifts in public housing assistance; issues concerning eligibility for rent assistance; ‘supply’ factors, such as loss of low-cost rental stock through upgrading and/or transfer to owner-occupied housing; patterns of supply and demand driven largely by middle- to high-income owner-investors and renters; and patterns of housing need among low-income households for whom affordable housing is not appropriate. In formulating a way of approaching the analysis of ‘risk-assessment’ in rental housing management, this study has applied three sociological perspectives on risk: Beck’s (1992) formulation of risk society as entailing processes of ‘individualisation’; a socio-cultural perspective which emphasises the situated nature of perceptions of risk; and a perspective which has drawn attention to different modes of institutional governance of subjects, as ‘carriers of specific indicators of risk’. The private rental market was viewed as a social institution, and the research strategy was informed by ‘institutional ethnography’ as a method of enquiry. The study was based on interviews with property managers, real estate industry representatives, tenant advocates and community housing providers. The primary focus of inquiry was on ‘the moment of allocation’. Six local areas across metropolitan and regional Queensland, New South Wales, and South Australia were selected as case study localities. In terms of the main findings, it is evident that access to private rental housing is not just a matter of ‘supply and demand’. It is also about assessment of risk among applicants. Risk – perceived or actual – is thus a critical factor in deciding who gets housed, and how. Risk and its assessment matter in the context of housing provision and in the development of policy responses. The outcomes from this study also highlight a number of salient points: 1.There are two principal forms of risk associated with property management: financial risk and risk of litigation. 2. Certain tenant characteristics and/or circumstances – ability to pay and ability to care for the rented property – are the main factors focused on in assessing risk among applicants for rental housing. Signals of either ‘(in)ability to pay’ and/or ‘(in)ability to care for the property’ are almost always interpreted as markers of high levels of risk. 3. The processing of tenancy applications entails a complex and variable mix of formal and informal strategies of risk-assessment and allocation where sorting (out), ranking, discriminating and handing over characterise the process. 4. In the eyes of property managers, ‘suitable’ tenants can be conceptualised as those who are resourceful, reputable, competent, strategic and presentable. 5. Property managers clearly articulated concern about risks entailed in a number of characteristics or situations. Being on a low income was the principal and overarching factor which agents considered. Others included: - unemployment - ‘big’ families; sole parent families - domestic violence - marital breakdown - shift from home ownership to private rental - Aboriginality and specific ethnicities - physical incapacity - aspects of ‘presentation’. The financial vulnerability of applicants in these groups can be invoked, alongside expressed concerns about compromised capacities to manage income and/or ‘care for’ the property, as legitimate grounds for rejection or a lower ranking. 6. At the level of face-to-face interaction between the property manager and applicants, more intuitive assessments of risk based upon past experience or ‘gut feelings’ come into play. These judgements are interwoven with more systematic procedures of tenant selection. The findings suggest that considerable ‘risk’ is associated with low-income status, either directly or insofar as it is associated with other forms of perceived risk, and that such risks are likely to impede access to the professionally managed private rental market. Detailed analysis suggests that opportunities for access to housing by low-income householders also arise where, for example: - the ‘local experience’ of an agency and/or property manager works in favour of particular applicants - applicants can demonstrate available social support and financial guarantors - an applicant’s preference or need for longer-term rental is seen to provide a level of financial security for the landlord - applicants are prepared to agree to specific, more stringent conditions for inspection of properties and review of contracts - the particular circumstances and motivations of landlords lead them to consider a wider range of applicants - In particular circumstances, property managers are prepared to give special consideration to applicants who appear worthy, albeit ‘risky’. The strategic actions of demonstrating and documenting on the part of vulnerable (low-income) tenant applicants can improve their chances of being perceived as resourceful, capable and ‘savvy’. Such actions are significant because they help to persuade property managers not only that the applicant may have sufficient resources (personal and material) but that they accept that the onus is on themselves to show they are reputable, and that they have valued ‘competencies’ and understand ‘how the system works’. The parameters of the market do shape the processes of risk-assessment and, ultimately, the strategic relation of power between property manager and the tenant applicant. Low vacancy rates and limited supply of lower-cost rental stock, in all areas, mean that there are many more tenant applicants than available properties, creating a highly competitive environment for applicants. The fundamental problem of supply is an aspect of the market that severely limits the chances of access to appropriate and affordable housing for low-income rental housing applicants. There is recognition of the impact of this problem of supply. The study indicates three main directions for future focus in policy and program development: providing appropriate supports to tenants to access and sustain private rental housing, addressing issues of discrimination and privacy arising in the processes of selecting suitable tenants, and addressing problems of supply.

The use of income valuation methods to value rural property

Despite the advances that have been made in relation to the valuation of commercial, industrial and retail property, there has not been the same progress in relation to the valuation of rural property. Although the majority of rural property valuations also require the valuer to carry out a full analysis of the economic performance of the farming operations, this information is rarely used to assess the value of the property, nor is it even used for a secondary valuation method. Over the past 20 years the nature of rural valuation practice has required rural valuers to undertake studies in both agriculture (farm management) and valuation, especially if carrying out valuation work for financial institutions. The additional farm financial information obtained by rural valuers exceeds that level of information required to value commercial, retail and industrial by the capitalisation of net rent/profit valuation method and is very similar to the level of information required for the valuation of commercial and retail property by the Discounted Cash Flow valuation method. On this basis the valuers specialising in rural valuation practice should have the necessary skills and information to value rural properties by an income valuation method. Although the direct comparison method of valuation has been sufficient in the past to value rural properties the future use of the method as the main valuation method is limited and valuers need to adopt an income valuation method as at least a secondary valuation method to overcome the problems associated with the use of direct comparison as the only rural property valuation method. This paper will review the results of an extensive survey carried out by rural property valuers in New South Wales (NSW), Australia, in relation to the impact of farm management on rural property values and rural property income potential.

The Influence of Farm Management on NSW Rural Property Income and Total Average Annual Returns

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes, profitability and land values. This paper will analyse both the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on several rural land use classifications and will compare the total return from rural properties based on the farm income generated by both the average farmer and those farmers considered to be in the top 20% of the various land use areas. The analysis will provide a comprehensive overview of rural production in a free trade economy.

Comparing subjective and objective measures of health : Evidence from hypertension for the income/health gradient

Economists rely heavily on self-reported measures to examine the relationship between income and health. We directly compare survey responses of a self-reported measure of health that is commonly used in nationally representative surveys with objective measures of the same health condition. We focus on hypertension. We find no evidence of an income/health greadient using self-reported hypertension but a sizeable gradient when using objectively measured hypertension. We also find that the probability of a false negative reporting is significantly income graded. Our results suggest that using commonly available self-reported chronic health measures might underestimate true income-related inequalities in health.

Socio-environmental factors and suicide in Queensland, Australia

Suicide has drawn much attention from both the scientific community and the public. Examining the impact of socio-environmental factors on suicide is essential in developing suicide prevention strategies and interventions, because it will provide health authorities with important information for their decision-making. However, previous studies did not examine the impact of socio-environmental factors on suicide using a spatial analysis approach. The purpose of this study was to identify the patterns of suicide and to examine how socio-environmental factors impact on suicide over time and space at the Local Governmental Area (LGA) level in Queensland. The suicide data between 1999 and 2003 were collected from the Australian Bureau of Statistics (ABS). Socio-environmental variables at the LGA level included climate (rainfall, maximum and minimum temperature), Socioeconomic Indexes for Areas (SEIFA) and demographic variables (proportion of Indigenous population, unemployment rate, proportion of population with low income and low education level). Climate data were obtained from Australian Bureau of Meteorology. SEIFA and demographic variables were acquired from ABS. A series of statistical and geographical information system (GIS) approaches were applied in the analysis. This study included two stages. The first stage used average annual data to view the spatial pattern of suicide and to examine the association between socio-environmental factors and suicide over space. The second stage examined the spatiotemporal pattern of suicide and assessed the socio-environmental determinants of suicide, using more detailed seasonal data. In this research, 2,445 suicide cases were included, with 1,957 males (80.0%) and 488 females (20.0%). In the first stage, we examined the spatial pattern and the determinants of suicide using 5-year aggregated data. Spearman correlations were used to assess associations between variables. Then a Poisson regression model was applied in the multivariable analysis, as the occurrence of suicide is a small probability event and this model fitted the data quite well. Suicide mortality varied across LGAs and was associated with a range of socio-environmental factors. The multivariable analysis showed that maximum temperature was significantly and positively associated with male suicide (relative risk [RR] = 1.03, 95% CI: 1.00 to 1.07). Higher proportion of Indigenous population was accompanied with more suicide in male population (male: RR = 1.02, 95% CI: 1.01 to 1.03). There was a positive association between unemployment rate and suicide in both genders (male: RR = 1.04, 95% CI: 1.02 to 1.06; female: RR = 1.07, 95% CI: 1.00 to 1.16). No significant association was observed for rainfall, minimum temperature, SEIFA, proportion of population with low individual income and low educational attainment. In the second stage of this study, we undertook a preliminary spatiotemporal analysis of suicide using seasonal data. Firstly, we assessed the interrelations between variables. Secondly, a generalised estimating equations (GEE) model was used to examine the socio-environmental impact on suicide over time and space, as this model is well suited to analyze repeated longitudinal data (e.g., seasonal suicide mortality in a certain LGA) and it fitted the data better than other models (e.g., Poisson model). The suicide pattern varied with season and LGA. The north of Queensland had the highest suicide mortality rate in all the seasons, while there was no suicide case occurred in the southwest. Northwest had consistently higher suicide mortality in spring, autumn and winter. In other areas, suicide mortality varied between seasons. This analysis showed that maximum temperature was positively associated with suicide among male population (RR = 1.24, 95% CI: 1.04 to 1.47) and total population (RR = 1.15, 95% CI: 1.00 to 1.32). Higher proportion of Indigenous population was accompanied with more suicide among total population (RR = 1.16, 95% CI: 1.13 to 1.19) and by gender (male: RR = 1.07, 95% CI: 1.01 to 1.13; female: RR = 1.23, 95% CI: 1.03 to 1.48). Unemployment rate was positively associated with total (RR = 1.40, 95% CI: 1.24 to 1.59) and female (RR=1.09, 95% CI: 1.01 to 1.18) suicide. There was also a positive association between proportion of population with low individual income and suicide in total (RR = 1.28, 95% CI: 1.10 to 1.48) and male (RR = 1.45, 95% CI: 1.23 to 1.72) population. Rainfall was only positively associated with suicide in total population (RR = 1.11, 95% CI: 1.04 to 1.19). There was no significant association for rainfall, minimum temperature, SEIFA, proportion of population with low educational attainment. The second stage is the extension of the first stage. Different spatial scales of dataset were used between the two stages (i.e., mean yearly data in the first stage, and seasonal data in the second stage), but the results are generally consistent with each other. Compared with other studies, this research explored the variety of the impact of a wide range of socio-environmental factors on suicide in different geographical units. Maximum temperature, proportion of Indigenous population, unemployment rate and proportion of population with low individual income were among the major determinants of suicide in Queensland. However, the influence from other factors (e.g. socio-culture background, alcohol and drug use) influencing suicide cannot be ignored. An in-depth understanding of these factors is vital in planning and implementing suicide prevention strategies. Five recommendations for future research are derived from this study: (1) It is vital to acquire detailed personal information on each suicide case and relevant information among the population in assessing the key socio-environmental determinants of suicide; (2) Bayesian model could be applied to compare mortality rates and their socio-environmental determinants across LGAs in future research; (3) In the LGAs with warm weather, high proportion of Indigenous population and/or unemployment rate, concerted efforts need to be made to control and prevent suicide and other mental health problems; (4) The current surveillance, forecasting and early warning system needs to be strengthened, to trace the climate and socioeconomic change over time and space and its impact on population health; (5) It is necessary to evaluate and improve the facilities of mental health care, psychological consultation, suicide prevention and control programs; especially in the areas with low socio-economic status, high unemployment rate, extreme weather events and natural disasters.

Relative income, happiness, and utility : an explanation for the Easterlin paradox and other puzzles

The well-known Easterlin paradox points out that average happiness has remained constant over time despite sharp rises in GNP per head. At the same time, a micro literature has typically found positive correlations between individual income and individual measures of subjective well-being. This paper suggests that these two findings are consistent with the presence of relative income terms in the utility function. Income may be evaluated relative to others (social comparison) or to oneself in the past (habituation). We review the evidence on relative income from the subjective well-being literature. We also discuss the relation (or not) between happiness and utility, and discuss some nonhappiness research (behavioral, experimental, neurological) related to income comparisons. We last consider how relative income in the utility function can affect economic models of behavior in the domains of consumption, investment, economic growth, savings, taxation, labor supply, wages, and migration.

The causal effect of income on health: Evidence from German reunification

We investigate whether therewas a causal effect of income changes on the health satisfaction of East and West Germans in the years following reunification. Our data source is the German Socio-Economic Panel (GSOEP) between 1984 and 2002, and we fit a recently proposed fixed-effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition.We find evidence of a significant positive effect of income changes on health satisfaction, but the quantitative size of this effect is small. This is the case with respect to current income and a measure of ‘permanent’ income.

Forecasting time-varying value-at-risk

In this thesis we are interested in financial risk and the instrument we want to use is Value-at-Risk (VaR). VaR is the maximum loss over a given period of time at a given confidence level. Many definitions of VaR exist and some will be introduced throughout this thesis. There two main ways to measure risk and VaR: through volatility and through percentiles. Large volatility in financial returns implies greater probability of large losses, but also larger probability of large profits. Percentiles describe tail behaviour. The estimation of VaR is a complex task. It is important to know the main characteristics of financial data to choose the best model. The existing literature is very wide, maybe controversial, but helpful in drawing a picture of the problem. It is commonly recognised that financial data are characterised by heavy tails, time-varying volatility, asymmetric response to bad and good news, and skewness. Ignoring any of these features can lead to underestimating VaR with a possible ultimate consequence being the default of the protagonist (firm, bank or investor). In recent years, skewness has attracted special attention. An open problem is the detection and modelling of time-varying skewness. Is skewness constant or there is some significant variability which in turn can affect the estimation of VaR? This thesis aims to answer this question and to open the way to a new approach to model simultaneously time-varying volatility (conditional variance) and skewness. The new tools are modifications of the Generalised Lambda Distributions (GLDs). They are four-parameter distributions, which allow the first four moments to be modelled nearly independently: in particular we are interested in what we will call para-moments, i.e., mean, variance, skewness and kurtosis. The GLDs will be used in two different ways. Firstly, semi-parametrically, we consider a moving window to estimate the parameters and calculate the percentiles of the GLDs. Secondly, parametrically, we attempt to extend the GLDs to include time-varying dependence in the parameters. We used the local linear regression to estimate semi-parametrically conditional mean and conditional variance. The method is not efficient enough to capture all the dependence structure in the three indices —ASX 200, S&P 500 and FT 30—, however it provides an idea of the DGP underlying the process and helps choosing a good technique to model the data. We find that GLDs suggest that moments up to the fourth order do not always exist, there existence appears to vary over time. This is a very important finding, considering that past papers (see for example Bali et al., 2008; Hashmi and Tay, 2007; Lanne and Pentti, 2007) modelled time-varying skewness, implicitly assuming the existence of the third moment. However, the GLDs suggest that mean, variance, skewness and in general the conditional distribution vary over time, as already suggested by the existing literature. The GLDs give good results in estimating VaR on three real indices, ASX 200, S&P 500 and FT 30, with results very similar to the results provided by historical simulation.

The conceptualisation, sensitivity and measurement of holding costs and other selected elements impacting housing affordability (Literature review and research methodology for confirmation of PhD candidature)

It is widely held that strong relationships exist between housing, economic status, and well being. This is exemplified by widespread housing stock surpluses in many countries which threaten to destabilise numerous aspects related to individuals and community. However, the position of housing demand and supply is not consistent. The Australian position provides a distinct contrast whereby seemingly inexorable housing demand generally remains a critical issue affecting the socio-economic landscape. Underpinned by high levels of immigration, and further buoyed by sustained historically low interest rates, increasing income levels, and increased government assistance for first home buyers, this strong housing demand ensures elements related to housing affordability continue to gain prominence. A significant, but less visible factor impacting housing affordability – particularly new housing development – relates to holding costs. These costs are in many ways “hidden” and cannot always be easily identified. Although it is only one contributor, the nature and extent of its impact requires elucidation. In its simplest form, it commences with a calculation of the interest or opportunity cost of land holding. However, there is significantly more complexity for major new developments - particularly greenfield property development. Preliminary analysis conducted by the author suggests that even small shifts in primary factors impacting holding costs can appreciably affect housing affordability – and notably, to a greater extent than commonly held. Even so, their importance and perceived high level impact can be gauged from the unprecedented level of attention policy makers have given them over recent years. This may be evidenced by the embedding of specific strategies to address burgeoning holding costs (and particularly those cost savings associated with streamlining regulatory assessment) within statutory instruments such as the Queensland Housing Affordability Strategy, and the South East Queensland Regional Plan. However, several key issues require investigation. Firstly, the computation and methodology behind the calculation of holding costs varies widely. In fact, it is not only variable, but in some instances completely ignored. Secondly, some ambiguity exists in terms of the inclusion of various elements of holding costs, thereby affecting the assessment of their relative contribution. Perhaps this may in part be explained by their nature: such costs are not always immediately apparent. Some forms of holding costs are not as visible as the more tangible cost items associated with greenfield development such as regulatory fees, government taxes, acquisition costs, selling fees, commissions and others. Holding costs are also more difficult to evaluate since for the most part they must be ultimately assessed over time in an ever-changing environment, based on their strong relationship with opportunity cost which is in turn dependant, inter alia, upon prevailing inflation and / or interest rates. By extending research in the general area of housing affordability, this thesis seeks to provide a more detailed investigation of those elements related to holding costs, and in so doing determine the size of their impact specifically on the end user. This will involve the development of soundly based economic and econometric models which seek to clarify the componentry impacts of holding costs. Ultimately, there are significant policy implications in relation to the framework used in Australian jurisdictions that promote, retain, or otherwise maximise, the opportunities for affordable housing.

Persistence of income inequality : does child mortality matter?

Many developing countries are afflicted by persistent inequality in the distribution of income. While a growing body of literature emphasizes differential fertility as a channel through which income inequality persists, this paper investigates differential child mortality – differences in the incidence of child mortality across socioeconomic groups – as a critical link in this regard. Using evidence from cross-country data to evaluate this linkage, we find that differential child mortality serves as a stronger channel than differential fertility in the transmission of income inequality over time. We use random effects and generalized estimating equations techniques to account for temporal correlation within countries. The results are robust to the use of an alternate definition of fertility that reflects parental preference for children instead of realized fertility.

Forecasting crashes at the planning level: Simultaneous negative binomial crash model applied in Tucson, Arizona

At least two important transportation planning activities rely on planning-level crash prediction models. One is motivated by the Transportation Equity Act for the 21st Century, which requires departments of transportation and metropolitan planning organizations to consider safety explicitly in the transportation planning process. The second could arise from a need for state agencies to establish incentive programs to reduce injuries and save lives. Both applications require a forecast of safety for a future period. Planning-level crash prediction models for the Tucson, Arizona, metropolitan region are presented to demonstrate the feasibility of such models. Data were separated into fatal, injury, and property-damage crashes. To accommodate overdispersion in the data, negative binomial regression models were applied. To accommodate the simultaneity of fatality and injury crash outcomes, simultaneous estimation of the models was conducted. All models produce crash forecasts at the traffic analysis zone level. Statistically significant (p-values < 0.05) and theoretically meaningful variables for the fatal crash model included population density, persons 17 years old or younger as a percentage of the total population, and intersection density. Significant variables for the injury and property-damage crash models were population density, number of employees, intersections density, percentage of miles of principal arterial, percentage of miles of minor arterials, and percentage of miles of urban collectors. Among several conclusions it is suggested that planning-level safety models are feasible and may play a role in future planning activities. However, caution must be exercised with such models.