Treasury’s intergenerational report was released today with the intention of assessing past and influencing future budgetary policy. Of course, the impact of the modelling analysis, required by law once every five years, will be initially political. Over the coming days, expect to hear all kinds of variations on “LABOR’S SPENDING WAS OUT OF CONTROL!” from a government yet to provoke firm economic growth. But listen carefully and you’ll find what many younger Australians already know first hand: the financial future’s so dim, they’re going to need bifocals. Which they’ll pay for, if policy is not shifted, without subsidy. Eating beans. Living on somebody else’s couch.
If he does not move to slow an emerging crisis of housing affordability, Abbott’s catch phrases about “intergenerational theft” will be remembered less as an indictment of his predecessors’ deficit and more as a record of a government that denied an entire generation of its parents’ advantages — advantages developed in the past and presently preserved, according to professor of housing and urban research at RMIT Gavin Wood, “by tax advantage and asset test concessions”. The dream of home ownership has become a nightmare for many younger people who, says Wood, “cycle in and out of home ownership”. If they can afford to buy into the market at all.
Whatever your view of Coalition policy or the indolence of “entitled” young people, the numbers on housing affordability tell their own constant truth. And that is, to be young in this dawn of wealth inequality is hardly very heaven. The IMF reports that Australia’s housing price-to-wage ratio is now the world’s third worst and the Reserve Bank of Australia offered the opinion last year that renting might make slightly more personal financial sense in the future than buying.
Although Wood is reluctant to offer an opinion on the RBA’s conclusions and says “the received wisdom has been that in the long run, that is over a lifetime, you are better off being a home owner”, he is explicit in his research that it is now more difficult to buy, or rent, a place in which to live than previous decades. Although, like many economic forecasters, he would not characterise the current surge in Sydney and Melbourne housing and rental prices as a “bubble”, he does say that multiple influences have had their impact on affordability.
“Planning controls are making supply less flexible and this intersects with tax concessions to home owners and the asset test concession. We have a pressure-cooker situation that lends an inflationary bias to the market.”
These factors — much less than the foreign real estate investors whom the Coalition have appointed as demons of convenience — push up prices and rents beyond the capacity to pay. The result is one group of older home owners who have tax advantages, an asset that grows faster than the rate of wages and an increasing tendency not to bequest their wealth to their children and one group of younger people who face higher unemployment rates and the possibility of homelessness if their parents are yet to build a Fonzie flat. New and affordable housing is in very short supply.
Some financial observers and policymakers still claim that negative gearing will increase the supply of rental housing stock by encouraging new builds. Nonsense, says James Bennett, policy and liaison officer with the Tenants Union of Victoria. “It chiefly encourages churn of existing properties. Over 90% of negatively geared houses were already in existence.”
To reverse this inadvertent “generational theft” — more authentically understood as taxation and policy mismanagement — is an urgent work. If housing prices continue to grow, an economic impossibility will emerge wherein residential property is the only commodity with value. And if unemployment continues to grow and commodity prices soften, then all sure bets are off in a macroeconomic dystopia. More directly, large numbers of people will have no-bloody-where to live. As Wood says: “Unless we address the structural causes of rising house prices and rent, these will exceed the reach of everyday Australians.”
Housing is a big matter for policy, but it’s also a matter for our individual consideration. We all need somewhere to live and, if we have reasonable personal wealth, we all should consider the implications of how we choose to see where we live. And if we are home owners with a good part of our mortgages paid, we tend to see where we live as a part of portfolio.
“There are two answers to the question ‘what is the primary purpose of the house?'” said Bennett. “One is it to provide shelter, and another is to provide an investment stream. This is a simplistic way of putting it, but the pendulum has swung too far to idea of the house as an investment.”
This idea of the house as investment is not only flawed in a personal financial sense — I spoke briefly with University of Melbourne assistant professor in finance Greg Schwann yesterday, and he says that, over time, managed funds can perform better than housing — and in a macroeconomic sense where negative gearing can actively screw things up for others, but it can also be flawed in a cultural sense, too. Rebecca Bentley from Melbourne Uni’s school of population health has been researching the mental-health implications of housing. “Looking at rental and what people pay for their housing we use a measure, the 30/40 rule, of which you may have heard. That is, we studied those who spend more than 30% of their income on housing and are in the lowest 40% of income distribution.”
When compared with low-income home owners, low-income renters were found to report a greater impact on their mental health. Even though low-income home owners are subject to great financial pressure and increasingly likely, as Wood reports, to cycle in and out of the market, renters tend to feel shittier.
Given that the vast structural problems of housing inequality are unlikely to be addressed at a proximate hour, perhaps it’s time to change our personal approach to, and policy demands of, rental arrangements.
Although about one in five Australians now rent their residence, the practice is construed as a failure. This has the cultural impact of making people feel like shit. And it has the very real legal impact of treating renters like shit.
“The tenant-from-hell-trashes-house-scenario is overplayed by media. The belief in the bad tenant and the virtuous landlord is a means of maintaining a power imbalance,” said Bennett, whose organisation is committed to making long-term, appropriate and affordable housing available to us renters. Legal protections for property investors far exceed those for renters and community or public housing planning is not on the increase; although Victorian Minister for Planning Richard Wynne has recently indicated that affordable inner-city housing is on his agenda.
We talk a lot about “erasing the stigma” of this, that and the other and it is often unmitigated bullshit. But, when it comes to renting — something 20% of us do and are likely to start doing in greater numbers soon — perhaps it’s best to extinguish this stigma so that we can campaign unabashedly for our rights.
Many of us reside in the future daydream of home ownership even as it is doused by poor planning and generous concessions to chiefly older property owners. To fantasise that renting may not be the only living arrangement within our means, or, as per last year’s RBA report, the only arrangement that can build substantial personal wealth is to ignore the need to shore up our rights. We need to cool the red-hot shame of our renting present to keep a cool head to advocate for policies of the future.
Said Bennett: “The fact that a house can be an investment is important, but, from a public policy point of view, appropriate and affordable housing are far more important matters than that of people making a good rate of return.”
Sure, rolling over right onto the Australian Dream of home ownership is not the best scenario. To be honest, I’d like to be able to dig a garden bed for my winter brassicas without seeing Permission to Broccoli in writing from my landlord. I’d like to see a nation that does not paralyse the poor and enlarge the fortunes created by the liberalisation of the 20th century to a particular age group. But, I’d also like to see a more frank admission that lots of us rent, that current policy means a greater number of us are likely to rent in coming years and we ought to, if moved, be able to cultivate cruciferous greens in our yards with greater ease.
The combination of negative gearing and the capital gains tax discount will probably go down as the most obnoxiously self-interested, economically insane and socially destructive domestic policy fuck-up in Australian post-war history. Combine sustained low interest rates with relaxed rules on self-managed property/super funds and you have an investment skew no-brainer: if you are property rich it’s been an invitation-come-license from the government to print money. The cascade of catastrophic economic implications is staggering: in a way the pricing of first-home buyers out of the city markets by multi-property portfolio speculators, the diversion of investment from more (job) productive projects, the artificially-accelerated rate of high density inner city building approvals (we are shortly going to be glutted out with small high-rise apartments in areas like Burwood, Chatswood etc)…in a way these are the least of the ills arising. Possibly the shittiest result has been the gutless stampede of our major banks – you know, those brave and bold ‘pillars of the economy’ – to grab a piece of the sure-thing speculative action: their lending profiles are now so weighted towards property that they are as dependent on the artificially-high big city price bubble as all those highly-geared investors. That’s why even alleged professional economists like Glen Stevens – Jesus, only the single most important professional economist in the fucking country – can’t bring himself to be honest about the housing market distortions. The other day when he was asked by a sixteen year old Eco 101 student about housing prices, he waffled on with the usual gutlessness about land releases and such shit, as if somehow, just chucking more ‘supply’ into the mix is going to straighten out the kinks caused by fuckwitted tax policies. Either Stevens is a disingenuous bull-shit-artist like every other economist who got us into this housing tax policy mess – and you wonder how many negatively geared investment properties he himself owns, of course, like the rest of these self-featherbedding/incompetent shitheads – or he is genuinely economically illiterate. Which is merely terrifying.
Everybody knows it: policies that afford unlimited negative gearing (against ALL income) plus capital gains tax discounts in parallel with property-trust/super fund mechanisms…equals property as the speculative plaything of the property-rich. And after three decades of treating housing – no less a social necessity and individual right than food, water and oxygen – as just that, a fucking tulip…is it any wonder that our entire domestic economy is now predicated on artificially and evermore fragile bubbled-up city housing price, while no-one can even talk about it honestly, let alone change policies, even gradually, for fear of the whole thing popping?
Fuck. Heads. Incompetent. Fuck. Wits.
I think a law should be passed: no-one is allowed to contribute further to public debate on housing policy without first declaring how many investment properties they personally own. This is an area of urgently-needed policy change that cuts across ideological and political party lines: the sole defining thing about housing policy, and where you stand, is whether you’re a ‘have’or a ‘have not’. The rest is bullshit and waffle. Unfortunately, pretty much everyone in a position of political leadership, policy-change power and economic expertise is a housing ‘have’. Economists especially have loaded up on investment housing: they above all people have realised what a nice quiet little rort housing tax policy has been for donkey’s. No: tax policy on housing has been more than a rort for three decades: it’s been, as Helen says, outright intergenerational fucking theft.
Nice one Boomers. Peace and love and equality and fairness, man. You pack of fucking hippy thieves.
Across the board the percentage of people who rent is closer to 30% (34% in Queensland). These figures include all rental types, not just the private rental system.
I am collecting ‘rental tales’ – renters experiences of renting (via ipad app and web browser) in a University research project to develop understandings of the factors and attributes that contribute to renters in Australia feeling secure and ‘at home’ (or not as the case may be)
Research such as this is highlighting the patterns and problems in the system from the renters perspective and so it is helpful to get as many tales as possible – from anyone who currently rents in an Australian city
to contribute a rental tale go to https://sites.google.com/a/griffithuni.edu.au/renters-at-home/home
A nation of rent-seekers?
Housing has been in an affordability crisis for 15+ years.
It’s been cheaper to rent than buy for a similar period of time.
the reason they won’t get rid of negative gearing is because all the politicians themselves benefit from it, housing is where they make they multi millions all the while royally screwing the rest of us. there needs to be a federal icac but as all politicians are greedy corrupt hate mongers who literally hate society that will never happen.