Whatever vicissitudes the Greens may be having internally, they’re doing God’s work taking Labor to task for the “$10 billion Housing Australia Future Fund”. As the slogathon over this proposal continues, it’s worth noting just how criminally inadequate and cynical it is.
It’s worth noting how it fails to address real housing needs, how desperately inadequate the coverage of it has been, and how far more complex the questions of our housing problems are, than is really being discussed. It’s also worth asking whether the Greens have managed to cut through in their opposition to this, or whether their wonkish side has got the better of them.
Let’s start with what the fund isn’t. It isn’t a $10 billion housing fund, in the sense that “fund” is being used about it. A lot of the terrible coverage hinges on the failure of the mainstream coverage to make this clear. The $10 billion is a capital sum socked away to provide income for housing.
Yes, yes, that is technically a fund, like your untouched super is a fund. But it is being deployed by Labor and carried by its press minions as if it were a disbursement fund, the money you’re going to spend over a period of time. Much of the public take it to be a disbursement fund, and Labor is happy to let them live under that misapprehension.
Still, the fund will disburse $500 million a year, and build 30,000 homes over five years, right? Ha ha, no. The $500 million is the maximum the fund can disburse from its income, by law. There is no guarantee it will make that much money. Or any. Last year it would have lost 3.7% and would have had to use part or all the profits from the next year to restore the fund.
Still, 30,000 homes. That’s a great target, ain’t it? That’s Labor laying down bricks and mortar on the landscape? Ha ha, no. For a start, “homes” means dwellings. That will include one-bedroom and quite possibly studio flats. Better to have than not, sure. But once again an ambiguous term is being used to make this look like a larger program than it is.
Still, even if we conclude that the fund won’t have $2.5 billion to disburse, the general direction of investment is upwards, right? Well, not necessarily. We may be entering a period of stagnation that stops short of crisis but delivers low returns for some time. But let’s say that the fund delivers as a generous lower limit $2 billion over five years. That’s 2 billion bucks, right?
Ha ha, no. The fund will not be indexed for inflation for the first five years, and global inflation may well run for some time. Let’s set that at a mild 3% a year for five years, with a cumulative loss in value of about 20%. That means that not only will the purchasing power of the fund go down to $1.6 billion, but the $10 billion fund will have to be shored up, either from its own income or from a further government injection.
But that’s not the end of it because we have to consider construction sector price rises, which have been running ahead of inflation and are responsible for the current collapse of numerous private builders — indeed, the stalling of the whole sector. Costs rose 13% in Victoria last year, and global demand means that rises will continue. So let’s — again generously to the fund — take out another 12% of the purchasing power of the $1.6 billion over five years, and take it down to about $1.4 billion.
Still, OK, $1.4 billion is… Heh. Even when you throw billions around in 2023, that’s looking pretty piss weak. But wait, it gets worse. The claim that the fund will build 30,000 homes — housing, say, 20,000 families and 10,000 childless couples and singles — appears to be somewhat ad hoc. On the $2.5 billion claimed five-year disbursement figure, it suggest a cost of $80,000 a unit (which is presumably supplements, or is supplemented by, state government funds, to which the funds are paid).
Well, look, I simply don’t believe the $80,000 figure for a second. If this is to be a double disbursement — from federal to state government, and then from state government to private subcontractors — that unit cost is going to blow out. Once again, err on the generous side and say $100,000 a unit. That’s not double-counting of inflation rises — it’s simply a realistic expectation that people will take a slice of “the fat” all the way down the line.
So, we now have $1.4 billion at $100,000 a “home”, which looks to me like we’d get 14,000 of them over five years. Fourteen thousand homes. For the whole country. Split city- and state-wise, this is say 3000 each for Sydney, Melbourne and Brisbane-Gold Coast, 1000 each for Perth, Adelaide and Tasmania, and 2000 for mainland regional and rural Australia.
As an annual build, in the major cities, it’s 600 homes a year, with say 250 of them being small units. So it’s housing about 3000 people total adults and children — in cities of 5 million.
How inadequate is that? Well, the waiting list for public housing in Victoria is 60,000 households, with 36,000 in urgent need. So it would address 8% of the urgent needs — over five years. It wouldn’t even touch the sides of acute housing distress. Rental stress and unmet housing needs? It isn’t within a million miles of doing anything about that.
Come at it another way. Nationally, there were about 60,000 absolutely homeless people in 2021 (with another 60,000 highly precarious). They need, say, 20,000 homes. The Housing Australia Future Fund wouldn’t even house all the Australians sleeping in a tent or their car tonight — after five years.
So it’s not a Housing Australia Future Fund, is it? It’s a cynical joke, a political stunt. It’s been reverse-engineered from political strategising by Labor wonks to work out what would most jam the Greens up, making them choose between being absolutely ineffectual, and backing the plan, or looking like they’re blocking a government “doing something” out of ideological purity.
That is what this fund is for. That’s why this utterly minor fund, which would otherwise be a line item in the housing budget, has been trumpeted as major action on housing. The clear intent is to take people’s desperation over housing, their hunger for any sort of hope, and use that energy for political gain.
The Greens have been going in hard on this, and on the rubbery figures behind it. But Anthony Albanese’s Labor knew its enemy, and knew the Greens would get hung up on the figures, and not go for the jugular. The jugular is to accuse Labor of being cheats, liars and con artists, guilty of using people’s hopes for political gain, and shamelessly punking them.
Maybe the Greens have gamed that all out, and decided to be the party of sensible reason. Maybe there’s a good argument for that. But in the absence of a moral and personal attack, Labor ninjas such as Penny Wong and Jason Clare have been able to paint the Greens as making the perfect the enemy of the good, moral vanity blah blah blah. Maybe this has been a teachable moment for how the newly expanded lower house Greens contingent needs to play things.
Well, with the usual caveat that I am happy to debate some of my assumptions and maths, one has to say this: there is a time when “something”, by its very scale, is nothing at all, where its existence blocks the ability to see the world as it really is, and act upon it. That’s what the Housing Australia Future Fund is. That’s what it’s for. Redouble the attack, personalise it to Labor’s cruel cynicism through bad maths, and make them scream.
Then let’s have a better conversation about what the housing crisis is. And isn’t. We can do a lot better, in talk and action. Housing Australia Future Fund? Four words, four lies.
Is Labor using people’s desperation over housing as a cynical political tool? And how should the Greens respond? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
Superb work Rundle — it is just such a crying shame articles like this don’t make it to the mainstream
Indeed it is a shame. It’s almost as if the mainstream is owned and managed by individuals who are somehow biased against arguments such as those made here.
That too could be fixed by Labor – but they won’t.
Well, I think that if the Greens shout “fraud! liars! criminals!” they would be squarely in line with sentiment among renters at the moment, who are the Greens’ base. The Big Lie (…enemy of the perfect, etc.) eventually runs out of steam.
In practical terms, the crisis cannot be solved by building more houses. There are not enough building workers, and materials and land are in short supply. Decades of neglect have dug a huge hole which cannot be reversed by “building more houses”. The solutions (plural) lie in regulations (banning or limiting AirBNB), ending negative gearing, cap rents, supporting tenants’ rights, especially security of tenure, loosening regulation of hotels to allow long term renting, offering tax incentives for converting large houses, whose child occupants have moved out, to be converted to accommodate lodgers, and allow people taking in lodgers to get the rent free of tax up to a limit, refurbish underutilised existing social housing, create State Departments of building and construction to actually build decent housing, change zoning to allow residential use in industrial and commercial areas, and do some of the RBA’s work by pulling money out of the market by taxing the wealthy instead of borrowers. And doubtless more that I haven’t thought of. It costs a small fraction of money and labour to refurbish existing buildings than to build new ones. Tax incentives, rent caps and tennants’ right do not require any capital or labour at all.
Also, as was shown in the NPC broadcast this week, the housing crisis in regional Australia is at the root of all regional Australia’s other problems – especially the shortage of skilled and professional labour – there’s nowhere for the new GP to live!
All very good ideas Andy. But they will all ultimately fail in the face of the extreme levels of demand required. That needs to be reduced.
Some of these moves can provide a very quick response. But in general, yes, “demand” has to be reduced. That is achieved in part by giving tennants rights, so they’re not thrown on to the market prematurely. The rental vacancy rate is determined by the number of people looking for an apartment, not the number needing an apartment. Also, renovations and tax incentives aimed at increasing the usage of existing stock reduces demand which depends on the household size, not just the number of people needing to be housed.
You forgot “curtail immigration.”
If the birthrate in Australia was not well below replacement level, maybe. But as things stand, we have a lot of other things about the whole Australian economy, built on immigration for many generations, which have to be changed before we can do that. Our education and training programs, and our ability to provide for aspirations, rely on immigration. Too large a ship to be turned around quickly enough.
I am not suggesting net-zero.
The Australian economy has only depended on contemporary massive levels of immigration for about 15-20 years.
Prior to the early 2000s, it was 1/3 to 1/4 current levels.
(Ironically enough, about the same time the birthrate picked up.)
So it most assuredly could be wound back quite dramatically, and while that would entail some short-term pain in some areas, they would be balanced out by the benefits in others.
Unfortunately the short term pain is born by those who pull the strings-and that ain’t politicians.
And therein lies the rub.
It’s got nothing to do with economics.
We could become a socialist republic and we’d still need doctors, nurses, aged care workers, teachers, an army etc.
You can’t have a society without people.
And you can’t have less people in a world of more people who are more integrated than any period in human history.
The bigger challenge is that because of the farcical cost of housing in Australia nobody in their right mind will want to move there.
So your wishes might still come true. But Australia will struggle to sustain its ageing population. And economics won’t save us.
Leave the poor straw man alone. The argument is not for “no immigration”, it’s for “less immigration” and “higher quality immigration”.
Australia has enough people to sustain its “ageing population”. The economy is rife with underutilisation, pointless services, bull**** jobs and opportunities to increase productivity.
Technological advances and productivity increases will continue to make labour less necessary.
“Higher quality immigration”. Love it. How patronising.
Robots won’t save us since most of the jobs doing require the human touch like healthcare, and best not to go down the route of, robocops.
There will always be pointless jobs and the more pointless the more money there is. There will also always be underutilisation because we’re talking about 24 or whatever million.
Still it’s less than half the size of Britain. Yet housing is twice the price….
As I said this will sort itself out because Australia is about to experience a severe brain drain due to the farcical housing costs.
Yes. Higher skilled, higher earning, more productive, more specialised, better for the country.
Why is that a problem ?
Plenty of room for automating jobs across the entire economy.
Both should be minimised. They are soul-crushing and destructive on an individual level and wasteful on an economic level.
Full employment should be the policy, not the toxic NAIRU that requires people be kept unemployed.
The UK’s property bubble is only marginally smaller than Australia’s.
As I said this will sort itself out because Australia is about to experience a severe brain drain due to the farcical housing costs.
Mmmm. Australia’s housing costs have been unaffordable for a good 10-15 years now and that hasn’t eventuated. Possibly because most places Australians would consider moving to are just as bad in that regard.
Just a minor quibble that there is no shortage of land. By any practical measure, there is an infinite supply of it.
Every household in the country on a 1/4-acre block, is roughly as much land as 1/7th of Tasmania.
Okay, now factor in the share of infrastructure needed to support the occupants of the house; roads, warehouses, shops, etc.
It’s still insignificant.
There are many good reasons to constrain population growth, but lack of land is not one of them.
Currently it does seem that there are a still a lot of building workers using a lot of materials to build oversized trophy houses and luxury apartments as the perverse Capital Gains Tax rules encourage them to do.
Winding back the CGT concessions over time (say 5% pa) might help to return the role of the home to human shelter not wealth shelter and deflate the nation’s McMansions to a scale more appropriate to need, not greed.
Capital gains typically come almost entirely from the land, not the structure.
Luxury apartments ? The typical apartment is a tiny shoebox for a single / young couple or a small 2-bedroom for multiple renters. They are built to derive maximum profit with minimal nods to liveability, let alone luxury.
Well said.
Excellent explanation of a terrible policy scam.
It’s increasingly obvious Labor is just as obsessed as the previous Coalition governments with putting up proposals just to wedge its opponents. Often, the worse the policy is objectively, the better it functions as a wedge because the opposition party is more likely to feel it must oppose something that bad. Labor learned to dodge getting wedged by the Coalition by the brilliant tactic of supporting the Coalition’s wedge policies; Rudd showed the way by backing the atrocious NT Intervention without even bothering to look at the bill just before the 2007 election, and so Labor continued all the way to the Stage 3 tax cuts and so on in recent years. Even so, the Coalition kept inventing new wedges right up to the end, and here’s Labor playing the same game just as enthusiastically. All great fun for the pollies no doubt, but it ensures no attention is given to whether a policy is any good for Australia and Australians.
Or 24 hours to say yes to a $300B commitment that has generational financial and strategic implications and impacts… I’m guessing the 24 hours was needed to war game the wedge, not the proposal at hand. We are so broken…
yes, for sure, the Greens should totally label Labor as being cheats, liars and con artists, guilty of using people’s hopes for political gain, and shamelessly punking them.
also: Four Words. Four Lies. brilliant
As I understand it, there is no money available until interest is accrued on the supposed fund. Is this correct? If so it is insane that it being debated at all!
Yes, that’s correct.