The need for a roof over one’s head is a fundamental human requirement, as Abraham Maslow famously pointed out. It’s also a problem reaching crisis proportions in Australia, where there are over 800,000 in housing stress and as many as 100,000 people living on the streets.
Housing affordability in Australia is one of those big, complex issues that governments find so difficult. As experts like Julian Disney, who headed the National Summit on Housing Affordability, point out, the crisis has been building for close to 20 years now. But little has been done. One day very soon, our major cities may end up like Karratha in north-west Western Australia, where the bulk of the labour force has to be flown in and out weekly.
Why are our house prices so high? The answer is essentially a conspiracy between governments, landlords and home-owners which has created an asset price bubble in housing. Since 1999, cheap money, rising wages, high levels of immigration and massive tax concessions have jacked up housing demand. The resultant price rises persuaded huge numbers of average Australians to gamble their future on rising property prices. Housing is now very over-valued, in terms of both average wages and the yields on rental properties.
This is why rents are rising: investor-driven demand has radically outstripped supply, especially for cheaper homes not too far from city centres. The losers are renters, first-home buyers and young people. Macro-economically, rent is nothing but a wealth transfer from poorer, younger Australians to their richer, older compatriots.
It’s a crisis of politics as usual. Politicians love nothing better than to talk about home ownership and “the Australian dream”. They also fear the power of the property lobby. So we end up with a celebration of home ownership as the best and only form of providing shelter. Australian governments spend a minuscule amount on public housing, but give away tens of billions in tax concessions to investors. As the recent Senate Committee on Housing Affordability reported: “the combined total of capital gains tax arrangements, land tax exemption and negative gearing arrangements is estimated to be in the order of $50 billion per year.”
That’s a lot of money which could be used to provide cheaper housing.
But Paul Keating’s changes to negative gearing in the 1980s badly burned the Hawke Government, and Labor hasn’t gone near the issue since.
Housing policy in Australia cuts across government jurisdictions. For decades the Commonwealth has washed its hands of urban policy. Meanwhile the states have come to rely more and more on property taxes like stamp duty to fund essential services. Local councils have turned to development charges and higher rates to help pay for the infrastructure burden imposed by new tracts of housing. These charges are passed on to home buyers and renters.
Our urban planning is also a mess. Australian cities are amongst the least dense in the world. But the property lobby’s preferred “solution” is releasing more land on the urban fringe. It won’t work — because people don’t want to live that far out, and increasingly can’t afford to commute either. Providing infrastructure across hundreds of klicks of suburban sprawl was already expensive before the current oil squeeze. With fuel prices spiking and state and local governments struggling to provide new infrastructure, it’s looking prohibitive.
Are there any solutions? Yes, actually.
The Federal Government can start to wind back the huge tax breaks for wealthier property investors and homeowners, and use the money saved to invest more in public housing and rental assistance. State and local governments can continue to plan for denser cities, despite the opposition of lobby groups like the Property Council. All governments can invest more in urban infrastructure — particularly public transport. Government departments could be moved out to regional towns. And, as citizens, we can also aspire to live in smaller homes. At the same time as housing affordability is worsening, the number of Australians living in each dwelling is falling.
It’s not rocket science, but it will take political will.
Before the last election Howard neatly defined his (and subsequently Rudd’s) constituency with one comment, being, “the real tragedy would be for Australians to the see the value of their homes fall”. This says it all. No pollie will tackle negative gearing, land release, concessional capital gains, or anything that could see prices fall. 60% – 70% of people fall into the category or buyers or occupiers, and this majority rule.
Public housing is great but you would want one next door to you? Not on your life. How many public housing recipients actually spend the time to look after their publicly funded asset? Go for a drive around here and it’s not hard to spot the housing commission house. Housing affordability is an issue but I really object to people getting houses and not look after them. As for rental assistance, that will only drive rents higher – just look at the child care rebate debacle.
The only solution to this problem is for a massive correction in house prices but that in itself has grave implications. Rents have represent a decent ROI to the investor yet not cripple the tennant there by affecting other sectors of the economy (more money on rent; less money spent elsewhere) Returns for owners are crap and with capital grwoth in most areas slowing or going to negative, I saw one realestate add for a rental property for sale that started “amazing 5.5% return” Dickhead, I can get 7.9% with my online account. Everyone’s to blame for the property fiasco and everyone’s going to get burnt by the fall out of our narrow sighted stupidity.
Does Ben own a home or is he a renter? If he is buying a home, then he is a dill for writing what he has. If he is a renter, then his envy of home ownership is undertandable but equally wrongheaded. Home ownership, even on the outskirts of big cities, is a positive for owner and society. Public housing is an undesirable necessity, not a virtue for government’s to promote.
You’ve misquoted the Senate Report – that is looking at all housing, not just investment properties. The giveaway is in the reference to land tax. Owner occupied housing is land tax exempt (hence why it is referred to as a concession), but investment property is not. This is a major error, you should correct it.
This bubble in housing will burst the moment renters start moving in with others again. There are more people living alone than ever before, with one person house holds increasing. As soon as this decreases as people realising how much money can be saved by not living alone, plus the social benefits. More people in one house = less rentals needed = drop in price, but main stream politicians and media won’t run it because if renters moved in with more two bedroom places holding two, three or four people, as it was thirty years ago, the house prices will collapse 30 or 40 percent, and a lot of peoples levearage on loans and credit cards will collapse as well, well and truly stalling the economy.