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.
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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.