Economy

Mar 5, 2018

How the rich weaponised NIMBYism to wage class war

A new report illustrates how effectively middle and high-income earners have used the tax system and NIMBYism to drive low-income earners out of housing ownership

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Housing affordability Federal Budget 2017

The Grattan Institute report on housing released today illustrates how, when it comes to housing, Australia's middle- and higher-income earners have successfully waged economic war on the young and low-income earners over the last 40 years.

The success is clear from some compelling data in the report: ownership of housing by 25- to 34-year-olds has fallen from over 60% in 1981 to 45% in 2016. And ownership among the lowest 20% of income earners has fallen from between 60-70% for all groups under 55 to below 50% -- and to just above 20% for 25- to 34-year-old low-income earners.

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29 comments

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29 thoughts on “How the rich weaponised NIMBYism to wage class war

  1. donhanoi

    Good stuff, Crikey, why we need you more than ever! The story of intergenerational theft [or, economic bullying-with-deception] should be disseminated as a cautionary tale for toddlers, and in suitable forms through to Uni. We willed it / we allowed it, per the privileges of the Boomers and the avarice and competition of the post-1980 Market Forces boosters. We all tend to MF where we control the F. We lost the supposed objectivity of the government bureaucracies to inform and promote the Public Interest; the academics became overwhelmed in commercialised uni’s and colleages and generally chose MF and Property rather than social-conscience propaganda per ACOSS etc . What can be done to shift the trends? – I believe that it will require a wide and deep collapse of asset ‘values’, experienced over at least ten years, to shift the morals and behaviour towards evidence-based fairness. In such a period, cashed-up foreigners will take over billions of assets, and ordinary Australians will blink their way into a diminished sovereignty. Thanks Boomers.

  2. klewso

    There’s bugger all monetary fluidity in the mortgage belt – who else was Howard-Costello (with members of this government) going to spray with their “Middle Class Welfare for Votes” policies (financed off the back of the mining boom) besides asset-rich home owners?
    The poor and put upon could fend for themselves thanks to milk-shake and sanga tax cuts.

  3. Robin

    I agree strongly with the thrust of the Grattan report (as reported in the media; I haven’t read the report), particularly what’s said about tax incentives. However as a Boomer with a valuable house in the middle ring of suburbs I do want to say one word in defence of what’s being described as NIMBYism.

    I, like most others in my demographic, bought a house in the middle ring because of the amenity of the area: quiet; green; peaceful. Contrary to the report and what Crikey says, housing density where I live is very definitely increasing and it’s having a hugely detrimental effect on the amenity I described. Right now, next door but one is a block where one 3 bedroom house has been knocked down and currently two 3-level 4-bedroom houses are being built. Just around the corner on a single (larger) block one 3-bed house has been replaced by five, yes five, 3-level houses, most of them 4-beds but also a couple of threes. Not a tree or blade of grass was left on either block; there has been some “landscaping”, but what’s been planted has so little space and light that it’s not likely to thrive.

    Why shouldn’t I raise every objection possible when yet another developer proposes the same again?

    1. David Coles

      Obviously, you have the right to object and to try to obtain a better outcome. Development can be more sensitive to the area, requirements can be made for more green space etc, but the “middle ring” was once outer and as it becomes closer to the centre pressure is inevitable. The amenity is available in other areas, probably further out and probably at attractive value. Current landholders have rights but “incomers” who want to live closer to where they work also have rights.

    2. Damon

      Robin: the problem with your analysis is you have the means to move somewhere else with the “amenity” you seek; the young (who have not benefited from the windfall capital gain as you have) have much less means to find shelter close to the services and employment to which they need access. It’s a big country, and you’re blessed with both capital and mobility. I suggest you use them.

  4. sheamcduff

    From BK:
    “Yet more evidence that NSW Labor shouldn’t be allowed near power in Australia’s largest state for many years to come.”
    Yeah, fair comment probably.

    But …. then there is this, from a bit over a year ago, which would warrant the same conclusion? Surely?
    “Up to 20 ex-Liberal MPs and businessmen tried to break the law in the lead-up to the
    2011 NSW election, the state’s corruption watchdog has found.”
    [That ‘ex-Liberal” is a nice touch don’t ya reckon?]

    https://www.sbs.com.au/news/mps-tried-to-evade-donations-laws-icac

    1. Arky

      It leaves me wondering why no Xenephon-esque party or personality has sprung up in NSW politics.

      Both majors are so riddled with corruption scandals that the best they can do is argue over who had more ties to Eddie Obeid and who can do the most to nobble ICAC. Meanwhile the NSW Greens are the in-fighty embarassing state chapter of all the state Greens. And this is the largest most powerful state in Australia! Surely it is worth someone’s time to try and do a Xenephon there.

    2. MAC TEZ

      BK fails to mention the Barry/Baird/Beryl group selling off everything NSW once owned at cut price-rates to developer mates nor the criminal actions they’ve overseen in relation to water rights/use and land clearing laws.
      Lets not forget Libs like Nick G. & Arthur S. had direct ties to Eddie O. in his little water supply rort as well. Then there’s the turfing out of public housing tenants who lived too close to the CBD , the multi – billion spend for stadiums that will never be filled, and the soon to be white elephant WSA and so much more.

  5. EG

    Good piece BK thanks.
    I was lucky to have a great bank manager back in 1981; they still existed then.
    He authorised a loan for me, a young, single female RN, for my first home, a modest studio in Coogee.
    That gave me the start I needed to secure housing close to my work through the years and now into old age and retirement.
    Thank you Mark Harris of Wesptac Balmain. Hope if your still around you had a happy life.

    1. Norm

      And 37 years later you are well-to-do, because it could be done in 1981, when it was being done almost exclusively for Australian citizens; but in 2018 no single, or even most married two-income RNs at any of Sydney’s hospitals can afford what was possible for you. Because it’s no longer being done almost exclusively for Australian citizens – quite the opposite. There are some yeses, but to my mind many noes, in BK’s article. Including his apparent belief that our middle class is not under attack.

      1. EG

        Agree that the middle class are also under attack Norm.
        You are right that what was possible for me is impossible for those today.
        Who can raise finance and how to buy into real estate these days is deeply wrong.
        BTW, I guess I’m well to do compared with many, many Australians and I know I’m very fortunate.
        I don’t have much disposable income however and am not entirely financially secure because I missed out on adequate super having to retire at 50 because of ill health. I’m very grateful for the aged pension and medicare otherwise I’m be selling my home to survive.

    2. bref

      You were not just lucky, EG, it was quite normal for a single person or couple to get a house loan if you had a deposit and a steady income. House prices in ratio with incomes were (in retrospect) very affordable. My wife and I, while living a very comfortable existence renting in Neutral Bay, were able to save a deposit for a house in Manly within 3 years. We are now in our 6th home since then and all the moves have been very lucrative in our favour. Property articles and magazines talk endlessly about why this is, but the only real reason I think is sheer lack of supply. I read recently that Australia is now several hundred thousand homes below demand. The coastal rural shire where I live now has had no rezoning and release of land to speak of since 1988, so no wonder prices are through the roof.
      I don’t know how this can be fixed in the short term now, but what can and should be done is look to overseas solutions. In European countries, the majority of people rent, the rentals are owned by governments, investors or corporations and operate under extremely strict guidelines.
      In Australia greater rental protection and long term rental agreements would alleviate much suffering at the hands of greedy investors. A massive build of social housing would allow both the older and younger generations to live with dignity at or near the poverty line. At the same time, regional councils should be forced to release more land to maintain house prices at least at current levels.

  6. Alex

    No OTT generalisations in that article, he says sarcastically.
    I’m with Robin on this issue. As it is said – for every complex problem there is a simple answer that is usually wrong. Too many decisions are made by looking at a financial spread sheet rather than through qualitative research – that is, actually talking to people. When a person busts their arse to buy their one and only home (not a house as an investment, a home) and carefully checks town plans for any upcoming changes, and careful chooses an area one likes, the character of that area should not change over night. Infill is one thing but it should be in keeping with the amenity of the area. And yes, I am very aware of the problems of urban sprawl and loss of native habitat etc. But, older citizens who prefer to stay in the family home (not purchased as an investment) do so for many reasons and chucking them out so that others and occupy their home can have major emotional and quality of life consequences. I agree that when there is a housing shortage, investment properties should be discouraged by whatever means are necessary.

  7. Scott Grant

    I am not sure where this notion that “new housing supply fell off a cliff under Bob Carr” came from. It may be true, but some supporting figures would be useful. The graphs that are displayed show ratios of “dwelling completions per additional thousand people”. A fall in this line could indicate greater population growth, not falling construction. As many people, including John Daley, have pointed out, population growth is largely a function of immigration rates, which is a federal responsibility.

    1. daveb

      Spot on Scott. In fact it’s the rapid increase in migration in the late 00s that exaggerates the fall in supply and hides the fact that housing supply is now the highest it’s even been in Sydney.

      1. bref

        I don’t know how you can say that Daveb, I read recently that Australia is in the hundreds of thousands of homes below demand. I know that in our coastal rural shire the council hasn’t rezoned or released land for housing in any numbers since 1988, and they seem to be proud of it. It has lead to unbelievably high prices, in the millions for ordinary homes. God knows we’ve got more than enough land to supply any amount of housing for a growing population.

  8. Arky

    “Yet more evidence that NSW Labor shouldn’t be allowed near power in Australia’s largest state for many years to come.” – I would love to disagree with you on that, as I don’t think the NSW Liberal Party should be allowed near power either, but Luke Foley gives me no confidence that things have improved. I say that as a strong ALP supporter federally and in Victoria; one of the worst things for Australia was NSW Labor hanging on probably two elections past the point they should have been booted and sent into a cycle of renewal, merely because the NSW Liberals were so incredibly incompetent and corrupt themselves. Meanwhile NSW voters were taking out their frustrations on Labor at a Federal level. Thanks Carr and Iemma, you muppets! (And then we got stuck with Carr in Federal politics too. WHY?)

    “Despite Scott Morrison bizarrely trying to insist the report is some sort of vindication of the government, the very first recommendation from the report is “The Commonwealth Government should limit negative gearing and reduce the capital gains tax discount”.” – He does it because all the TV news stations will run Morrison saying the report vindicates him and none will run anyone pointing out the negative gearing recommendation. Feel free to watch them all and do a follow-up story on it.

    Reminds me of Cohen the Barbarian in one of Terry Pratchett’s Discworld stories, pointing out that when something omen-y happens the thing to do is yell “THE GODS SMILE ON US!” before the other side claims it for themselves. Is it nailed down? Does it have someone’s name written on it? No? Then it’s mine.

  9. JMNO

    We are still a settler society, really. We occupy the continent rather than inhabiting it. We are creating virtual communities which have very little connection to the country we live in which we seem to see as an inexhaustible supply of land, water and resources to be exploited by an ever-increasing population.

    You, Bernard, live in the most sparsely populated of the capital cities and you pontificate on what people who bought their houses 30-40 years ago in the larger cities should do to make way for those younger and/or less well off.

    I live in the ‘leafy inner eastern suburbs’ of Melbourne, where, by the way lots of blocks of units are going up where they should go up, along the railway lines and on old commercial and industrial sites that are no longer wanted for that purpose.
    Are you suggesting that once people reach a certain age, if they live in a detached house, they should sell it and move into a flat for the good of the community? Why should we move from a house we have lived in, maintained, put in a garden that we enjoy (and which by the way is a haven for native birds – the impact on the environment never really gets a mention in your economic articles). And then, having done that (which with stamp duty, removal costs, etc) probably won’t leave that much, make sure we have enough to cover the costs of any future self-funded age care that we might need.

    And if we did sell our house, it would most likely be bought by a well-off family or investor, probably Chinese and knocked down, not for a block of town houses or well-planned units, but for a giant house that fills the entire block – a larger house for fewer people. This is what happens around our way. Perfectly good houses with gardens knocked down for giant mansions like the 3 in a row next to us.

    And most of the units which are put up are cheaply built and tiny, or built with the luxury class in mind and therefore very expensive.

    There are a whole lot of things that need to change, including planning and other rules that favour investors who knock old houses down to built even bigger ones and favour developers who want to cram as many tiny, badly-built units on a block of land that they can to maximise their substantial profits.

    With good foresight and planning, it is possible to add medium density dwellings to established suburbs as there are generally quite a few areas that are in need of regeneration and which are suitable for housing. It has to stop being developer driven and that seems to be too big an ask for most state governments.

    As for high levels of immigration: I am a supporter of immigration and temporary entrants but the numbers are too large. At the current rate of inflow, Melbourne will grow by another million people in under 10 years, as it has done over the last 20 years. When is this going to stop? When are economists going to come up with another economic model which doesn’t demand the constant influx of people in order for the rest of us to have a job? Will immigration still be the answer to the economic question in 20 years? And where is the land and water going to come from? We are already building over the market gardens that provide our veggies and over the most fertile land in the country.

    To have a medium/high density city needs a completely different structure and layout to that of our suburban sprawl, more like European cities and with excellent public transport. Melbourne is groaning at the seams and the infrastructure can’t keep up. We need to stop for a bit, catch up with the infrastructure we need before we get even bigger.

    1. Woopwoop

      Agreed.
      If immigration numbers were lower, a lot of these problems about housing would be solved.
      And other problems too: traffic congestion, over-stretched amenities etc. True, immigration might grow the economy, but what does it do for GDP per person? besides, as Tim Costello said, we live in a society, not an economy.

    2. Wayne Cusick

      To be fair, I think BK is suggesting that those who wish to downsize/move are hampered by the current taxes, such as stamp duty.

  10. Dog's Breakfast

    “The report praises immigration as economically beneficial overall to Australia, but argues state governments have failed to plan for it effectively.”

    Our record immigration rates, which were not debated by either side, and run up staggeringly by the same man who demonised boat people, is the major problem with this report.

    It takes two sides of a problem and axiomatically assumes one to be inviolable because it is ‘economically beneficial overall’. Overall, don’t you love a weasel word.

    Blaming the states for not being prepared for a doubling and tripling of immigration is just arse-about. We could have had the planning before the immigration increase but it was unilaterally decided by the big end of town and federal politicians to do the immigration first.

    It’s fine to talk about solutions, and offering the middle ring of surburbs makes some sense and would make a lot more sense if they had better public transport, but why is the immigration rates ignored. Immigration isn’t even the half of it, as that doesn’t count the visa for work that could have been done by locals and the massive increase in overseas students over the last 20 years, and damn them, they want a house to live in.

    And it doesn’t seem to mention the worst economic decision of the last 30 years, Peter Costello allowing SMSF to borrow to buy into property, putting a rocket under and already overheated market.

    This has been a failure on about a million levels, and blaming state governments for lack of planning is managing to pin the tail on the wrong donkey.

    1. JMNO

      Agree. After writing my comment earlier, I went for a walk around my suburb as I often do. Away from the main roads, it is peaceful and there are some beautiful gardens and it is a relaxing place to go for a walk at the end of the day.

      I crossed a busy road clogged from end to end with peak hour traffic – a road which 10 ten years ago I could have driven down at the time of night and got into central Melbourne quite quickly and also found parking. Not anymore, no parking and too risky to drive because you never know when you will get there if you are going to a show.

      I am lucky, however, as I live in the part of the city with excellent train and tram services, put in by more far-sighted governments than we have had recently when it comes to transport infrastructure. So I can catch a train or a tram into town.

      And I thought about Bernard’s diatribe about rich people and NIMBYISM, although he didn’t actually spell out what he would do to make the houses in inner and middle rings of cities like Melbourne more affordable (apart from removing capital gains and negative gearing incentives, to which he could add removing the capacity of cashed-up foreigners buying houses to launder money, and it is not just Chinese). Does he want to us all to move out so that the existing housing stock can be bulldozed (in the process erasing our history and trashing our sense of community) and replaced with units?

      And are we a society and a community or are we just a market and an economy? Why do we have to have such high levels of migration if it means that housing is unaffordable for the young and if it destroys the communities we love to live in.
      How do we want to live? Does high migration mean sacrificing those things we love about our cities in order, for some reason to cram them full of people? What is the point? Can we have a different basis to our economy than growth based on every-expanding numbers?

      And the environmental arguments are completely overlooked. Melbourne nearly ran out of water during the last 13 year drought. We have the desalination plant but can that cope with another 3-4 million people during the next drought? As well, most of Australia is regarded as threatened – degraded land, species decline, deforestation, etc etc. Can it sustain much larger populations?

      I don’t think we should close the doors. I think we should have a generous refugee program, a reasonable family reunion program and a well-targeted skilled visa program (the 457 and its successor are still poorly thought through) and perhaps reduce the numbers of temporary entrants or at least limit their stay.

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