There is much confusion about the housing crisis. Let’s examine key issues and debunk myths with six essential diagrams.

1.

We have more houses than households.

The current housing crisis is not a supply issue.

But it’s a demand for occupancy issue.

Estimates vary, between 700,000 (Statista) and 1 million (Greens) homes are unoccupied on any night. Whilst many of those houses are between owners, or under repair, many of those excess houses are holiday rentals or holiday houses or simply empty.

We do need to build more houses, particularly social housing, but because house building is so slow, and demand so high, we need a quick fix. One good way is for needy households to permanently occupy those empty houses.

2.

 Three kinds of households, equal thirds, which we call ternary.

Owners own one house outright, often another.

Purchasers who have a mortgage with a bank.

Renters, the last third, have no property investment. 

We used to have only two kinds, purchasers 70% and renters 30%. A binary. But boomers in particular, paid off loans and banks gave them money to invest in more houses. This has perverted the housing market from shelter to property. It will take a strong will to turn that tide.

3.

Each third sees housing differently in the language used.

Owners see houses as property.

Purchasers worry about housing affordability.

Renters are looking for affordable housing.

Politicians confuse the terms, and who the are addressing or discussing, all the time, and that muddies the debate terribly. But we once aimed for everyone to own a home.

4.

Housing stress is different for each third.

For owners, it is the stress of trying to buy more investments and reap the rewards. That 25% of all investment properties are owned by just 1% of taxpayers speaks to deep inequality in Australia.

For purchasers, it is the stress of interest rates, putting them at the mercy of the Reserve Bank of Australia, whose decisions disproportionately affect this group directly. Increased rates for owners are passed on to tenants via increased rental rates, so the RBA indirectly stresses the renters.

For renters, stress may vary: 10% of households rent for lifestyle, and have little care; 10% rent in the commercial market because there’s no other option – and increased rents from owners cause cutbacks in other areas, leading to poorer lifestyles; and 10% cannot afford to rent in the commercial market and need social housing. Again, increasing inequality in equal thirds.

5.

Politics.

The Liberal National Party supports the free market, less government and the wealthy. Therefore they support owners, and are champions of negative gearing and capital gains discounts.

The Labor Party which supports the middle (working) class, is concerned with the interest rates being paid by purchasers, and talks endlessly of housing affordability, over which they exert little control.

That leaves the renters unaccounted for by the big two parties (the binary) a space the Greens have filled, talking of legislating rent controls over increases and evictions.

6.

The 3 tiers of Australian governing:

Federal government has the money.

State governments have the power.

Local councils have the problems.

To effect change in the housing crisis all three levels of government need to act.

The federal government needs to raise more money for services generally, and social housing in particular. Stop giving tax breaks, and raise the tax/GDP ratio to the OECD average of 35%.

The federal government needs stop negative gearing for owners and transfer it to purchasers (and thereby promote sustainable improvements to the family home), and stop discounts on capital gains tax (added to revenue – see above).

The federal government needs to protect renters’ rights, by introducing model national legislation on rent controls for the states to follow.

Even more radically, it could re-establish a government-owned bank to bring competition to the banks, and challenge the RBA.

The state government needs to build or buy to raise social housing from 3% to 10% of households. It should never offer first buyer grants or make any other intervention anywhere else in the market.

The states need to enact the legislation on rent controls.

Local councils should establish clearer policies in their plans, so that deemed to comply becomes the norm, not the ‘computer says no’.

Summary

Once you understand the. housing crisis you can see that none of the required remedies are happening now, or soon.

The federal Labor government has no appetite for tax reform. They are promising money to the states, but falls well short of the monies the state governments need just for good social housing.

Building costs spiral, whilst the building industry is in decline, so the states can’t build social housing even if they wanted to. And local councils show no appetite for restructuring their processes to promote increased densities within existing suburbs.

It’s bleak.

Title image: Politics and housing. TW.

Next week: 6 diagrams that explain social housing.

This is Tone on Tuesday #225, 20 August 2024. Researched and written by Tone Wheeler, architect / Adjunct Prof UNSW / President AAA. The views expressed are his. Past Tone on Tuesday columns can be found here. You can contact TW at [email protected].