The housing crisis in NOT one of supply. We already have more houses than households.
Rather than argue over targets for new houses, why not make better use of the houses we have? An alternative solution is twofold:
- more houses for people and
- more people in houses.
More houses for people
The difference between the total number of houses in Australia (10.875m) and households (9.808m) (from ABS in 2021) is a delta of 1 million. Earlier this year, Max Chandler Mather of the Greens pointed out that on the most recent census night there were over a million vacant homes. One million. 10% of houses. He was promptly pilloried by conservative economists, (is there any other kind?) showing a lack of understanding of urban planning.
He wasn’t saying we could use all those empty homes, but you wouldn’t know it from the pile on. Even if you take out the homes that are vacant between owners or tenants, absentee owners, holiday houses, or unfit to live in, that still leaves a lot of homes that could be occupied long-term, as some policy wonks have been highlighting.
The focus is on two types of houses for long-term residential occupancy: short-term rentals and land-banks (houses deliberately left vacant by wealthy owners, waiting for capital gains). Some governments are suggesting remedies, including bans on short-term lets or higher taxes on unoccupied houses. It’s piecemeal and somewhat random.
A more coordinated way would be to assess whether a house is suitable for long term occupation, and if it is, then offer incentives, such as tax rebates for long-term use, or higher taxes if not. Suitability could be determined by location (remoteness or proximity to work) or whether other options for short-term lets, such as hotels and motels are available. Exemptions would be clear: e.g. remote holiday houses, or Air B+B within an occupied house, would be excluded.
The elephants in the room are negative gearing, and discounts on capital gains tax. Abolish both, transfer them to the primary residence (see below), and the path is a lot easier.
Long-term occupation is encouraged: improvements are tax detectable on long, but not on short-term. Rentals could be through a registered agency, like a Community Housing Provider or CHP, to provide oversight on rental rates, increases and rebates. In a similar way that short-terms are with specialist providers. Owners can short-term let if they want, but they would earn no more income, maybe less, than a long-term rental.
Land-banking is dissuaded by the loss of capital gains discounts, and a tax which increases exponentially over time. The tax income can help fund social housing.
Let’s say this approach converts 20% of unoccupied homes to occupation. That’s 200,000 houses from property to shelter. More than our current yearly new-builds, and close to the federal government’s intended targets. Immediately housing stress is reduced, as revenue raised. Win-win-win.
More people in houses
The second approach is to have more people in each house. Australia has the world's largest houses; gold medalists with 236 sqm. We also have the lowest occupancy rate of 2.52 people per dwelling. 95 sqm average per person, twice the OECD average. More than numbers and statistics, it is the wastefulness of having one or two people rattling around in unused rooms.
Let's convert large homes to house more people. Every good architect can design many ways in which a large house can be subdivided into multiple residences: a main house with one or two separate apartments, which can be used for adult children, grandchildren, students, a nanny, guests, legitimate short-term rental, essential workers, and so on.
We can incentivise the changes by transferring negative gearing from investment homes (as above) to the family or primary residence. Tax discounts or rebates could encourage owners to not only subdivide the large houses for more residents, but to improve them as well. Tax write-offs for solar photo-voltaic panels, better insulation, double glazing, landscaping, trees or food production.
We could also consider replacing stamp duty, which discourages downsizing, with rates levied yearly, to encourage occupation over value. Society over wealth. Homes over housing. Radical and socialist perhaps, but we do need changes to overcome our wide-spread, unsustainable suburbs.
In other words, we need to change our property industry from one that encourages more homes for some, to one that encourages better homes for all. The Council controls are simplified as ‘deemed to satisfy’, and work can start almost immediately.
This is a true triple bottom line. The homeowner is wealthier. The environmental quality and performance is better. With a social dividend of ageing in place, having others nearby, younger to look after the old, older to look after the children.
As well as improving the housing stock, the changes use the existing infrastructure. At a larger scale, the extra local population increases the viability of local shops and services, fostering a more viable suburb and a greater sense of community, as well as potentially improving the environmental quality.
Let's say 3% of the existing detached homes, 7.625m in 2021, gain one extra resident each year. That’s an additional 230,000 people housed in one year, or 2.3m in 10. Together with converting unoccupied to occupied, that’s almost half a million extra residents housed in one year, or 1.5% of the current population.
In other words, we could solve the housing crisis right now without building one additional house.
Title image: Housing in Australia is property first. Run by real estate agents. Beautifully lampooned in the film ‘The Castle’. Those two ideas collided in the mid 70s. Image by TW.
Next week: Why immigration has nothing to do with the ‘housing crisis’.
This is Tone on Tuesday #214, 18 June 2024. It was 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]
