“As health minister and mental health minister I learnt that housing is not a supply issue, it’s a social issue.” Roger Cook, WA Deputy Premier; Minister for State Development, Jobs and Trade; Tourism; Commerce and Science.
In last week’s column I predicted there would be nothing about housing in the budget. I was wrong, dead wrong. The budget papers included a three-page document entitled ‘Improving Housing Supply and Affordability’. But in a way I was right; it’s so bad it would be better to have said nothing.
Being generous about its manifest mistakes, you’d say it was written by work experience kids with no access to the internet. More cynically, you’d say it was written by PR spivs to make it look like you care, and are doing something, but do nothing and not be held accountable. It’s wrong in both analysis and prescription; repetitive, but uninformative; confused and confusing; without metrics or viable targets; announcement without action. Morrison on steroids.
Before we pick apart its idiocies and non sequiturs, we need an introduction to housing in Australia.
Housing in Australia
We have two kinds of housing by occupant: owners and renters.
Owners first: 67% of households own (previously 70+%). Half of them own the house outright, the other half are paying off a mortgage. Outright owners are buying an additional house or houses, exacerbating inequality.
Owners with mortgages, always characterised as ‘families’, are subject to interest rate fluctuations, and politicians focus disproportionately on them, or those who want to join them, as in “can they afford to buy a house?” That’s called ‘housing affordability’.
The other 31% of households are renters, (pedant’s note: 2% are not census identified). They rent from various owners, mostly on the ‘private market’ from multiple homeowners (identified above). Rent for those houses is becoming increasingly expensive, not affordable, hence the need for ‘affordable housing’.
There have always been some households too poor to rent in the private market, needing ‘subsidised’ housing. In the 19th C this was done by churches, in the form of a ‘glebe’, but in the 20th C, governments, firstly local councils, then states, took over that role. More than 6% of all housing was state owned in the 1960s, but has substantially waned since then, so now it is less than 3%, for twice the population.
By the early 21st C governments in NSW and Victoria backed away from housing the poor; they rebranded ‘housing commissions’ as social housing; then privatised the sector through ‘community housing providers’ and the like, hoping that the private market could make sufficient profit from existing stock to build more. That failed.
The Budget papers
The opening line, “Australia faces significant housing pressures” is truthful. The next, “The Australian Government is implementing a comprehensive housing reform agenda” less so. And it only gets worse, as spin and weasel words seek to paper over the little that is on offer. I call it ‘home-wash’.
Housing affordability and affordable housing
The report conflates home ownership with ‘safe and affordable housing’, mixing up renters and owners, confusing housing affordability, affordable housing, and social housing as if they are interchangeable. It’s unclear which measures are intended to address which part, although it seems mostly targeted at housing affordability (which, as we shall see, is the lesser issue). Classic rookie mistakes which can be avoided by consulting the many experts on our housing woes.
Housing supply
The document assumes Australia has a housing crisis needing government intervention to create one million more homes in 5 years. But not starting until 2024, go figure. The need for more housing supply is a complete furphy put about by the development industry. Right now, we have more homes than households. The problem is one of allocation, not supply.
That’s right, more homes than households. We could fix the ‘housing problem’ in Australia, within the term of this government, by changing how housing is distributed. But that would require changes to the fiscal arrangements that favour some to have many, whilst some have none. Addressing the inequality of ownership is beyond this budget.
Owners with several homes
Years of favoring homeowners over renters has made housing the most profitable form of investment. A person’s ‘property portfolio’ is encouraged by federal government regulations that ease banking regulations and promote negative gearing and discounts on capital gains. The irony is that we have become a nation in love with property development, whilst reviling property developers.
Australia is unique in allowing people tax breaks on multiple houses rather than on their own individual dwelling. If you own a house, you can own several. If you don't own a house now, you are unlikely to ever own one. The divide between owners and renters has become a gulf.
All that could be reversed with the stroke of a pen. Strip investment houses of negative gearing and capital gains concessions and introduce tax concessions on your own home. Then make tax concessions on investments in manufacturing or rent-controlled social housing. The tax take could be revenue neutral, (or even better an increase) but the societal impact would be profound. This budget is WAY too timid for that.
Wannabe mortgagors
Australia once thought of itself as a nation of homeowners. We had the idea that we could reach some 90% of households owning their own home, leaving 5% to rent by choice, and 5% to be cared for by the state. We never reached that nirvana; the Menzies’ dream has long since disappeared. The talk now is focused on getting homeowners into the market. Note the word: market not house.
It's an unregulated property market and therein lies the major problem. Government intervention through discounts and grants only pushes up prices, and the multiple homeowners can outbid the non-owners. Nevertheless, this budget plunges headlong into increasing this inequality in multiple ways, without restraining the mum and dad developers.
Private renters
The budget papers accurately diagnose “that renters are experiencing deteriorating conditions with rents increasing and vacancies low”, they fail to identify the reasons for this. Most rental housing is from a private landlord (described above) whose investment is their second, fourth, or 10th house, rather than through a co-operative or housing society, as is common in Europe. There are no rent controls; laws favour owners and little deterrent to extorting a profit, offset by negative gearing.
Whilst renting a privately-owned house was bad enough five or so years ago, now short-term rentals (Airbnb, Stayz etc) have so totally skewed the market that renters are totally screwed. As noted, there is no housing shortage per se, just a market shortage created by distortions in short-term rental income. The budget document fails to identify these issues, lumping it together as social and affordable housing.
Socially housed
The poor will always be with us, as Jesus said. So, you’ve got to wonder why successive governments can’t plan to house them. As described above, the proportion of social housing has halved whilst the population has doubled. Now more than ever we need state built and run housing with fixed and guaranteed modest rentals.
No-one is arguing for a return to co-located housing commission high rises creating social ghettoes. It was never an appropriate form of social housing. Contemporary social housing has three key characteristics: that it be modest, indistinguishable from the housing around it; that it has a diversity of location; and that it be well-located relative to all services, not in the ‘burbs. It needs to be mixed as pepper and salt through the community and it needs to be supported with strong rental requirements to ensure that it remains affordable forever.
That this budget refuses to acknowledge the need for government-built housing for the poor is an abrogation of responsibility. Instead, we get corporate gobledespeak more suited to the ABC’s ‘Utopia’: “more flexibly deploy ($millions) to unlock … projected new dwellings, accelerate housing supply and seek to attract more institutional capital to the sector”. Joint ventures with the private sector? Manifestly failing all around us? I call BS.
Superannuation funding
The budget papers call for investment in ‘affordable housing’ from superannuation funds, dodging the responsibility of the government to directly pay for social housing. Why not ask superannuation funds to invest in defense or hospitals or schools? Because they don’t return a profit. But then neither should housing. It’s a right, not a money maker. But we’ve got a government that thinks it’s a property developer.
The budget paper makes a great play of how it is combining with the market and institutional investors to deliver the housing. It's like saying you've got the support sweet makers to run your childcare centers. Why? Because the government is broke.
Social democracies redress inequalities, such as social housing, through the ‘public sector’, funded by taxes. The size of the ‘public sector’ is measured by the ‘Tax to GDP ratio’, and in most OECD countries it’s 33-40%. But in Australia it’s only 27%, (only the USA is lower at 24%). This leads to government underfunding of social welfare programs, like housing. Which in turn increases dependence on philanthropy and superannuation. The government is so broke that it has chosen to give up on social housing. But not nuclear subs.
Well located
The budget paper refers several times to the million houses being “well located”, and to “expediting zoning, planning and land release…to improve the availability of social and affordable housing in well located areas”. The entire paragraph is an oxymoron. By definition, land release areas are at the edges of cities, cheaper because they lack the infrastructure of schools, hospitals, and retail. That’s not well located.
Ironically, the best positioned land in Australian cities is owned by the federal government. How about defense properties are reconfigured for social and affordable housing, and we remove the possibility of targets from our cities. Why are warships in Garden Island in the center of Sydney and not Jervis Bay? We could better utilise well located land with huge potential. Win Win.
The other plans
There are a series of eight ‘plans’ on the last page. They are so non-sensical I can barely begin to describe their failings. The National Homelessness plan fails to mention that homelessness is entirely different to housing provision, requiring a heightened increase in services in addition to a “roof over their head”.
The National Housing Supply and Affordability Council will independently advise the Australian government. There is no hope if their advice has this level of understanding of housing problems. The Housing Australia Future Fund is a clever sleight of hand to say that you're putting money aside for housing in the future when in fact current action is needed. You're waiting on the interest gained from that future fund rather than a direct investment as governments have traditionally done
The National Housing Infrastructure Facility has the mumbo-jumbo words about money flexibly deployed. The Help to Buy program is worthwhile, copied from the states, but without any further commitment to monies or why we need duplication? Regional First Home Buyer Guarantee is a means of trying to halt the rise of the National Party in regional areas by suggesting changes in deposit ratios, but why not nationwide?
This mishmash of ideas is so confused and ill thought they won't deliver one more affordable home in a social program and won't make housing more affordable in the term of this government. Any upside? There’s two. Firstly, the housing proposals in this budget won't commence for another two years. Still time to change the course of this Titanic disaster.
And secondly, the housing proposals in the Labor states of Victoria, WA (see above quote) and Queensland are quite progressive. And it increasingly appears that the Labor party in NSW, who are likewise developing some very good housing plans, will be in power from March next year. There is hope.
And finally
Here is a story that sums up how the new Labor government has lost its way. Anthony Albanese is fond of his ‘log cabin story’: how he grew up with his single mum, on government support, in a Housing Commission home in Camperdown. It was, and still is, a good home: two down, two up modest apartments, in the form of a house, the very kind of home that we should be building now as social housing. Albo was not the first, nor the last tenant in its almost 100-year life.
The irony is, when it was built in 1927, Stanley Bruce (National Party) was PM, and Jack Lang (Labor), was premier of NSW. Lang is one of Albo’s heroes, but the lesson seems lost on him, acting more like Bruce. He refuses to raise the dole called ‘Jobseeker’; and nothing in this budget paper suggests any government investment to build the very housing that he so benefitted from. I call housing hypocrite.
Tone Wheeler is an architect / the views expressed are his / contact at [email protected]
