Was there anything in the attack ads during the federal election campaign by either major party which mentioned over-the-moon home prices, spiralling rents, increased homelessness?
You probably remember the Coalition plan, announced a week before polling day, to allow workers to raid their superannuation to fund the skyrocketing deposits now being demanded of home buyers.
Analysts quickly slammed this “cure” as simply worsening the disease, by fuelling competition for dwellings and boosting prices still further.
From Labor, there was silence, unless you dug deep into their policy documents.
Why the refusal to run hard on such an explosive issue?
Economist Saul Eslake told The New Daily: “There are 11 million people who own at least one home, within that there are two million people who own two or more homes, and the last thing they want is any government to do anything that restrains the rate at which house prices go up.”
The Labor Party clearly decided before the elections that owners of residential property were not to be put offside.
Housing in Australia is not just for living in. For many of those able to buy, home ownership is also, even primarily, a way of growing their wealth.
Capital-city house prices are now well over five times their 1975 level.
Part of the reason for the wild boom has been years of record-low interest rates. But a longer-term cause has been tax provisions, largely introduced by the John Howard Coalition government in 1999, that have created a strong incentive to speculate in residential property.
Older and better-off people are gaining from a huge shift in social wealth, a shift paid for mostly by renters on lower incomes.
At present, the poorest 20% of households shell out an average 29% of their income on housing costs. This figure is just shy of the 30% level at which “housing stress” is considered to kick in — and is up from 22% around the turn of the century.
For many younger people — especially those unable to tap into “the Bank of Mum and Dad — purchasing a home has become a fading dream.
As prices have risen, saving up a deposit has often become impossible. A CoreLogic study in March put the cost of a standard 20% deposit on a median-value dwelling at $147,795. For an average income earner, saving at a rate of 15%, that sum would take 11.4 years to put together.
Australia has traditionally had a high rate of home ownership, which peaked around 1966 at about 72%. But, since the mid-2000s, the figure has been dropping steeply, especially for people under 40. Trends suggest that when people born after 1990 hit their forties, their home ownership rate will be less than 55%.
Australians are thus being divided starkly into those who own housing and stand to benefit from price increases, and those who never will. The latter face rental bills that in the 12 months to March rose by 14.2% for houses, and 8.2% for units.
Cruel as the situation has become, neither of the two major parties is willing to prick the housing-price bubble. Both, however, can see dangers in allowing millions of people to grow resentful at being skinned alive by property speculators.
Hence the housing relief schemes that a search of the election campaign literature turns up.
At best, these schemes do no more than to give selected “aspirationals” a chance to jump on the investment gravy train.
In their election program, the Coalition boasted of raising “almost 60,000 first home buyers and single parent families into home ownership” over two years via a “Home Guarantee Scheme” that allowed selected purchasers to take out mortgages with a deposit of as little as 2–5%. Labor offered a “Help to Buy” scheme to aid home purchases by “10,000 Australians each financial year”.
The numbers of people helped by such schemes, however, are lost among those needing secure, affordable housing. And, by adding new buyers to the competition for a near-static supply of housing, both these schemes would pump up prices still further.
Meanwhile, how many lower-paid workers can stump up $35,000 for even a 5% deposit on a run-of-the-mill $700,000 one bedroom unit or studio in Sydney or Melbourne?
The Coalition promised essentially nothing to meet the housing needs of people who cannot even dream of buying their accommodation. Labor pledged a $10 billion “Housing Australia Future Fund”, the proceeds from which would finance the building of “social and affordable housing properties” at the rate of 6000 dwellings per year.
Unfortunately, a recent estimate puts the current national shortfall of controlled-rent social housing at 433,000 properties. Labor’s promise is barely a pimple on that.
The way to meet the housing needs of low-income people is not to trust in the market. It lies in governments taxing the rich — who ultimately profit from the mayhem in the housing sector — to build good quality, low-rent public housing in massive quantities.
Together with changes to speculator-friendly tax laws, such a program of public housing construction would puncture inflated demand. Property prices and rents would then steadily decline.