The Great Housing Hijack
By Cameron K Murray
Allen & Unwin, 2024
Dr Cameron Murray, economist and property market specialist, brings us this highly accessible and much-needed book about the persistent myths that prevent rational discussion and action to address the housing crisis in Australia. Murray is also the co-author of Game of Mates (2017) with Paul Frijters, and has appeared on the ABC's Q+A program.
The “hijack” in the title refers to the capture of the public debate around housing by the vested interests of property speculators and landlords. Their relentless and well-funded propaganda machine makes sure that no one realises that any successful change to bring down rents and house prices would cause them to lose billions.
Murray grounds his thesis on some basic principles. The first is that property is a monopoly on a particular location. This principle was even expounded by conservative Winston Churchill in his famous speech “The Menace of Land Monopoly” in 1909. Another principle he uses is the symmetry of property markets. Put simply, every economic gain for a homeowner or landlord is exactly equal to an extra cost for a new buyer or tenant. The board game Monopoly serves as a useful analogy in a number of Murray’s arguments.
This in turn leads to five housing market equilibria: These are the asset price, rental, spatial, density and absorption rate equilibria. A chapter each is devoted to explaining these.
For example, the housing asset price equilibrium is a balance point where the annual interest on the cost of buying a house equals the annual cost of renting a house. This is why low interest rates result in high house prices.
In Australia, housing rents consistently track renter incomes, staying at around 20% of average income. This determines the rental equilibrium.
Respectively, the spatial and density equilibria are expressions of the value of proximity to various amenities (for example jobs, schools, parks, etc), and where there is no net gain from building taller. Finally the absorption rate equilibrium exists because property developers will not flood the market with new homes and thereby reduce their profits.
Murray is not saying that these equilibria are necessary or desirable, just that they are natural consequences of a market system with a property monopoly.
One section of the book analyses the way debate is hijacked by politicians, the media, think-tanks and new YIMBY groups calling for developers to “let rip”. Concerns are expressed around the language shift to “social” and “affordable” housing and the influence of Community Housing Providers. There are also ample studies that show the effectiveness of rent controls, however property owners do their best to ignore or deny them.
Murray looks at tax issues such as negative gearing and capital gains tax exemptions. He argues that abolishing these would increase the fairness of the taxation system, but unless those reclaimed taxes are put into public housing or similar programs, they would be unlikely, in themselves, to bring down the cost of housing.
The final section looks at solutions, which are primarily to build more, and widen access to, public housing. After a brief overview of the history of public housing in Australia and other countries, Murray proposes a parallel, non-market housing system he calls “HouseMate”. It has some similarities to Singapore's Housing Development Board. Access would be through broad criteria: every non-property owning citizen would be eligible to buy a home at a price approximating building costs but not the cost of the land.
Homes then purchased in the HouseMate system could be sold later on, but only to others eligible for HouseMate. Since those homes would have to compete with other heavily-subsidised HouseMate homes, this would not lead to profiteering. Murray also proposes to expand existing public rental housing.
These are all great proposals but the next problem is how to get them implemented. Considering the huge powers that hijack debate and hold the levers that could fix the problem, organised and strong social movements are urgently needed to build the people power necessary to transform the housing hijack into housing justice.
[Andrew Chuter is a housing activist in Gadigal/Sydney.]