The current global housing crisis has been growing for more than a decade and only getting worse. It is now a defining feature of intergenerational inequity. Effective policy remedies are well understood, but Australian efforts have been ineffective and marginal at best – to the extent that they seem calibrated to maintain the status quo. Therefore the answer to the question “how can we get some policy action” is simple. Vote for it.
The title image is now well-known among insiders.
An early design from the office of UK architect Peter Barber, it is for affordable and social housing that with many other examples has earned plaudits for his practice, to the extent that his professional colleagues recently awarded him their Soane Medal.
In his acceptance speech Barber drew sharp attention to the political origin of the current UK housing crisis.
He observed that despite post-WWII privations the UK built its National Health Service and constructed new homes that eventually accommodated half the population in social housing.
Yet, following the Thatcher and Heseltine housing reforms in the early 1980’s, that figure has since declined to about 10 per cent across the UK and London has become one of the least affordable places in which to live, globally.
The ideologically harsh underpinnings of this decline are vividly revealed in Barber’s quotation of recent UK Prime Minister, David Cameron in about 2016:
“Post war estates across the country are ripe for redevelopment. We will sweep away the planning blockages and take new steps to reduce political and reputational risk for projects’ key decision-makers and investors. I believe that together we can tear down anything that stands in our way.”
Under different guises, these efforts are ongoing.
Does any of this sound familiar to the Australian experience?
Though we may recognise the tune, the musical treatment differs. In place of the shrieking thrash of Cameron’s rally-call, Australia’s sunset-vibes mostly sustain public indifference to the decline of our affordable housing.
However, the ideological impulses are functionally similar because the end results are the same.
Both parties actually claim they will address the issue, each in slightly different ways, but have been claiming so for years while the problem only gets worse.
So, the better questions to ask are:
- why is the problem so persistent?
- who actually benefits from ongoing housing unaffordability?
- are the proposed remedies adequate?
- what additional remedies might be deployed?
- what if no party will implement the necessary reforms?
The housing system is complex
The housing industry is much larger and more complex than land-plus-bricks-and-mortar.
To illustrate: housing – or at least urban housing where most Australians live – can be conceived of as possessing and expressed within cultural, financial, economic, institutional, political, legislative, technological, geographical, infrastructural and even global dimensions. A brief account of each would require separate essays.
It follows that remedies located within just one or a few of these dimensions would not effectively increase housing affordability.
Like the adage that for a person holding a hammer every problem is a nail, it seems that experts in each field believe they can solve the housing crisis by only tweaking those factors they are most familiar with.
Thus, technologists might proffer new building systems, architects more novel designs, students of cultural preferences may insist on the deep significance of the Aussie backyard, economists may recommend novel financing arrangements, geographers might recommend better relationships between dwelling clusters and centres of economic vitality, and politicians might propose different subsidies, institutional arrangement or planning changes.
Yet amidst this cacophony, three key composites appear to be constant:
- the first entails the combination of market, material and financial conditions that define the industries and institutions that provide housing
- the second consists of the political, legislative and financial arrangements by which these industries are regulated
- the third comprises the mix of cultural, personal and economic interests of those wishing to be housed – the housing market
Current housing affordability debates are usually explained as the interplay between these elements, yet within each the complex interaction of constituent components still persists.
Who benefits?
It is now largely accepted that rising housing unaffordability is a marker of increasing inequality, yet the individual contributing elements are now so interwoven into our social, financial and political make-up that it is almost impossible to unravel them.
Richard Denniss spells out the absurdity. Governments wish to appeal to two cohorts:
- home owners that benefit from the accelerating wealth embodied in their homes, many of which are investment properties
- those aspiring homeowners unable to enter a market dominated by the first cohort.
The result is a chronic failure to implement meaningful policy reform.
The Grattan Institute’s Coates and Maloney make a similar point; that the wealth disparities arising from house ownership in Australia are creating a “Jane Austen world”.
Yet maintaining high prices is also economically destructive. Though building new houses is economically productive, subsequent price increases certainly are not, and consume investment funds that might be used more productively.
Shane Wright reports that the extent of house price inflation in Australia has caught the concerned attention of the International Monetary Fund, which predicts a slump.
As Peter Mares observed, “the only sure-fire way to quickly make housing substantially cheaper is to crash the economy”.
A recent report by SGS Economics found that failure to invest in social and affordable housing will cost the nation $25 billion annually by 2051, yet we would all be better off by some $110 billion if we did invest.
Inadequacy of remedies
The mere fact that housing unaffordability is growing means that remedies applied thus far have simply not worked.
Given the complexity of its constituent components it is self-evident that no single remedy will likely be sufficient to resolve the housing affordability problem.
Yet current policy debate seems to treat these complexities as a series of “false binaries” in which those offering simple single-dimensional solutions are electing to exclude other remedies.
For example, though acknowledging the complex relationships between demand and supply side factors on housing affordability, the recent Falinski enquiry studiously avoided examination of demand factors that would have examined the impact of taxation settings that most benefited his party’s natural constituents.
The development-for-profit industry recommends simplified development controls but opposes inclusionary zoning and value capture provisions that could lead to increased housing affordability.
Some economists claim that reduced regulation would increase housing supply but are selectively blind to industry practices of land-banking and withholding completed stock from the market to increase demand and hence prices.
Community groups lament that their children will not be able to purchase their own home but refuse to countenance any land density increases in their own backyards, as Phillip Bull constantly reminds us. Chris Johnson also reminds us of the very real benefits of higher density living.
Governments confront the unfunded externalised costs of private sector edge-city developments yet squander their own land, as this author argued.
In summary, the two defining features of the current housing affordability debate are, firstly, the plethora of known workable remedies, and secondly, the effort by which implementing those remedies is avoided.
It is time to integrate the well-known remedies
What is clear is that if the problem is to be addressed many remedies must target each of the components in a coordinated way.
Almost five years ago, Troy, Randolph, van den Nouwelent and Milligan recommended six economic planning and delivery measures that in combination would have the best chance of improving housing affordability. Importantly, the last of these measures was to increase the scale of not-for-profit housing provision, such as the Nightingale initiative.
This should be attractive to lawmakers as redressing the affordable housing shortfall would be shared with the private sector, though some government provision of social housing would still be required.
Based on their studies of successful efforts in Vancouver and Portland in North America Whitzman Raynor and Palm offer 10 detailed recommendations for improving housing affordability.
As a consequence of the policy sclerosis described by Denniss, this author argued that the acceleration of housing unaffordability was evidence of market failure, which is the generally accepted precondition for government intervention.
This might reasonably be addressed by confining any planning reform to the exclusive benefit of the not-for-profit sector, leaving the existing conditions of the for-profit industry and investors unchanged.
An example of this approach was explored here, the significant feature of which was to develop alternative pathways to home ownership that also avoided changing existing policy settings that would likely attract stiff voter resistance.
In short, we know what can be achieved, so why doesn’t it happen?
It’s the politics, stupid
Writing in Foreign Affairs, Charles King reflects on the unwillingness of governments to effect real change when faced with the alternative prospect and impetus for no change at all.
He retraces the decline and collapse of the Soviet Union to illustrate that the steps leading to political failure were largely invisible to insiders but obvious to outsiders and in retrospect.
In terms that could apply equally to Australian governments he suggests that: “a better way to think about political cleavages (is) to observe which portions of society are most threatened by change and which ones seek to hasten it”.
This helps explain why persistent political inattention to policy dilemmas can lead to the apparently sudden annihilation of support for those failing to address them meaningfully, as Australian conservative parties are now discovering.
Following the demise of what he refers to as the “three amigos of conservative chaos” – Johnson in the UK, Trump in the USA and Morrison in Australia –
George Megalogenis explores the resurgence of progressive politics.
In the Australian example he notes the particular significance of younger voters – those that are facing the multidimensional disbenefits of climate change, job insecurity and housing unaffordability.
Reviewing recent policy roadblocks, like inaction on climate change and housing affordability, Peter Mares suggests possible solutions. He agrees with others that because the major parties are too beholden to electorates, lobbyists and party advisers, the best hope for resolution rests with the new independents.
Yet, there are signs that the current government has developed a spine. In contrast to its success against previous governments the bluster of the gas industry failed to prevent modest pricing reforms, from which, Peter Harper concludes, that government is no longer routinely bullied by vested interests.
This could auger well for housing affordability, but to test it a colleague entertainingly suggested to this author that:
“All Teals and Indies in the senate should say to government and opposition, “we give you six months to pass affordable housing legislation in the parliament, failing that, we will oppose all bills except supply”.
They could possibly get one politician in the house of representatives to sponsor such a bill, to get the debate going. It would be deferred or defeated of course, but the debate would then begin.
That would make them heroes with the young and houseless, and ensure they get reelected.
Watch the other pollies duck and weave.
“The opposition would try hard to oppose it, which only will alienate voters further from them. Labour could say, we have no option if we want to continue a parliament that governs the country for all Australians.”
Peter Barber claims the market has made a complete mess of housing but adds that we are all politically active and can vote.
The next generation should take note – and vote accordingly…
The comment about Teals and Indies sounds familiar. Hey, I said that.
I suspect it wouldn’t fly, because too many politicians have negatively geared property.
The Leader of the South Australian opposition David Spiers is reported as owning 13 rental properties. Really.
Remember the old saying, in various forms attributed to Jack Lang, Keating, Whitlam etc:
“The punters know that the horse named Morality rarely gets past the post, whereas the nag named Self-interest always runs a good race.”
I livened up a pre-Christmas lunch by saying that I could fix the housing crisis quite simply. How so, they asked?
“Well, if I was the Labor party, I’d say ‘if re-elected, we’re going to reduce John Howard’s 50% Capital Gains discount from 50% to ZERO’. Some friends arced up “you can’t do that, that’s retrospective”, to which I replied, “no it’s prospective, we’re giving you three year’s notice. Watch them run to the exits.” Then I said: “governments change tax rates all the time; John Howard introduced the CGT discount to encourage Mum and Dad investors, and reduce the demand on the aged pension.” My friends, who have an investment property said “you’d have to grandfather those with existing property”, which I disagreed with, saying “they’ve had their tax breaks….tax rates change.”
Well, it’s served its purpose, and barred hundreds of thousands from owning their own home.
Meanwhile, 50,000 work visas a month are reported as being issued. Really.
Housing became an asset class, rather than just basic shelter, as it was until the 90’s.
Housing affordability is the greatest policy failure in Australia. It’s obscene.
Really well said… and totally agree. Taxes change all the time. Or they had the prospect of change until the Labor Party stuffed up the last election with their smorgasbord of tax changes. Mike Brown says there are also planning instruments that can deliver more affordable housing.