The adage “the wise learn when they can; fools only when they must” is both a metaphor and useful scale with which to measure Australia’s public policy milieu.
Our disgraceful and costly response to the climate crisis suggests we prefer to slouch towards the future at the foolish end of the spectrum, all the while moaning about the high cost of adaptation long predicted if we did not act sooner.
Sadly, resolution of the housing affordability crisis seems to be following the same trajectory.
We remain stubbornly indifferent to the increasingly harsh conditions of our fellow homeless citizens, our hapless next generation, and the very real economic costs of our indifference, preferring instead to enjoy the benefits of wealth and lifestyle conferred by our stubborn inaction – pour us another chardy please…
But first some context
Introduced in The Fifth Estate, the highly respected Australian Housing and Urban Research Institute (AHURI) recently released its wide-ranging report, Towards an Australian Housing and Homelessness Strategy.
In addition to its explicit recommendations, there are three implicit features of the report that warrant further elaboration in this discussion.
The first is that the report “right-sizes” the housing affordability problem.
Much recent debate tends to focus narrowly on specific pathologies, such as tax settings or specific planning controls.
Yet the complexities that combine to produce housing unaffordability are much more extensive, but they are not limitless. The AHURI report extends its analysis to the natural limit of all these elements so that the affordability problem cleaves along larger yet natural boundaries.
This means that any discussion that fails to account for all of these elements – including how they interact – is faulty from the outset. It follows that any remedies deriving from those misapprehensions are likewise defective.
Workable models and remedies already exist and are reasonably well understood
The second is that the affordable housing remedies AHURI identifies were obtained from “desktop surveys” and from interviews with national and international experts in the field.
This means that workable models and remedies already exist and are reasonably well understood, to the extent that they might confidently be adopted with little further adjustment.
The third is that the report assigns to governments the primary responsibility for applying remedies.
No other sector possesses the breadth of “agency” – has the range of levers – as those available to government. Further and relevant to the following discussion, new thinking on the appropriate role of government, particularly its role in money supply, suggests it should take the lead in solving housing un-affordability.
Clueless national governance
So how do recent housing affordability announcements compare with recommendations in the AHURI report?
The AHURI report cautiously suggests the $10 billion Housing Australia Future Fund Bill is a good first step to more extensive structural housing affordability reforms.
However, the Greens are linking their support of the Bill to the introduction of state rental controls; a power that national government apparently cannot meaningfully exercise.
Reprising their bewildering “perfection-is-the-enemy-of-the-good” role in killing the carbon tax, it is difficult to distinguish between the Greens’ position and that of the conservatives when measured against the effects of each on the passage of the Bill.
The balance of national political opposition can probably be dismissed as rump dumb-as-a-rock conservatism, which seems to hold that existing and worsening social inequities are perfect as they are.
State cluelessness
It is sometimes observed that the reformist instincts of Labor governments favour expression in programs rather than structural change.
Sadly, recent signature state government announcements also recall Einstein’s definition of stupidity – doing the same thing over and over again expecting a different result.
The merit of the South Australian announcement can be put to the sword in two paragraphs.
Though the folly of its Mount Barker subdivision – some 50 kilometres from its CBD – still reverberates, the SA government aims to repeat it. Its recently announced affordable housing initiative entails even more peri-urban subdivision, including at Sellicks Beach, some 75 kilometres distant.
Just like Mount Barker, future inhabitants will be permanently condemned to the “locational poverty” of remoteness from high value city centre jobs AND future taxpayers will be faced with the currently un-costed but expensive liability of public transport upgrades not provided for in the initial subdivision calculus, long after most windfall developer profits will have been extracted from the enterprise.
The merit of the NSW government announcement requires a few more paragraphs to dispatch.
In mid-May this year, the NSW premier announced that “we have to go up”!
His significant initiative would grant large for-profit developers 30 per cent extra height and 30 per cent extra yield if they included 15 per cent affordable dwellings – those renting for 20-25 per cent lower than market rents – for a minimum of 15 years.
Widely derided at the time as also generating windfall developer profits, the reason why is easy to understand.
For reasons of simple geometry, additional yield and height is always placed at the top of new developments, where apartment values are higher, even though the construction cost is the same as those lower. Hence, profits increase by much more than 30 per cent overall.
In addition, 15 per cent of affordable housing apartments provides a valuable loss opportunity for tax-effective wealth planning that could be recouped when those apartments are sold into a relentlessly growing real estate market after 15 years with capital gains tax concession of 60 per cent, compared with the 50 per cent discount normally applying to other investment property.
When those sales are completed, the net result would be precisely zero increase in affordable dwellings arising from the initiative AND the national tax-take reduced by the extent of the additional concession.
Redevelopment of the Sirius Building perfectly symbolises the deep indifference of government to the escalating housing crisis.
Some commentators predict failure of this initiative on the Einsteinian grounds that similar initiatives didn’t work in the past.
Overall and by analogy, if the SA government has just refreshed the napkins at a long-running developers’ picnic, the NSW government has furnished a whole new picnic basket.
Local knuckle-dragging
Political stupidity extends to local government.
When the Secretary of the NSW Department of Planning and Environment Kiersten Fishburn indicated that many more planning levers, like zoning changes, will be pulled to address housing affordability she was taken to task by inner city mayors for council-bashing.
Rather than yet more indignant preening and finger pointing, local government might just as easily have been on the front foot by committing to work together, identifying new opportunities for and types of residential density, such as American Auxiliary Dwelling Units, “missing middle” housing long championed by former Planning Minister Stokes, and more community housing like Nightingale’s.
Instead, we hear reports of some inner-city councils persistently resisting the supply of affordable housing within their boundaries over several years.
The crisis of governance perpetuates housing unaffordability
It increasingly appears that government, broadly understood, is riddled with ineptitude.
The recent Robo-debt inquiry and PriceWaterhouse Coopers revelations have highlighted the profound consequences of shrivelling public sector competence that has been pressed by government for at least the last decade.
These events are simply the latest in a litany of malfeasance uncovered by strongly resisted inquiries into the dire consequences of light touch regulation of the financial sector, banking industry, aged-care sector, gambling industries; this list goes on and on and on.
Pathologies in the for-profit housing sector are also now well known.
Spectacular apartment building faults and failures persist despite recent reregulation after the disasters that followed successful industry urgings to deregulate some years ago.
Unsustainable peri-urban development continues largely unabated leaving the climate, accessibility, social and infrastructure costs all to be borne by others, mainly governments.
Yet, as Ross Gittins points out, blaming “developers” for our housing affordability woes misses the point.
Developers provide housing for profit and have long demonstrated they are unwilling to service the lower-cost end of the market or diversify extensively into other settlement patterns.
Though objectionable, their wielding of market power to restrict supply is merely the operation of the market forces developers legally operate within.
That they are also effective lobbyists is actually a criticism of clueless overly accommodating government, not of developers.
The housing problem rests fundamentally on the belief that social goods like affordable housing can be supplied through appropriately tweaked market forces.
Fortunately, this idea is increasingly under challenge in the United States though the folly is not sufficiently appreciated in Australia.
As the AHURI report illustrates, solving the problem of housing affordability increasingly rests at the feet of governments, which are now struggling to recover their once impressive competence.
So, is it back to the future?
Faced with these examples, some might develop a misty-eyed affection for the previous NSW government.
Fortunately, this folly can be disabused by referring to three highly symbolic legacies of its affordable housing endeavours over the last decade.
The first two serve as physical sentinels to the CBD when approaching across the Sydney Harbour Bridge.
Firstly, the Sirius building on the left, freshly “disinfected” of its “undeserving” social housing tenants – given the valuable views – is being redeveloped into apartments for the worthy-wealthy.
The second, to the right, the Barangaroo Crown development contains apartments for the globally-wealthy and a casino for the generation of unproductive gaming profit. Built on public parkland, it also celebrates the clearance of adjacent social housing, on-sold to the globally not-quite-so wealthy.
Confirmation of the previous government’s priorities can be gleaned from this map. It depicts the extent of public land sold by the previous government – once the party of home ownership – during its last tenure, and during which period the housing crisis worsened to its current crescendo.
On this evidence alone, some may consider the previous government deserves to be kept from power for at least a generation.
So, are our politicians wise or fools?
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Returning to our introductory motto, the success of the “teal wave” at the last election illustrates the folly of ignoring calls for change.
The conservative parties now fear that the electorate will move increasingly to the left as they age, marking a profound shift in voting behaviours hitherto thought rock solid. If this trend is borne out over the next few years the conservative side of politics risks annihilation.
This outcome is particularly likely in relation to housing affordability. The party was originally known for its promotion of home ownership but now seems set on the production of a class of permanent renters to service the income needs of its landlord constituents.
Yet as we have observed above, the problem extends to all parties and all tiers of government.
Will any of them learn?
It’s too early to tell.
A good test would the extent to which they adopt the kinds of recommendations in the AHURI report, and if they do not, why not.
If they continue to prevaricate, the electorate is increasingly likely to declare through gritted teeth, “a pox on all your houses – at least you have some”.
