Coalition MP Jason Falinski, chair of the federal government’s Housing Supply and Affordability Inquiry, talks the talk when it comes to housing.
“We have created some of the least-affordable housing in the world… it is akin to intergenerational theft.”
The government touted the inquiry as a genuine investigation into the cause of Australia’s housing woes. However, Falinski had already decided what the solution was even before the inquiry began.
A neutral inquiry would not have included the word “Supply” in the title. Instead it would have focused on affordability – the key issue.
It is an issue Falinski has been pushing relentlessly over the past few months in the mainstream media – with headlines such as: “Irresponsible’ to boost immigration without more new homes” (Daily Telegraph, 20/10/21); “Planning restrictions, not investors pushing up prices: housing affordability chair” (Sydney Morning Herald, 8/1/2022); and “if you don’t have supply…there’s only one way for house prices to go and that’s up” (Sky News, 29/11/2021).
But here’s some facts that are inconvenient for Falinski’s s narrative.
As an economic think tank Prosper Australia has for the past 14 years analysed statistics around vacant land and housing, suggesting that our understanding of housing “supply” is very limited.
Our most recent Speculative Vacancies report found that 69,004 properties in Victoria alone were likely vacant in 2019, based on water usage of less than 50 litres a day. That number of properties could house more than 185,000 people, dwarfing the 80,000 people on Victoria’s public housing waiting list. There’s evidently plenty of supply, but it is not being made available to the market.
Speculative vacancies are when private landlords don’t make their properties available to the market but sit on them in the expectation that prices will continue to rise. With prices increasing $660 per day, there’s not much need to rent them out.
Prosper’s numbers on vacancies are backed up by the Victorian Valuer General. But despite more than a decade of lobbying for government to analyse these hidden speculative vacancies, little has been done.
As the pandemic set in and housing precarity was exposed, the Victorian government thought it apt to give property investors who wouldn’t rent out their property in good times, a vacancy tax holiday.
The preference is to look the other way as campaign donors bemoan supposedly poor land supply – code for ‘rezone my land and make me a billionaire’.
Housing numbers don’t add up
Moreover, our numbers don’t reflect the whole housing supply story. Large land banks in master planned communities are not included in its study. The Melbourne Urban Development report notes that 25 years of supply is available. This is 40% more than is required to provide affordable housing, according to Plan Melbourne.
Victorian data on supply is the best on offer, with room to improve. Queensland also provides reasonable data, with NSW having the least supply data transparency.
How can we have a housing supply crisis when we barely measure supply?
All of this and barely a mention at the inquiry on the impact of AirBnB, tearing at the fabric of so many tourism hotspots. With no commercial zoning required for short term lets, it’s become a free for all to turn our communities into party zones.
Government has provided no leadership on what impact this has had on long term rental supply.
Falinski has also lamented that red tape and regulations are hindering land rezoning, and thus limiting supply.
Yet take the case of Sydney. The number of dwellings approved by the planning system have exceeded by more than 100,000 the number of dwellings built in the past nine years. Similar trends exist in Queensland.
All this land already rezoned, ready to be subdivided and turned into housing. Why aren’t the developers just getting on with building homes? Because flooding the market with sufficient homes would stabilise prices or even lead to price drops. Such “land banking” is logical in the current system – and thus prices continue to rise.
Developers also want less red tape and easier planning controls because it increases the value of the land they own.
As Dr Cameron Murray, a research fellow at The University of Sydney points out, what developers claim in the media is quite often the complete opposite from what they say in their annual reports – because developers are legally required to be honest with shareholders.
Dr Murray writes: “Developers never claim in annual reports that planning regulations are stopping them meeting housing supply targets.
Often they say the opposite; that they are banking a certain project because they can get a better yield down the track.”
Take the timing of property sales in the master planned community of Jordan Springs, Western Sydney.
An analysis by Dr Murray found that by minimising sales when the property market was uncertain, and maximising sales during buoyant times, developers pocketed an extra $137 million from just 2,131 sales. This added $68,000 to each mortgage. Will this finding and the relevant policy recommendations make it into Falinski’s report?
As to Falinski’s argument that investors are not driving unaffordability, many eminent economists disagree. The tax system is currently designed to incentivise speculation in real estate – from the 50 per cent discount on capital gains to record low land taxes in once affordable communities.
Negative gearing is also a key player, where Australia is one of the few nations that allows all property-related costs to be written off against one’s income and not just against the property’s profit.
Until we effectively measure supply, including mass land banking in master planned communities, AirBnB’s impact alongside the empty homes we all walk past each day, politicians will believe anything their mates in property tell them.
Karl Fitzgerald is director of advocacy at Prosper Australia.
Elizabeth Minter is a freelance writer/editor who worked at The Age for 20 years and at The Guardian newspaper in London for more than seven years. A former tennis professional, Liz has a Bachelor of Arts (Hons).