PETER PHIBBS. we must call governments out on this ‘Game of Homes’.

When politicians say supply will fix the problem, ask them why it hasn’t worked yet. And also send them a copy of the graph from Chapter 1 of any first-year economics text book showing that price is the result of the interaction of supply and demand

Politicians have found their voice on the issue of housing affordability.

Gladys Berejiklian thinks it’s the most important issue of our time and the Federal Treasurer is preparing a comprehensive housing package as part of his budget. The Victorian Government has produced a package of measures including stamp duty concessions.

Politicians are understanding the pain of Australians trying to find decent and affordable places to live and they are on it! So this should be a time for optimism.

Right?

No — I am afraid I am not very optimistic about the latest flurry of activity.

After observing and researching housing markets and housing policy for the past 20 years, my conclusion is that the default position for many modern Australian politicians is to sound deeply concerned about housing affordability pressures but do nothing effective.

The reasons why they take this position is not hard to find: with so many homeowners in Australia cheering up the price of housing in Australia, politicians do not want to deliver bad news to them by putting real downward pressure on house prices.

For State Governments, stamp duty in their capital cities is now, in most cases, a ‘river of gold’. What State Treasurer wants to give that up? So we have many inquiries, taskforces, working parties and a lot of blame shifting, but not much action.

With so many homeowners in Australia cheering up the price of housing in Australia, politicians do not want to deliver bad news to them by putting real downward pressure on house prices.

Take the current favourite talking point for politicians — the supply fix — we need to build more houses. This is a great policy for a federal politician because they don’t control the supply levers to any large extent, the State Governments do.

State Governments also like it because they can blame Local Governments and also communities for resisting development. It also sounds good — everyone is an economist now and more supply will help bring down prices — it works in lots of markets so it will work in housing markets.

This is the point in the story where I would like you, the reader, to become a researcher. If you are in Sydney, Brisbane or Melbourne have a look around your city and notice the number of residential construction sites — there seems to be a lot of new supply out there, but prices are still rising sharply.

New supply is terribly important and we should build as much new stock as possible, but in a market with very strong demand pressures, supply on its own is not a great strategy. A key difference in the housing market is that new supply is only about 2 percent of the total housing market. It’s like trying to put out a bushfire with a garden hose.

To really make a difference we need to attack the problem at both ends – we need to reduce demand by changing the tax settings (i.e. negative gearing and the capital gains discount) to reduce the level of demand at the same time as we encourage new supply.

The housing outcomes in Australia are not some dreadful accident, they are a result of groups of home owners and investors in Cabinets over Australia constructing a system that is geared towards making housing more expensive.

So what would a real housing strategy that tried to improve housing outcomes for the many Australians struggling in today’s expensive housing market look like?

We do need to do something about house prices for first-home buyers, but there are many Australians who will never get the opportunity to purchase a home — long-term renters. We have to turn our rental system from one which sees renting as a temporary tenure to one which respects the rights of renters and provides secure tenure and decent maintenance of dwellings.

The recent Choice survey of renters in Australia showed the really bad housing conditions that many tenants live under.

We also need to divert some of the large windfall profits being gained by landowners as areas are up-zoned (e.g. converted from industrial areas to high-rise apartments) and dedicate them to the provision of ongoing secure rental housing.

The NSW Government has begun moving down this path by asking for 5-10 percent of dwellings in these areas to be dedicated to affordable housing. This is a pretty small target compared to many other parts of the world, but it’s a start.

Some of the stamp duty stream should be diverted to Australia’s not-for-profit community housing sector to provide them with some capital to construct new dwellings. Many of these dwellings could be built on the sites being redeveloped by Government in our cities. For some other ideas put together by a group of Australian housing academics, have a look here.

So what can YOU do?

I think to break the cycle of inaction we need to call Governments out when they play their standard role in what has become a Game of Homes. So, when Malcolm Turnbull says the planning system is the problem, ask him why planning approvals are almost double the current level of completions in Sydney and Melbourne.

When politicians say supply will fix the problem, ask them why it hasn’t worked yet. And also send them a copy of the graph from Chapter 1 of any first-year economics text book showing that price is the result of the interaction of supply and demand.

If you are a first-home buyer, ask your local member why you have to compete with investors that the Government is arming with cash. The housing outcomes in Australia are not some dreadful accident, they are a result of groups of home owners and investors in Cabinets over Australia constructing a system that is geared towards making housing more expensive. Imagine for a second how different housing policy might be if we had a cabinet full of first-home buyers.

The very low interest rates after the GFC were the final part of the mix that has led us to where we are today.

Peter Phibbs is Chair of Urban Planning and Policy, University of Sydney. This article first appeared in the Huffington Press on 10 March 2017.

print

This entry was posted in Housing, Politics and tagged , , , , , . Bookmark the permalink.

2 Responses to PETER PHIBBS. we must call governments out on this ‘Game of Homes’.

  1. Colin Cook says:

    I am surprised that so little attention is given to relating land on leasehold. ACT provides a lot of data and experience on leasehold development. Is there any reason why residential?As cannot be granted on condition the blocks are sold on very long leases?
    A recent report tabled that home ownership required 20% of household income in the ACT, whereas in the states the figure was 30plus% – a 50% increase. Surely this is worth investigating.
    Our Governments have the land, the ability to generate interest free credit and there is much un/under employment – surely it is not beyond our political class to set up a great program of public housing to bring us up a ratio comparable to UK.

  2. Colin Cook says:

    Corrections,
    First line releasing NOT relating
    Third line, residential D/As

Comments are closed.