LIONEL ORCHARD. Housing Policy: a social democratic response

The missing element in current debates about Australian housing policy is consideration of the social democratic case for building a genuine mixed economy in the housing system respecting the different purposes of the sectors involved – public, private and household. Given the demand and supply problems currently making effective housing access very difficult, the case for much more direct public intervention and investment in the Australian housing system is strong.  

‘The collapse of housing affordability – both buying and rental – in capital city Australia represents the single greatest failure of policy in the post-social-democratic era. . . . Put simply, state and federal governments all concluded that it was not their business to ensure that people had decent housing that did not make them slaves to a mortgage or landlord for years on end . . .’ Guy Rundle

The Australian housing system is at an impasse and the question is how to respond. There is currently no end of analysis and policy advocacy in the housing debate all of which is reaching some sort of crescendo. What is missing is an understanding the social democratic case for building a genuine mixed economy in our housing system.

Everyone seems to agree that there is a need for a better mix of sectors and interests in building new responses to the problems. But they all err in giving precedence to private interests in driving change. The public and government role is understood as playing a supportive and largely secondary role – primarily centering on better (or different) regulation and taxation of private housing and land markets, and building more ambitious public-private partnerships to support the growth of social and affordable housing drawing on the now large pool of institutional superannuation savings in Australia.

In response, it is worth highlighting what the idea of ‘genuine’ has meant in social democratic thinking about how to mix a mixed economy. The key idea is that the different purposes, roles and principles guiding the public, private and household sectors should be respected through strong separation between them. Expressed another way, a mixed system should build a robust public economy with public enterprises to compete with and counter the power of the private capitalist economy while acknowledging the contribution of the unpaid work and activity which goes on in the household sector. The values that underpinned the case for strong separation are important. For the private sector, those values centre on the virtues of choice, efficiency, competition and profit understood in market terms. For the public sector, they centre on the virtues of decommodification removing important (merit) areas of economic and social life from the market justified through public conceptions of choice and competition standing against private interests and motives. For the household sector, the key has been to acknowledge the value of the mainly unpaid work and activity taking place there.

What has been lost amid the noise of the current housing debates is this social democratic understanding. The influence of neo-liberal thinking with its emphasis on individualism, privatisation, deregulation and limiting the public and government role has been central to the loss. At the same time, social democrats have given up on seeing the mixed economy in these terms through their embrace of communitarian and civil society critiques of government. They have also fallen prey to governance arguments that partnership between public, private and civic sectors is needed in public policy. Rather than counter and compete with private markets in housing, partnership models argue that, in these times, the best government can do is to draw in private investment to pursue social purposes. Consensus on private sector terms shapes the ambition not the idea that the public and private sectors have rival and conflicting objectives requiring the maintenance of clear boundaries between them.

Australia has never had a strong social democratic approach to housing provision even if social democratic themes about separation between the sectors and the role of public enterprise competing with private enterprise shaped housing policy of earlier times. Public housing enterprises in the various states played a central role in times past in ways that helped keep housing supply ahead of demand as Saul Eslake reminds us. The growth of home ownership through the 1950s and 1960s better reconciled the use value of activities in the household sector with private home ownership as a vehicle for investment and asset accumulation. We are now in an era when social democratic themes are almost entirely absent from discussion to a point where the housing system has become dysfunctional given private investment distortions, house price inflation, runaway demand, and supply limits and imbalances.

Some might say that social democratic ideas are of little relevance in these times. Given the dominance of neo-liberal and governance ideas, and the declining capacities of national government, the best progressive public policy can do is to address the sharper edges in the housing outcomes and hope for the best. This is the dominant theme running through current prescriptions in Australian housing policy. Many argue that rampant house price inflation driven by excessive private demand for housing as an investment good is best addressed by changes to taxation arrangements – in particular, removing or curtailing negative gearing and capital gains provisions. Others argue that limits of private and social housing supply are best addressed through removing constraints on development supposedly imposed by urban planning and related regulations. And for many, the growth of the social housing sector depends on abandoning old public housing models and embrace partnership models aggregating public and private finance on terms favourable to private interests to grow the social housing system.

While many of these proposals have merit, they mostly assume the virtues of private housing provision and private initiative in underpinning the social housing system. If we are to restore a more balanced approach, we should not lose sight of the need to reassert views about the public interest and values in housing policy – decommodification, cost management and direct public investment in housing supply – and build new public institutions and enterprises to take them forward. The interests of those at the bottom end of the housing market depend on it. We need to better acknowledge the role that social democratic governing has played in the Australian housing system in the past and, with some creativity in the design of new public institutions and enterprises, could do so again.

Lionel Orchard was Associate Professor of Public Policy at Flinders University. With Chris Miller, he co-edited Australian Public Policy: Progressive Ideas in the Neoliberal Ascendancy, Policy Press, Bristol, 2014 which includes his essay ‘Loose moorings: debate and directions in Australian housing policy’.

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3 Responses to LIONEL ORCHARD. Housing Policy: a social democratic response

  1. Bruce says:

    At last a recognition of the role of social democracy in this debate.
    Private investment for profit has never provided affordable, secure housing for the average person. In times past, before the emergence of the social democratic state, housing supplied by private investment (employer) was substandard, crowded and totally insecure. The slum clearance programs of the late 1930’s in Australia was aimed at ridding us of these houses. The cute terraces of inner cities that have survived were mostly for the middle to upper classes.
    Except for the aberration that occurred in the early seventies, every time housing was made affordable for average people was through government housing projects; Selection, Soldier Settlers, War Service Homes and State Housing Commissions being examples. None of these schemes were perfect, but all enabled common people to own homes. Anything that is not aimed at home ownership is simply band aid treatment and a return to a feudal system where the landlords have replaced the barons and lords.
    In terms of funding, it is cheaper to have home owners than to pay rental subsidies to either those on welfare or landlords. A state funded housing scheme, starting with renters who progress to purchasers with no need for huge deposits has worked wherever it has been tried. It can end up being cost negative and self funding and provide those even on extremely low incomes an opportunity to build assets, the absolute necessity for escaping poverty.

  2. Colin Cook says:

    Not for publication!
    John,
    I posted a comment yesterday which was not exactly correct about an ABC News segment by Alan Kohler so would be happy if you would delete it. AK spoke about Housing Affordability by showing a graph of how many years it takes to save for a home deposit of 20% of the average house; I have just received the graph and transcript from ABC and this shows that over the last three decades for Sydney and Melbourne, the figure moved from 4 years to about 10, for Canberra it moved from 2 to 4 years.
    So AK remarks were maybe not really superficial – better not to publish for my comments could be classed as a sound conclusion based on a false premise!
    It so happens that today I have received the book, The Game of Mates and in the first two chapters, much is made of the Canberra leasehold arrangements, their benefits and potential – and why they will not be nationally applied! The book looks like a well-researched, authoritative document as to what we are up against – and what to do about it; you get an early passing reference on page 8. Certainly worth reading and publicising.
    Pardon if this is a difficult way of communicating but I cannot find a simpler one.
    CC

  3. Peter Small says:

    Why can’t everybody see it. Its not the cost of the house, its the cost of the land on which the house is built. Collect the economic rent on the land each year, for the public good. In other words what we know as “capital gain” becomes part of the common wealth; not the province of land developers, land speculators, and the Banks, but collected by governments each year as a land tax for the public good.

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