Pearls and Irritations

The following is the latest instalment of a monthly digest of interesting articles, research reports, policy announcements and other material relevant to housing stress/affordability and homelessness — with hypertext links to the relevant source.

Submission by Sarah Nelson into Federal Housing Affordability and Supply Sarah Nelson, who recently made a written submission to a House of Representatives Standing Committee Inquiry into Housing Affordability and Supply, speaks as one with extensive lived experience of homelessness, as well as incidents of family and domestic violence from a tender age. She was homeless from age 14 to 22, and suffered through much of her life from the ill-effects of transient or insecure housing. The case she makes for action to address the lack of housing affordability is powerful and moving, and supported by an extensive body of evidence. Sarah is disarmingly open about how much her homelessness and related problems have cost society in terms of calls on the health and social security system, as well as law enforcement and the judicial system. She demonstrates just how much society could save and benefit if the housing and related needs of people in her situation were properly addressed with adequate affordable housing. She pithily sums this up by saying, “My life is a ‘how not to do’ guide for tax and revenue policy”, while acknowledging her gratitude for all the support she has received. She says that the resources expended could have been so much less, and so much more effective, if she had received appropriate and affordable long-term housing at an early stage in her life, enabling her to become a more productive member of society. Sarah’s recommendations to the inquiry include the adoption of a national housing strategy, a more targeted focus on youth homelessness, the unlocking of private sector investment into affordable housing and the establishment of a national framework for mandatory inclusionary zoning (MIZ). In support of her MIZ recommendation, she cites the MIZ framework developed by the Constellation Project, which she helped work on. Sarah’s closing words are to the effect that we have had enough inquiries and don’t need any more. We now just need to act. Well said.

Brisbane BTR contenders revealed, work starts on Mirvac development Australian Financial Review property reporter Martin Kelly highlights some of the most recent initiatives by leading residential developers, including Mirvac, Lend Lease and Frasers Property, to develop Build-to-Rent (BTR) accommodation, including an affordable housing component. For example, Mirvac’s LIV Anura BTR project in Newstead, Queensland, will include Queensland government subsidised affordable housing comprising 25 per cent of the apartments in the complex. Queensland Minister for Investment Cameron Dick said such affordable housing is targeted at making it easier for eligible Brisbane city-based workers and their families to access affordable housing closer to their jobs. LIV Anura is part of the Queensland government’s $70 million BTR program.

Extending foster care to 21 reduces crime, homelessness Stephen Lunn, social affairs reporter for The Australian, cites Paul McDonald, chairman of foster care reform advocacy group Home Stretch and a former senior Victorian bureaucrat, as saying: “NSW and Queensland remain the laggard states on extending foster care through to age 21 even though nine in 10 Australians believe all young people deserve a place to call home until that age.” Victoria, Western Australia, South Australia, Tasmania and the territories have all reformed their foster care policies to extend formal care to the child until they reach 21, while Queensland has lifted the age of support to 19. NSW provides formalised support only to age 18, though it does offer ad hoc programs of support for those over 18 who require it. McDonald claims that those who leave foster care at age 18 live on average in five different places in their first year thereafter, and notes that 85 per cent of Australia’s 18 to 21 year olds still live with their parents. Lunn mentions a study by Deloitte which found that for each dollar spent on foster care for those between age 18 and 21, there was a return (to the public purse) of an estimated $3.40, in the form of reduced crime (down 10 per cent), reduced homelessness (down 20 per cent) and reduced teenage pregnancies (down 10 per cent).

Understanding discrimination effects in private rental housing This final report of an AHURI scoping project, conducted by researchers from the University of Sydney, examines discrimination across age, gender, race, and indigeneity in the private rental sector (PRS), throughout the PRS lifecycle from property procurement and investment through to eviction. Ancillary objectives of this research were to determine the mediating impact of informal tenancies, increases in sharing and non-standard accommodation, the increasing role of digital technologies and shortcomings in existing policy, law and practice. Unsurprisingly, the report finds the incidence and effects of discrimination differ according to the socio-economic status and income-grouping of the renter, and that there is an accumulation burden — financial, psychological and physical — borne by those who experience discrimination. It also concludes that the growing number of informal and shared tenancies increases the potential for discrimination. The COVID-19 pandemic has highlighted systemic problems in Australia’s PRS, including a profound power imbalance between landlords and tenants, which drives discrimination. Rectifying this imbalance cannot be addressed without relieving pressure from the PRS (particularly at the lower end) by increasing the supply of social and affordable housing, and reform to the incentives, rights and responsibilities of landlords, agents and tenants. What is needed are specific and minimum standards regarding matters such as rental agreements and dwelling standards. The report notes “The structural nature of discrimination means that its effects are embedded in policy areas that intersect with housing such as energy, ageing, taxation, and the environment”, meaning that discrimination must be addressed holistically.

Leading economist, Saul Eslake, criticises Australian politicians for housing affordability measures Herald Sun journalist Jonathan Chancellor highlights submissions made by one of Australia’s renowned and most respected economists, Saul Eslake, to the current House of Representatives Inquiry into housing affordability and supply. Eslake savages Australia’s politicians for failing to make housing affordable for all, as the young struggle to get a foothold in the market. He has written extensively on the subject of housing affordability over many years, including on Pearls and Irritations  Chancellor notes that in the period between 1990 and 2017, the value of household wealth held in residential property has risen by some 700 per cent, an increase of almost $5.7 trillion. Even after offsetting the $361 billion increase in mortgage debt, the net value of wealth in residential real estate was up by $5.3 trillion over this period. Chancellor cites Eslake as saying that for the households living in rental accommodation over this period “none of this eye-glazing increase in wealth came their way”. Australia’s home ownership rate fell from 68.9 per cent in 1991 to 65.5 per cent in 2016, the lowest it has been since the census of 1954. The fall for those aged 25 to 34 was much steeper, dropping to 1940s levels. Eslake argues that would-be first home buyers have been “squeezed out of home ownership by cashed-up immigrants and, even more, by investors able to take advantage of more readily available credit and more generous tax breaks”. He points out that house prices have risen to six or seven times annual disposable incomes, effectively requiring two incomes to save a deposit and service the mortgage required to buy an average-priced home.

Biden’s “House America” initiative White House press secretary Jen Psaki announces the launch of Joe Biden’s “House America” initiative, a new homelessness alleviation drive by the Department of Housing and Urban Development (HUD) and the United States Interagency Council on Homelessness. Psaki notes that America’s homeless number more than half a million, and that the plight of the homeless has been exacerbated by the Covid pandemic. Biden is tasking HUD with working collaboratively with state, Tribal, and local leaders to use funding from his “American Rescue Plan”, as well as other existing federal, state and local resources, to rapidly reduce homelessness, and add new units of affordable and supportive housing into the development pipeline by the end of 2022.  The initiative is based on a “housing first” policy, which is generally seen as best practice in addressing homelessness. See also Alleviating Supply Constraints in the Housing Market, a recent blog by the White House Council of Economic Advisers, which details the extent to which housing supply has failed to keep pace with population growth. Housing starts as a share of the population decreased by roughly 39 per cent in the 15-year period from January 2006 to June 2021. The blog cites Freddie Mac research estimates that the current shortage of homes is close to 3.8 million, up from an estimated 2.5 million in 2018. These overall figures mask even more worrying housing shortages at the “bottom rung” of the home ownership ladder. There is also inadequate supply of rental housing, particularly at the cheaper end of the range, with one in four American renters paying more than half of their income on rent, and 47 per cent spending more than the recommended maximum of 30 per cent of their income on rent and utilities. Public housing in the US is also in short supply. Overall, more than 5 million low-income households live in either public housing (some 2 million of the 5 million), privately-owned but publicly assisted housing, or receive rental assistance against their private sector rentals. The blog lists a number of Biden administration initiatives, in aggregate designed to create or rehabilitate more than 2 million housing units, primarily directed towards helping low- and middle- income earners.

‘Lifting rates won’t end housing crisis’, says RBA’s Philip Lowe  Patrick Commins, economics reporter for The Australian, and fellow reporter Mackenzie Scott, analyse Reserve Bank governor Philip Lowe’s recent speech to the Anika Foundation. Lowe reaffirmed that he was not inclined to cool the overheated property market via tighter monetary policy, reasoning that lower housing prices would mean fewer jobs and lower wages growth, which Lowe regards as a “poor trade-off in the current circumstances”. Commins and Mackenzie note “Australian property prices have soared 18 per cent over the 12 months to August despite intermittent lockdowns, pushing the dream of home ownership further out of the reach of many. The average property price in NSW has blown out from being roughly equivalent to three times average disposable household income in the 1990s, to more than seven times now, according to RBA research.” Serviceability of mortgage debt is — at least currently, while interest rates remain at historically low levels and credit is readily available — not a big problem, despite ballooning debt levels. However, the big challenge for home buyers is saving for a deposit, which according to the RBA now requires an average young household to save a fifth of their pre-tax income for around nine years to get a 20 per cent deposit for a median-priced home, something that took less than six years in the early 2000s. See also: Why the Reserve Bank and government are in no mood to rein in property prices in booming market.

Governments need to care more about renters and defer less to wealthy homeowners, think tank says Domain journalist Tawar Razaghi canvasses Peter Tulip’s views on the housing crisis and what governments ought to do to alleviate housing affordability. Tulip, chief economist at the Centre for Independent Studies (CIS) and a former head researcher at the Reserve Bank of Australia (and prior to that at the Federal Reserve board of governors) does not believe that changing demand side tax settings (eg. reducing negative gearing and/or the CGT discount) would make much of a difference. He recognises that historically low interest rates have fuelled the housing boom, and that high net overseas migration in the years leading up to the pandemic have also played a part, but sees the biggest problem being an undersupply of new homes, driven in large part by planning obstacles. Razaghi cites Tulip as saying that Australia’s housing affordability crisis has been caused by excessively tight planning restrictions that pander to NIMBYs (“not in my backyard”), blocking new housing construction around where they live. This attitude is claimed to be driven by many older, wealthy homeowners, afraid of densification in their neighbourhood, and mindful of the value to them of maintaining scarcity in relatively lightly populated middle-ring suburbs. Tulip says: “We need to care more about renters and young home buyers and defer less to wealthy homeowners’ fear of change.” He is also reported as being a strong advocate of using government subsidies to boost supply of homes suitable for market entrants, rather than, for instance, subsidising demand through mechanisms such as first-home buyer grants. For further detail on Tulip’s views about what to do about housing affordability, see CIS’s recent submission to the current Inquiry into Housing Affordability and Supply in Australia. See also:  Professor Tulip: Immigration drove nation’s housing shortage.

Home Share program to reduce homelessness In a recent media release, the NSW Department of Communities and Justice announced the NSW government’s “Home Share” program, under which empty nesters will be matched with young people looking for affordable housing, as part of a plan to reduce homelessness. The program is being piloted in Sydney by NGO, Holdsworth Community, and will run in the inner city and northern suburbs of Sydney. Rather than formal rent, Holdsworth negotiates shared expenses such as utilities for the younger person to contribute to the household, in lieu of weekly rent. For the homeowner, the benefit is companionship, as well as some contribution to out-of-pocket living expenses. Holdsworth also safeguards all parties through a robust screening and matching process.

COVID-19 effects on housing and homelessness: the story to mid-2021 The Australian Institute of Health and Welfare (AIHW) has recently published, as part of their data insights into Australia’s welfare 2021 survey, an analysis by UNSW Professor Hal Pawson titled “COVID-19 effects on housing and homelessness: the story to mid-2021”. The analysis is divided into four main sections: First, Pawson reviews the initially anticipated housing system impacts of the pandemic, as it unfolded in early 2020. Next, he focuses on the period of emergency policy making that accompanied the subsequent national lockdown, including key policy initiatives enacted by Australian governments to stabilise the housing market and protect vulnerable people, particularly those who were homeless. The following section examines pandemic impacts on homelessness, including 2020 crisis impacts in relation to the emergency actions taken by state governments to protect the homeless. The last section analyses pandemic impacts on the private housing market, as seen during 2020 and early 2021, with a focus on the specific drivers of the rental housing market.

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