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.

‘Affordable rentals out of reach for low-income workers’. The AHURI research referenced in this article, which was led by Sydney University Professor Nicole Gurran and supported by colleagues from Sydney University, Swinburne University and RMIT, reinforces the key point that urban productivity (including labour force participation) is closely linked to affordable rental housing supply – particularly in some of our large cities.  

Sydney and Melbourne feature an almost inverse relationship between employment density and the supply of such housing. In both cities, lower-income private rental households struggle increasingly to find affordable rentals. In Sydney, for example, 71% of such households pay rent at levels considered unaffordable. The problem is most acute in inner and middle ring areas, which offer higher accessibility to employment. Professor Gurran notes that low-income renters tend to endure affordability stress, commuting burdens, or both, in order to access employment opportunities.

‘As homeownership falls, it’s time to make housing a human right in Australia’. Labour MP, Josh Burns, reinforces his recent policy piece published by the McKell Institute, in which he argued that housing in Australia should be a legally enforceable human right. As Burns acknowledges, this would require an enormous shift in attitude and policy by the federal government. He notes that the International Covenant on Economic, Social and Cultural Rights, to which Australia is a signatory, recognises (in Article 11) the right to adequate housing, and that both France and Scotland have codified the right to adequate housing, while UK legislation places a responsibility on local government to provide housing for those in need. 

Burns claims that tax concessions such as negative gearing and the 50% capital gains tax discount cost the Federal Budget more than double what federal and state governments spend on housing and homelessness services each year. He observes that our homeownership market is “skewed towards investors”, noting that fewer than 40% of Australians in their 30s can afford to become homeowners. More and more young people are resigned to never being able to own their home, or they face the prospect of crippling debt levels if they can and do take the plunge. Burns also points to the growing waitlist for social housing, and the widespread rental stress experienced by low-income earners renting in the private rental market.

‘Homeless numbers set to rise again, but inquiry can be a turning point if we get smarter about housing people’. University of South Australia Associate Professor, David MacKenzie, applauds the recently released report based on the Inquiry into homelessness in Victoria, describing it as advancing a bold reform agenda with proposed measures that would be the “most significant response to homelessness in Australian history”. He says the two largest cohorts who become homeless are families with children and young people on their own.  

His plaudits are based, in large part, on the report’s “focus on early interventions and preventing homelessness in the first place”, avoiding the temptation to simply build on the status quo and create more crisis accommodation. Quoting from the report, he says prevention and early intervention are particularly important “to ensure that experiences of homelessness and disadvantage at a young age do not affect the life chances of an individual and increase the likelihood of ongoing homelessness into adulthood”. MacKenzie goes on to describe homelessness programs that have been found to work, including the Community of Schools and Services (COSS) model of early intervention (pioneered in Geelong), the Kids Under Cover model and the Education First Youth Foyers model.

‘A big problem requires even bigger solutions’. Fiona Patten MP, Chair of the Victorian Parliament’s Legal and Social Issues Committee and of the recently reported Parliamentary Inquiry into Homelessness, gives her own reflections on some aspects of the Inquiry. She welcomes the Victorian government’s landmark “Big Housing Build”, which was announced towards the end of the Inquiry, but cautions that this will still not ensure that Victoria meets the national average of social housing as a percentage of total dwellings, at 4.5%. For further information about the “Big Housing Build”, see the P&I monthly housing digest editions in Oct/Nov 2020 and Nov/Dec 2020.  

Patten encourages the government to look at other measures, including implementing mandatory inclusionary zoning in all new major housing developments across Victoria. She supports early intervention, to prevent homelessness from occurring in the first place, or to ameliorate its effects promptly when it does occur, as this helps to prevent disadvantage from becoming entrenched and chronic. Patten clearly sees homelessness as not only a social issue, but also an economic one, as “the long-term cost and implications to society of not preventing homelessness will be larger than the investment to mitigate that cost”.

‘Adelaide Zero Project makes great strides in bid to end street homelessness’. Luke Michael reports that the “Adelaide Zero Project”, launched by the Don Dunstan Foundation in 2017, has helped more than 500 of Adelaide’s inner-city rough sleepers into stable accommodation over the past 4 years. The Project aims to achieve “functional zero homelessness”, meaning that the number of homeless people on any given night is no greater than housing placement availability. It has emerged from an extensive cross-sector collaboration.

One of the Project’s major achievements has been the creation of a “by-name list” – a real-time list of all people experiencing homelessness in a community, data which is shared by all those involved in providing help. This avoids homeless people having to tell their stories repeatedly and facilitates the rapid provision of support tailored to each individual. Brisbane has recently become the only other Australian city to adopt a similar system for helping the homeless. Louise Miller Frost, Chair of the Adelaide Zero Project and CEO of St Vincent de Paul Society (SA), encourages other cities in Australia to emulate Adelaide’s example. Miller Frost acknowledges that homelessness is a dynamic system (people move in and out of the system all the time) and says that functional zero is a really good way of representing this in a manner which is outcome focused.

‘Vital signs: to fix Australia’s housing affordability crisis, negative gearing must go’. UNSW Professor of Economics, Richard Holden, highlights Australia’s housing affordability problem, particularly in our largest cities (Sydney and Melbourne), and the more-or-less steady fall in home ownership rates. “Young people are basically excluded from home ownership unless they have very high incomes or parents with the means and inclination to provide financial help”, he says. Holden is critical of Federal government measures targeted at first home buyers, such as the “first home-owner grant”, which he believes simply translate into higher prices.

He recognises that historically low interest rates have made borrowing much cheaper, but describes household debt levels as “disturbingly high” (threatening financial stability at a macro level), observing the risks this poses if the housing price boom turns down. As he says, “asset prices come and go, but debt is forever”. Holden dismisses the idea of the RBA using interest rate policy to calm the housing price boom, encouraging the RBA to maintain a focus on the inflation target, getting unemployment down and wages growth up. He recognises that APRA “macroprudential tools” remain available to calm any house lending frenzy, but his main recommendation is that both sides of politics revisit “negative gearing” on rental properties, by gradually phasing it out over time, and allowing it only for new dwellings in future.

‘Housing affordability is a problem.  Here’s why super-for-housing isn’t a solution’. Grattan Institute Program Director for Household Finances, Brendan Coates, and Grattan Senior Associate, Will Mackey, believe the Federal Coalition’s Tim Wilson and his colleagues are misguided in thinking it a good idea to allow young Australians to dip into their super to help buy their first home – an idea they’ve called “Home First, Super Second”. Coates and Mackey say that such a proposal could in fact make housing less affordable and that there are other, much better, ways of boosting home ownership. They first paint a picture of how fast and by how much home-ownership rates have fallen in the period from 1981 to 2016, particularly for the young and poor. For example, for the poorest fifth of the 25-34 age group, home ownership has fallen from 63% in 1981 to 23% today.

Coates and Mackey argue that a Home First Super Second policy is “superficially attractive” and would do little if anything to increase home ownership rates. Specifically, allowing Australians to use their super for housing would be of little assistance to those most in need. And boosting demand for housing would lead to even more upward pressure on house prices. The biggest winners would be those who already own their own home. Grattan’s solution is a simple one: boost the supply of housing, including through relaxing planning rules to allow more homes to be built near the centres of Australia’s major cities. While recognising that planning rules are within the remit of the States and local government, Grattan contends that the government can incentivise them to relax planning rules, as President Joe Biden has done in the US.

‘Home prices are climbing alright, but not for the reason you might think‘. ANU Crawford School of Public Policy Visiting Fellow, Peter Martin, delves into the reasons why home prices are soaring again, even in the wake of the Covid-19 induced economic downturn. He suggests the reason is not a lack of supply, noting that the 2016 Census found we had 12% more dwellings than households, up from a 10% surplus in 2001. The surplus is accounted for by holiday homes and second homes, or homes simply left empty. He points out that rents have been barely moving (growing even more slowly than wages) for half a decade (from 2016), during a time of soaring house prices, and says this belies the argument that there aren’t enough homes for people who want them.

Martin considers the real reason for this disparity is the increase in the attractions of investing in residential rental property, spurred by generous tax incentives (notably negative gearing and the 50% capital gains tax discount). Martin says that 20 years ago, only one in 15 of us were landlords, compared to the present ratio of one in 10. The problem, Martin concludes, is that in Australia “housing is two things: accommodation and a form of speculation”.