Frankel: Australia’s housing affordability and homelessness crisis
Oct 1, 2022
1 in 28 indigenous people homeless, Australian rental market “hurtling toward disaster”, and $575 million committed to affordable housing in this month’s report on Australia’s housing affordability and homelessness crisis.
Read on for the latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.
Urban Indigenous homelessness: much more than housing This AHURI research report, authored by a group of academics from the University of South Australia, shines a light on issues specific to homelessness amongst Australia’s indigenous people. By way of context, one in 28 Indigenous people were homeless at the time of the 2016 Census and the Indigenous homelessness rate is 10 times that of non-Indigenous people. The key findings of this report reflect, to some extent, the range of vulnerabilities and disadvantage that afflict Australia’s indigenous people, but the report focuses on a range of core research questions, including the causes, drivers, and cultural contextual meanings of homelessness for Indigenous Australians in urban settings. Themes emerging from the study are that Indigenous homelessness is different from the general problem of homelessness in Australia (particularly in terms of cultural perception and expectations), and the policy responses to it need to be situationally specific, culturally appropriate, and respective of Indigenous perspectives, and would greatly benefit from full involvement of Indigenous community-controlled organisations and those with relevant lived experience. This applies to the development of policy options addressing the causes and incidence of homelessness and factors affecting both inflow into and exits from homelessness.
Taxpayers to give super funds a $575m leg-up into affordable housing AFR journalist, Michael Read, reports on an initiative by the Albanese government, announced by the PM in the closing stages of the recent Jobs and Skills Summit, to make up to $575 million of National Housing Infrastucture Facility (NHIF) funds available for investment in affordable housing. This would expand NHIF’s existing remit (ie. the offering of loans, grants and equity finance for “housing-enabling infrastructure” like utilities and roads) and, at least in theory, make it more attractive for the members of the $3.3 trillion superannuation sector to invest in affordable housing, by using public funds to mitigate investment risk for such private sector investors. The latest initiative sits alongside the new Labor government’s pledge to create a $10 billion Housing Australia Future Fund to build 30,000 affordable housing properties in 5 years. See also Affordable housing attracts institutional investment and Affordable housing returns don’t stack up yet: AustralianSuper
Why super funds may be hesitant to invest in Australian housing Grattan Institute housing experts, Joey Moloney and Brendan Coates, assess the Labor government’s initiatives to get institutional super funds to invest in housing. The applaud such efforts insofar as concerns investment in market rate housing, arguing that it could lead to a more secure rental experience for tenants, a much-needed boost to housing supply and therefore lower rents, and could all be done without super funds compromising returns or relying on government subsidies. They recognise that reform of state-based land taxes is still necessary in order to make it economic for large investors to own residential property, given the way land tax currently favours small holdings. However, they say it is unrealistic to get institutional super to invest in affordable housing, let alone social housing, where the returns are far too low to warrant such investment without very significant government subsidy. The Grattan experts say that rather than trying to commercialise social housing, the federal government should double the size of the Housing Australia Future Fund, from $10 billion to $20 billion.
Rental crisis engulfs Australia Leith van Onselen, Macrobusiness self-styled “Unconventional Economist in Australian Property”, presses his case that Australia’s rental market is “hurtling toward disaster”, with the fastest rental growth on record. Citing data from various geographic markets, including Sydney, Brisbane and Perth, he notes that total rental listings have shrunk by around 40% over the pandemic across the combined capital cities, with vacancy rates also at record lows. He goes on to observe, against this backdrop, that the Albanese government is proposing significant rises in temporary and permanent migration. He questions where the hundreds of thousands of new migrants will live when Australia already faces such a chronic shortage of rental accommodation, and he forecasts even more upward pressure on rents, associated rental stress, and higher incidence of homelessness.
The Great Australian Nightmare Brendan Coates, Grattan Institute Economic Policy Program Director, delivering the 131st annual Henry George Commemorative Lecture, assesses the economics of land, and the way rising house and land values sit at the heart of some of Australia’s most pressing policy challenges. While average full-time earnings have doubled over the past 50 years, house prices have quadrupled and that the rising value of land, mostly in the form of housing, has turned Australia into a nation of millionaires. Homeownership has become the main driver of wealth in Australia, and passive capital growth from owning a home has, in many recent years, exceeded median income from personal exertion (ie. salaries). Returns from rising house values have, to a large extent, been untaxed or only lightly taxed, at rates far below the rates at which corresponding salaried income is taxed. This is thanks primarily to the exemption from capital gains tax (CGT) of one’s principal place of residence, and also to the generous 50% CGT discount and negative gearing allowances for investment properties. Coates traverses the range of factors contributing to the rapid rises in the cost of housing, including historically low interest rates and ready availability of mortgage debt, tight planning restrictions and NIMBYism that crimp supply, demographic changes, rapid population growth (including the impact of high immigration rates) and various other influences on supply and/or demand for housing. He analyses declining rates of homeownership, particularly as it affects the young and poor. For example, in the 40 years to 2021, homeownership rates among 25- to 34-year-olds fell from more than 60% to 40%, falling even further for the poorest 40% of that age group. Coates paints a bleak picture of the recent and forecast trajectory of homeownership, and an even bleaker one for those Australians forced to rent long-term. He comments on growing income and wealth inequality in Australia, observing that the rising share of capital income in Australia is at least partly explained by the rising cost of housing and the land on which it is built, and goes on to say “The growing divide between the housing ‘haves’ and ‘have nots’ also risks being entrenched as wealth is passed onto to the next generation”, and in terms of inheritances over the past decade, “the wealthiest 20 per cent received on average three times as much as the poorest 20 per cent”. Finally, he explains ways in which expensive housing stifles economic dynamism and productivity. The challenges he outlines in his speech are considerable and disheartening, but (he argues) are not insurmountable, and he lays out his proposals for reform, including a national housing plan which embraces tax reform to abolish negative gearing and halve the CGT discount, federal incentives for state and territory governments to increase housing supply, capturing (for the community’s benefit) at least part of the windfall gains arising from re-zoning, improving protections for renters, removing barriers to institutional investment in rental property, increasing the size of the Housing Australia Future Fund to help boost social and affordable housing, and dramatically increasing (by 40%) the rate of Commonwealth Rent Assistance. See also Home ownership changes point to deepening inequality, The “fair go” has gone and stage one of the revolution has happened; and A home of one’s own: So good only the rich need apply
The world of build-to-rent (BTR) BTR is attracting increasing interest amongst the increasing proportion of Australians (already around a third) who are either embarking on their adult life away from home or simply electing to rent as a lifestyle choice, or (as is increasingly common) are forced to rent long-term due to the increasingly unattainable prospect of becoming homeowners. Rent.com.au, a relative newcomer to the ASX, which offers a range of information and other services specifically addressing Australia’s approximately 7 million renters and the marketers of rental properties, has devoted part of its web-blog pages to explaining what BTR is, and how it works. The blog asks whether BTR could be the solution for creating ‘community’ against the trend of single person living, lists the advantages of BTR for renters (versus the more traditional, non-institutional, private rental market), and ponders the question whether BTR could be a game changer for renters.
Oliver Frankel is a former corporate finance and M&A lawyer, who has spent the second half of his career in finance, investment and management. Most recently, he has taken a strong interest in how to address the affordable housing crisis.
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