This is the latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.
Not just more supply, but the right supply
NSW Professors Bill Randolph and Hal Pawson provide introductory remarks to their City Futures Research Centre’s written submission to the current federal parliamentary Inquiry (see submission no. 42). Despite the inquiry’s ostensible focus on the supply side of the housing affordability issue, the submission argues that consideration should be given to both housing supply and housing demand, and the underlying drivers on both sides of the market.
They point out that Australia’s home ownership system has become one that “concentrates wealth and drives growing inequality”, “Over-preferencing existing home-owners and investors” and that has “increasingly excluded young adults from access”.
Solving this problem is not just a case of more supply, but rather the right type of supply, and particularly more for the “missing middle”. This includes well-located medium density homes and build-to-rent housing at both market and affordable prices. They note that when increased market priced supply risks depressing prices, the development industry responds in a perfectly rational way by rationing output (ie. reining back supply).
Among other things, Randolph and Pawson call for the federal government to take a leadership role, including through introducing more targeted incentives via a soon to be re-negotiated National Housing and Homelessness Agreement between the Commonwealth and the states. Finally, they say that the cost of local infrastructure to support increased residential density should be borne by the whole community over time, not just by developer contributions.
Do we care enough?
Macrobusiness blog author, Leith van Onselen, observes: “Because around two-thirds of households own or are paying-off a home, politicians will pander to home-owners and implement policies that support house prices”, and “For this reason, politicians will shed crocodile tears about affordability while implementing fake ‘affordability’ policies that actually make the situation worse, such as buyer subsidies”. Van Onselen considers the numerous housing affordability government inquiries that have been conducted over recent decades as somewhat of a waste of time and effort, because of his (perhaps) cynical view that “our politicians don’t actually want more affordable housing, since this requires prices to fall”. The real policy villains, according to van Onselen, are easy credit, mass immigration and economic stimulus.
A roof over our heads
David Hayward, Emeritus Professor of Public Policy at RMIT University, and chair of the Victorian government’s Social Housing Regulation Review, has penned this opinion piece in The Age, timed to coincide with the Review’s just published interim report (available for public comment until 28 February). The Review comes in the wake of Victoria’s $5.3 billion Big Housing Build, announced in November 2020, which Hayward describes as “the largest investment in public and community housing in living memory”, driving the creation of almost 10,000 new and refurbished homes. The Review Committee has recommended that all public and community housing be overseen by a single regulator (for the first time), with a new set of standards designed primarily to protect the interests of social housing tenants. They would also benefit from funded tenancy advocacy services that build people’s capacity and guide them through issues such as maintenance, repairs and complaints. Conflicts would be resolved through mediation rather than legal action. The overriding intent of the changes proposed by the Review is to place tenants at the centre of the social housing system, because each social housing property is someone’s home.
The bogy: planning restrictions or investors?
Sydney Morning Herald economics correspondent Jennifer Duke canvasses views recently expressed by Liberal MP Jason Falinski, chair of the current federal inquiry into housing affordability, which is due to report in February. Falinski’s remarks during the inquiry suggest that he sees the main issue as lying on the supply side, including the burden on developers of onerous planning rules and excessive developer fees imposed by state and local governments. Duke cites a 2020 paper for the Reserve Bank which she says showed that planning restrictions and zoning raised the cost of an average apartment by 68 per cent in Sydney, though less than a third of this in Melbourne and only a relatively tiny fraction in Brisbane.
Falinski defends the role of property investors as a source of supply of rental accommodation, and it seems unlikely that he, as chair of the inquiry, will be recommending any reform to relevant tax settings (ie. Negative gearing and the 50 per cent capital gains tax discount). See also Jason Falinski: Immigration has no impact on housing supply, in which Macrobusiness author, Leith van Onselen, sets out to demolish Falinski’s argument that a general undersupply of housing is the main culprit in the housing affordability debate, instead blaming excessive net immigration as the primary driver of any supply shortage. Some would argue (as many well-respected economists do) that if strong annual net migration to Australia is on balance positive for the economy, then housing supply should be boosted adequately and in a timely manner to cater for it.
Labor’s frilled-neck lizard solution
Writing in The Conversation, University of Queensland Economics Professor, John Quiggin, outlines Labor’s proposed $10 billion social housing policy initiative, the Housing Australia Future Fund – a mechanism analogous to a number of other government funds, including the ‘Future Fund’, used to fund public service pensions. In its first five years, the proposed new housing fund (or more accurately excess returns from such fund) would be used to build 20,000 social housing properties and 10,000 affordable housing properties, and to provide financial support for other public housing initiatives, including those addressing the needs of remote Indigenous communities, women and children fleeing family and domestic violence, and older women at risk of homelessness.
Quiggin notes that “like the frilled-neck lizard, the $10 billion looks much bigger than it is” and that “Labor could probably do what it has promised to do for $450 million per year”. He appears to give Labor’s initiative a qualified tick.
Singapore shows the way
In this article from The Conversation, University of Sydney research fellow Cameron Murray outlines his new idea for boosting the supply of social housing, inspired by the Singaporean government’s long-standing direct involvement in the development and financing of public housing, through the Singapore Housing Development Board (HDB).
As Murray points out, over the past four decades and thanks to the HDB’s efforts, home ownership among Singapore’s 25-24 age cohort has climbed from around 60 per cent to 88 per cent, while at the same time the corresponding age cohort in Australia has seen a reduction in home ownership from around 60 per cent to 45 per cent. Overall, 8 in 10 of all dwellings in Singapore today were built by the HDB over the past 50 years. Eligibility to participate in HDB’s offerings is limited by income and age, and owners are required to hang on to their property for five years, with resales limited to only other eligible buyers.
The HDB’s remarkable achievement obviously warrants analysis to see if and how lessons can be drawn for Australia. Murray’s proposal for an Australian version of what Singapore has done through HDB is called “Housemate”, a model he claims could halve the cost of buying a home.
The following gives a flavour for the core elements of Murray’s proposed scheme: It would rely at least to some extent on cheap public-owned land and cheap federal government loans, for up to 95 per cent of the purchase price; buyers would need to satisfy certain eligibility criteria (partly age and marital status related); buyers would be permitted to dip into their super to fund both their deposit and mortgage repayments; buyers would be required to occupy the home for seven years, with limits on leasing and resale during that time; and thereafter they would be disincentivised from making any sale to someone other than another eligible buyer. Murray acknowledges that his proposed scheme will attract critics, and he seeks to address some potential criticisms.
Women “falling through the gaps”
It has long been known that older women are Australia’s fastest-growing group at risk of homelessness. This has been attributed to a variety of factors, including them tending to take the primary child-rearing role in a family (with associated time out of the workforce and a diminution in lifetime earnings and superannuation savings), ageism in the workplace, marital breakdown and the impact of family and domestic violence.
SMH social affairs reporter Caitlin Fitzsimmons discusses a new idea to help vulnerable women with steady but low incomes chart a path to home ownership. The idea, which is backed by the National Housing Finance and Investment Corporation (NHFIC), has been dubbed “build-to-rent-to-buy”, or BTR with a right to buy bolted on. NHFIC is trialling various models of this idea through a pilot study in Canberra, with hopes to scale them nationally, if successful.
nder one model being considered, a woman would rent a home from a community housing provider over a 10-year period, at a rental discount of around 20% to the market rate, and then have the right to buy it. The woman would be given a share in capital growth and the savings from the operational efficiencies and cheaper finance. For older women, a shared equity model might be preferred. Fitzsimmons cites 2020 figures from the Housing for the Aged Action Group (based on data from the HILDA survey) which estimated that there were 405,000 women nationally aged 45 and over at risk of homelessness, including 110,000 women in NSW and 120,000 in Victoria.
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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