With a federal election just around the corner it is time to talk policies. There are two big issues to address: sustainability and inequality.
The former attracts much well-ventilated debate. The latter, with its issues of social and financial sustainability discussed last week, is arguably more important. And nothing is more inequitable now than housing. So, what do our politicians propose to do?
Australia is currently in the grip of a crisis for both buyers and renters. For potential buyers house prices are rising an alarming rate, putting ownership out of reach for a whole generation. For renters, particularly those on low or welfare incomes, there is an extreme shortage of social housing. We urgently need policies to address these intertwined situations.
The federal Parliamentary Library makes a linguistic divination between the stress for owners as ‘housing affordability’ and the stress for renters as ‘affordable housing’. Somewhat similar to the incomprehensible division that Tony Fry makes between the ‘history of design’ and ‘design history’ in his book of the latter name.
Nevertheless, let's go with that subdivision for our analysis.
Housing affordability – buyers
What is the scope of the problem? For buyers, affordability is measured in the price/income ratio: comparing the average price of a dwelling to the median income. In 1980 the factor was 3.3, which it was roughly since WW2.
The recent rocketing rise in house prices, which economists point out is beyond any calculable value of the land and construction, generates rises of 20%+ this year in some cities. The price/income ratio exploded to 12 or more. Four times the deposit and four times as long to pay it off.
The causes are variously identified as a lack of supply; unprecedented and inordinately low interest rates; and the preferential treatment given to investors. Depending on the vested interests, the remedies variously concentrate on one of those factors, when all three need to be addressed.
On the face of it we don’t have a housing supply shortage: there are about 9.84 million households in Australia and 10.6 million dwellings (these are ABS figures, others vary widely).
However, if you deduct the dwellings not occupied by households (holiday houses, Air B+B etc.) we might estimate that there are several hundred thousand households who are not able to find a home of their own and are currently sharing. The problem has eased somewhat with the downturn in immigration, but it will get worse soon.
There is no doubt that low interest rates encourage house purchases, but the steep rise in prices preferences investors, and discriminates against those without significant assets, first home buyers. Net result: money is cheaply available to those who already have assets, and increasingly out of reach for those who don’t.
Policies are needed to increase supply, and support first home buyers, but cool the easy money for investors. No party shows any inclination to address all three. The Liberals like Jason Falinski talk about increasing supply, through more greenfield sites opened up at the suburban fringes, but it has no official policy. But then, neither does Labor.
The Liberal election manifesto, entitled ‘Our Plan’, with a picture of Scott Morrison on every page, says it supports first home buyers through its ‘HomeBuilder’ program and some concessional rates for home loans for 30,000 households. But it’s over 1 million that need help. Last election Labor matched the LNP promises on first home buyers and will probably do so again.
But it’s in the area of encouraging multi home purchasers that the policies of the two big parties differ. Or at least they used to. Last election Labor promised to abolish negative gearing and a reduction in capital gains tax concessions from 50% to 25%. Sound policies if you want to discourage multiple home ownership.
The LNP did not, viscously attacking those ideas, together with Clive Palmer’s intractable lies (e.g. death duties tax). Labor was so chastened it has withdrawn its policies, which were eminently sensible then, and urgently needed now. Talk of tax reform is now considered so evil that no party has any policy to effectively address the spectacular rise in house prices, further entrenching inequality. Those who have a house can own more houses, further shutting out those who don't.
Affordable housing – renters.
What's the scope of the problem? Most economic commentators identify the lowest quintile, that is the poorest 20% of household income earners, as needing some form of rental assistance, and the lowest 10% requiring some form of ‘social housing or SH’ – discounted rent in housing provided by the state, or a not-for-profit organisation.
Social housing has recently declined below 5% of total housing in Australia, to 436,000 dwellings. Yet we need at least 10% of the housing stock to be social housing (and a further 10% as subsidised ‘built-to-rent’). We need to increase SH dwellings to about 1 million, that is a further 560,000 dwellings.
Let’s assume a SH dwelling costs about $330,000, excluding land costs (an average identified in recent State proposals and my own recent social housing projects). This gives an identifiable cost for providing social housing in today's terms at $185 billion, or roughly the cost of two French submarine contracts.
But only one side of politics seems in any way interested in addressing a problem that large as the LNP is largely silent on the issue of social housing, referring to ‘affordable housing’ in only one line in ‘Our Plan’.
The Labor party has a $10 billion program, the Housing Australia Future Fund, to invest in social housing through the Future Fund Board of Guardians (chaired by Hon Peter Costello AC). Labor proposes that each year investment returns from the Housing Australia Future Fund would be transferred to the National Housing Finance and Investment Corporation (NHFIC) to pay for social and affordable housing projects.
Over the first 5 years the investment returns would build around 20,000 SH properties (4,000 allocated for women and children fleeing domestic violence and older women on low incomes at risk of homelessness) and 10,000 affordable housing properties for frontline workers. Woefully inadequate, but a start is better than the nothing the LNP is offering.
What about the Greens? They correctly identified the need for 500,000 social dwellings in the previous election. But they are doubly damned: unable to implement any policy unless they have the balance of power; and once they got that power, they voted against an ETS and forced a carbon tax on to the Gillard government. Any greens proposal is impotent irrelevance.
Inequality is the key issue of our times. Architects can help advocate for sensible policies for purchase and rental housing at this federal election, particularly since neither major party seems willing to address the issues with anything more than a token offering.
Tone Wheeler is principal architect at Environa Studio, Adjunct Professor at UNSW and is President of the Australian Architecture Association. The views expressed here are solely those of the author and are not held or endorsed by A+D, the AAA or UNSW. Tone does not read Instagram, Facebook, Twitter or Linked In. Sanity is preserved by reading and replying only to comments addressed to [email protected].