[By Sue Bolton] The federal treasurer’s “solution” to the housing affordability crisis is to get state governments to relax restrictions on housing developers to increase supply. Scott Morrison told the industry’s peak body, the Urban Development Institute, on October 24 that “housing in Australia, especially in Sydney, Melbourne and Brisbane, is expensive and increasingly unaffordable, but that does not mean it is overvalued.” How can you have more affordable housing and keep prices up at the same time? The answer is you can’t do both.
Morrison’s claim that housing can be made more affordable while keeping prices up indicates he is not interested in making housing more affordable. His proposal is to get state governments to extend urban growth boundaries — doing the bidding of property developers who resent any impediment to making spectacular profits.
This would mean releasing more land and allowing development on areas currently reserved as “green spaces”.
The land that is released for development on the urban growth boundary in Melbourne is mainly owned, or optioned, by six to eight large developers. The release of more land on the urban growth boundary will simply encourage speculation just outside the urban growth boundary.
We are in the middle of a building boom in Sydney and Melbourne, with record numbers of housing approvals.
If housing supply was the issue, rents and the cost of housing would have come down. But that hasn’t happened: housing has instead become more unaffordable.
Speculation is the reason housing prices are going up during a building boom.
In its December 2015 report, Prosper Australia found that:
- 4.8% of Melbourne’s total housing stock was vacant in 2014.
- Up to 18.9% of investor-owned property was vacant.
- The speculative vacancy rate had increased by 28% since 2013.
Prosper Australia analysed abnormally low water consumption over 12 months to determine the number of speculative vacancies. It found that the speculative vacancy rate rose 28% for properties using less than 50 litres of water a day. Those using zero litres of water increased by an amazing 70%.
“This is clear evidence land is being hoarded for profit,” the report stated. It also showed that over eight years, hoarding has been magnified by intense speculation in land and housing.
Even if there was a supply of more “affordable” private housing, it’s unlikely to remain affordable as it would get snapped up by investors. First home buyers go through the demoralising experience, each weekend, of turning up to auctions only to be outbid by investors. More than half the money lent to buy homes each month goes to investors. This is up from 15% during the 1990s.
While speculation in housing is not new, the Howard Coalition government massively fuelled speculation in property in 1999 when it halved the rate of capital gains tax, making negative gearing even more attractive.
This meant that renting out a house at a loss, or leaving a house vacant, became a way of reducing tax. There are no limits on how many dwellings an investor can own and leave vacant. Investors poured into the market with one in six taxpayers becoming a landlord, according to the Age economics editor Peter Martin on October 27.
There is no mystery about how the property industry works.
Developers charge what they think they can get away with. They make sure that demand is tight by land banking, which is when you don’t release land for development until profits from that development are likely to exceed the profits from speculation.
We need measures to restrict speculation, including doubling the capital gains tax, the abolition of negative gearing and forcing investors to rent out or live in their properties within a certain time frame.
Such measures would help, but not solve, the housing affordability crisis. Ultimately, the market is not an effective mechanism for providing affordable housing. We urgently need laws in this country to cap rent and for more security for tenants.
We also need a serious federal budget allocation to public housing. Public housing is the only genuine form of affordable housing. From the early 1980s, a succession of governments has followed the neoliberal path of selling and outsourcing public services. Public housing hasn’t escaped their zeal.
First we had the government propaganda about how public housing had failed. Then came the propaganda that we needed “social housing” — a term that was always ill-defined — rather than public housing. Most thought social housing meant public housing, but better.
Then came the government push to either demolish or sell public housing and to not replace or transfer it to not-for-profit housing associations.
Another problem is that housing associations are based on a capital accumulation model. They are required to borrow money from banks to expand their housing stock. To repay the loans they become unwilling, or unable, to rent out their social housing to vulnerable people living on benefits, or with a low income.
Residents in social housing run by housing associations pay higher rent than public housing tenants and have less security of tenure. Some housing associations operate in a very similar way to private real estate agents, including their policy on evictions.
We have a housing crisis in Australia. There has been a spectacular increase in the number of people who are homeless or who are barely holding onto their accommodation because of increases in rent. To add to this precariousness, there is an increase in unemployment, underemployment and casualisation of work.
If we want to avoid a social catastrophe, we have to reject those who argue that public housing has failed and demand a massive expansion in public housing.
[From Green Left Weekly.]