Opinion Pieces

Is the great Australian housing dream finally dying?

September 13, 2021

On January 1, 1901, Australia’s six colonies (OK, Western Australia was late to the party) came together to form the Australian Commonwealth. There were many reasons driving disparate parts of this continent together. One was the promise of an Australian Dream centred on homeownership.

The significance of homeownership in 1901 is not fully appreciated today. Back then, the class divide was about whether you owned land. Ensuring everyone had an opportunity to own their own home was about creating a classless society.

On Tuesday, the Tax and Revenue Committee of the House of Representatives will convene to inquire into whether this dream should be condemned as an ideal of another century.

It is on the back of middle class home owners that liberal democracies were built. They are the bulwark against political extremism.

On the face of it, this makes no sense. We have created a nation of immense wealth and capacity. Outside of Antarctica, we live on the least densely populated continent in the world, with one of the highest average weekly earnings among the OECD nations. Yet, we still have the least affordable housing markets on the planet.

If you are under 40, you are less likely to own a home than at any time since 1947. When updated census data becomes available, this is likely to be since 1901. Let us be clear, this is a fundamental betrayal of one generation to the next.

The cost of this problem is too often seen in terms of house prices – it is much more.

Thomas Piketty’s data makes clear the major cause of inequality in the world is determined by homeownership. If you want to reduce inequality, you need to ensure widespread homeownership. Plus, it is on the back of middle-class homeowners that liberal democracies have been built. They are the bulwark against political extremism.

Last year’s retirement income review demonstrated that financial security in retirement comes not from your superannuation balance but the equity in your home.

All of this is well and good but does not touch on the human costs of this public policy failure. There is the mental health cost when people don’t feel safe because of insecure housing tenure. Countries with liquid housing markets tend to have lower levels of domestic violence, lower levels of unemployment and higher rates of economic growth. Economic growth being a fancy way of saying more job opportunities.

The Tax and Revenue Committee’s inquiry is our last and best chance to understand why in 1985, growth in house prices radically accelerated away from underlying inflation. Everything the vested interests told us to try has only made the problem worse: we turned housing commission into social housing, we introduced affordable housing quotas, we discounted capital gains tax, we incentivised first home buyers. We even eliminated immigration for a couple of years.

The problem only got worse.

Maybe, just maybe, it is time to ask the usual suspects to justify their ideas. To ask them why they think the Australian housing market is the only market in the world where supply has no effect on prices?

It is a rare opportunity to take stock, consolidate and recalibrate the gap between the aspiration of every Australian sharing in our nation’s dream and reality.

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