I have a confession to make. This month, when the House of Representatives Committee on Tax and Revenue convened to hear from Treasury, the Department of Social Services, and the Reserve Bank on housing affordability, their evidence did not have my full attention.
You see that day I was homeschooling, and my daughter was conducting a Food Tech experiment in the kitchen. As the hearing got under way, disaster was unfolding next to me.
For the next 30 minutes, I tried to juggle my dual obligations. I quickly came to realise they were the aligned. In both places I was trying to understand what had gone wrong, and how we could get it right for our children.
The way things stand, there is little chance that my daughter or her friends will be able to afford their own home. Low homeownership correlates with increased wealth inequality, worse mental health, greater democratic instability, domestic violence and less economic productivity. So, it is a concern that, despite generous government assistance, homeownership for people under 40 is now lower than it was in 1947.
There are many stories in the media of houses selling $1 million above market. This is not a well-functioning market; it is a sign that buyers are desperate.
Why has the Australian housing market gone as wrong as the food tech assignment?
Here is a summary of the usual suspects: property speculators (however, the proportion of property investors has been at record lows), net migration (for the last 18 months net migration has been zero), interest rates and the tax system turning housing into a speculative asset.
Some of these are only a problem if you stop people from building more houses.
Think of it this way: government programs help 100 people to buy a bus ticket, but there are only 50 seats on the bus. At this point we have a choice, we can either get another bus, so everyone can get on, or we can tell half the people waiting to rack off because they don’t deserve a seat. Currently, councils and our planning system does just that.
Five years ago, Sydney was undersupplied by 100,000 houses. The NSW government says 42,000 new homes a year are required to stop the problem getting worse. In 2020, only 29,500 homes were built. This year building approvals fell another 10 per cent. The RBA says that 68 per cent of the cost of a Sydney apartment is due to planning laws.
Only one of 35 local government areas in Sydney is on track to achieve their housing targets. In Brisbane, at the end of December just 5,905 approved lots remained, way below the government’s mandate; and in Melbourne, a $1 million apartment includes $220,000 in taxes.
Some would argue this is not an issue, in my view it is nothing short of intergenerational theft. Funnily enough that is exactly what the NSW government’s Intergenerational Report says.
This is driven by insiders who refuse to countenance the role of supply. All they talk about is reducing demand, by increasing taxes, increasing interest rates, and cutting the HomeBuilder stimulus scheme that offers $25,000 grants for new homes. Oh, and stop eating smashed avocadoes.
It means, and could they just be honest about it, that millions of Australians under 40 should just put up with never owning a home. It is a cruel and dishonest argument made by vested interests. It amounts to victim blaming. Besides providing homes for the next generation, building new homes creates a lot of new jobs.
We have the least densely populated continent in the world with plenty of land to build on, and some of the highest wages in the world. It is hardly that difficult for us to create an affordable housing market. Sydney has the third most unaffordable houses in the world, Melbourne sixth, Adelaide 13th and Brisbane 18th.
I ask you: should we accept the unfair deficit of seats on the housing bus or stand up to the outrageous misuse of power by the high priests of policy who lie to all of us to protect their privileged position?