A boomer’s take on the housing crisis: a personal response

Recently, Tas Times on-published an article by Matt Ellis (via John Lawrence) which carried the title “The housing crash we had to have: A Gen Y perspective on the bubble”. You can read the article again [Here] and Ellis’s full article in [Rational Radical: Here]. I share Ellis’s view that we have a broken economic model. Ellis says that this…

utterly broken economic model is wholly reliant on housing speculation … and unacceptable financial risk.

Furthermore Ellis points to private debt (‘we borrow too much’) and certain financial policy settings which apparently enable Gen Ys to do so much borrowing.

Pete Godfrey, in the first of the comments that followed that TT article recalled the 60s/70s when some of the then-young went bush, shared land, and built their own homes. Pete told us

It is not just the real estate industry, banks and policy makers that have conned everyone. We only have to look around at what passes for a normal house these days, everyone wants to live in a massive house with every conceivable gadget installed [and he recalled ] Way back in the 1960s and 70s a few folk dared to think differently and chose not to follow the spin. They went bush, shared land, and built cheap home made houses. I was one of them. I bought my own land and built a small timber slab hut from salvaged trees. The total cost was $350. I can assure you that I managed to survive, without power, without TV. And I loved it. People need to think outside the box, too many people are caught up in following the flock, doing what is expected and being slaves to their job. Government policy has been to make jobs insecure, workchoices did that well. It took away job security,put people on short term contracts. Then the government tells people ” get a good job then you can buy a house”. Folks it is bullshit.

Pete went on – with passion – to conclude…

You are being controlled by lunatics, the asylum is our society and the loonies are in control. Go overseas look at how other people live, see that it is possible to be happy without a 30 year mortgage. The system stinks and it stinks deliberately. What the lords want is a bunch of workers who are too frightened of losing their jobs to say No, or ask for better pay or conditions.

…Yes, Pete Godfrey struck a chord with his comment…

Me? I’m a worker. I think of the recent payrise for Parliamentarians that the Libs and also (?) the Labs passed for themselves, just recently, in Hobart. I’d prefer instead that our Parliamentarians were paid no more than our country’s men and women who are on the dole. I recall that Eric Abetz once made quite a few dollars from real-estate deals – deals about which some (e.g. John Hawkins) have raised questions ( TT here ).

I think of Eric Abetz, of real estate deals and I think of this housing bubble ‘question’. I think of Pete Godfrey’s comment and I recall what got through to many of us ‘boomers’ … turn off, tune in and drop out. And we did … in varying ways. Many of us funded/found ways to get a toe-hold and to get beyond rental. In my case we couldn’t ‘go bush’ straight up, we borrowed from family, from friends, from the credit co-op just to scrape up enough for a deposit on a tiny concrete house in ‘Olympic Village’ aka West Heidelberg … a Housing Commission area in Melbourne … some of these places had become privately owned, most were rented out as public housing. Just as you wouldn’t expect to find Will Hodgman living in Bridgewater or Ravenswood, you wouldn’t have found him living in ‘the Village’. It was a tiny half-house, a twin under a shared roof. We’d got a ‘low start mortgage’ from the (Victorian) Real Estate and Stock Institute. The RESI. On my wage, with four kids, that was all we could afford. At the time, most families had just a single wage coming in. Where we were, many had only social service benefits or the dole

With two more kids (twins) we sold the place 7 years later, in the eighties, for a block of land in the Liffey, and a house ‘under construction’ … and (slow-coach me) it still is unfinished! Given the interest rates and the way the first loan had been structured, we’d still actually owed the RESI as much as they’d loaned us when we sold that Commission place, but fortunately (?) the prices had risen and for one brief moment I had a cheque for $20,000 in my hand before I gave it back to our solicitor as our deposit on Liffey. I still had no money. And so the story goes.

As I see it, we’re on a treadmill which we call a ‘growth economy’. In capitalism, the lingo is all to do with sales and demand. For the capitalists to operate, they need the sales and so there has to be a demand for their goods. One way of increasing demand (and thus, sales) is to increase the number of people needing what is being sold.

Look at the graph (heading this article) that our Gen Y author, Matt Ellis supplied to illustrate the ‘housing bubble’. We can see that in those post-war years (beginning just prior to 1950), housing prices began to rise, and have steadily continued to climb, over the last 65 years. At this time, the labor govt of Ben Chifley had commenced a massive immigration program (after we had just escaped a Japanese invasion by the skin of our teeth). They said, we had to ‘populate or perish’, to survive as a nation. With the coincidental and wonderful baby boom that had followed the return of our servicemen – and I am such a product – around the nation there were not the vacant houses to take these new families. Both Aussie and then New Australian families were in a bind. Just prior to the war, there had been established Housing Commissions in some states, but they didn’t really kick off till after the war. Living with your in-laws must have been a hard call for many a man, or woman.

What was the alternative? Where were the jobs, where were the houses? To have a house, in my opinion, was the Great Australian Dream – a house of one’s one. Some things seem to be fundamental to all humanity … housing is one of those things. Love, security, family etc. Well, in my parents case, the Housing Commission came through with the goods. My parents, with presumably little money, having taken to the Dandenong Hills, to live without power in a fibro-cement shack, made available by family friends, eventually moved into a prefab, concrete Commission home in the suburbs, just as I myself did some twenty five years later … before I baled out and gambled on being an owner builder on the side of a mountain whose bush is quintessentially australian … Taytitikitheeker … aka ‘Drys Bluff’.

I’ve been looking at a few articles on Google, trying to see what other people thought about the housing bubble. Philip Soos and Paul Egan in “What is your home worth?” [Here] present information which suggests that it is the cost of the land, and not the cost of the construction which is escalating. However, much of the housing market is in established stock, where buyers compete at auction to buy an established home. I read the Herald-Sun the other week. You’ll get quite a few hits if you google ‘herald sun chinese housing‘. Here’s one I found: “Chinese to buy $60b in Australian housing” [Here] It’s quite an eye-catching headline. Here’s another 10 million Chinese buyers look to buy Australian homes… Another article tells us that in Melbourne and Sydney, 25% of new housing stock is being sold to Chinese investors. What effect will that have on regional Australia … which includes Tasmania?

Recently, in Tasmania’s north east, I’ve seen a number of bush properties logged, and then put up for sale as ‘lifestyle’ opportunities. I call this practice log and flog. Last week I was astonished to see one such large piece of just-logged bush had been subdivided, advertised as lifestyle opportunity, with the sub-divided blocks each selling from $220,000 !!!

These blocks are 15 mins out of the Launceston CBD and are not serviced …

These blocks are 15 mins out of the Launceston CBD and are not serviced. $220k just for the land sounds like a fair bit, but consider the plight of those across the strait … Melbourne. My wife’s family home was just put up for auction as part of her parents’ deceased estate. The house, in fair-poor condition, is weatherboard, tiled roof, three bedrooms and a bungalow with a modest backyard and front lawn. The suburb was built after WWII, for the baby boomers and was a mix of private, Housing Commission and War Service Loan housing. I was from the same area. In the 50s, everyone there was ‘new’ and the age profile was similar. Everyone was ‘starting out’ in new homes, brick veneer, weatherboards and prefabs, unsealed streets, no gutters, no footpaths. We were all working-class, dads going to work each morning, kitbag in hand, catching the bus (cars ‘as rare as hens teeth’), mums staying at home, doing the shopping, cutting the lunches, the washing done in the copper before Hoover invented the little twin-tub, her talking to the neighbours across the fence and even playing mid-week tennis!

But now, 60-70 years later, with housing estates at remote distances from Melbourne itself, as far out as Uranus, Neptune or Pluto, there is incredible buyer pressure on these now older, now relatively inner, ‘established’ suburbs. This family home, up for auction had a crowd both sides of the street, there to watch. On the front lawn were the auctioneer and agent, members of the selling family and five or so bidders. These last were a mix of ‘investors’ (buy and lease), developers (buy, demolish, build units and sell … a bit like your urban version of ‘log and flog’) and one young couple who wanted to start a family.

The young couple wanted the house real bad. They both work for a respected Bank so I guess they knew how far they could go with the bidding. The reserve, I later discovered, was set at … $700,000! The bidding was begun when the auctioneer offered a bag of lemons to whomever made the first bid. How well I know the tree in that backyard, from which the lemons came, and how well I knew the man who planted it, those many years ago. The first bid – well below the reserve – was made and the bag of lemons had a new owner. Minimum bids were taken, $1000 was the price. The young couple put their shoulders to the bidding wheel. The reserve was breached, albeit unknowingly. Still the bids kept coming, up through the $700k’s and then beyond. Our unknown couple stuck grimly to the task, as the bids passed $800,000, $820k… $850… 870 and somewhere some bidders dropped out, but two or three (including the young couple) remained in.

Bids were now being taken in increases of $500. $880,000 … $880,500… $881,000… $881,500 and so on to $887,500 then this young couple called $888,000 and finally there was no counter bid. The investors and developers had given up. Going, going and gone!

This is what those in the big cities are going through – under this ‘housing bubble’ – in order to realise the Great Australian Dream – home ownership.

After the auction, the selling family took the young couple next door to meet their neighbours of 57+ years, had a chat and a cup of tea, and then this couple walked down the road, hand in hand to return to their car. She, when they’d got some distance down the street, gave a little skip of joy, as they walked along. We can all feel happy for them and hope that they will make a go of it. Their kids, when they come, will go to the same school as the baby boomers.

But mum won’t be staying home, doing the washing and talking to Mrs Kafoops over the fence while the kids grow up. She’ll be working for the rest of her life (if she’s lucky). There’ll be no mid-week ladies tennis for her. She won’t be putting a paper bag containing sandwiches, two bikkies and a piece of fruit into their schoolbags then waving to them from the door, as she sees them begin their walk to school, along with all the other kids they once would have bumped into along the way. No, her kids, once they are old enough, will be sent to creche/child care, because she will have to return to work as soon as possible. After all, eight hundred and eighty eight thousand dollars is a massive amount of money to repay. Then, when the kids go to school, they will be parked in ‘after-school’ programs until such time as Mum or Dad is able to get away from work, to pick them up – often in the winter dark – and bundle them into the car, do the supermarket, get them home, turn on the telly for them, get the tea going, get them fed, be together, get them to bed, read them a story, get them up, get them dressed … and so on. I hope that their humble home does not become a millstone to them.

And then, for our young couple who are about to start a family yet are saddled with this huge mortgage, with the housing dream finally realised, there are the unwelcome possibilities … ill health, loss of job or even family breakdown. Finding a home is becoming increasingly difficult, in Australia. Whether it’s in the big cities, or even whether it’s in the regions, or (like Pete and me) in the bush, things are getting harder, if not impossible. We, who lie comfortably abed each night, should ask ourselves, on behalf of our fellow Aussies:

“What needs to be done, in order to bring a stop to the relentless expansion of the cities and of the suburbs and of the regions? What needs to be done so that we all have access to housing at reasonable rates?

I suggest – strongly – that we consider curtailing Australia’s population growth, that we consider preventing investors and developers from buying up existing housing stock and that we immediately reject foreign ownership of our houses and our lands. It’s time we had a real discussion on ‘growth economies’.