How bad is the ‘housing crisis’?
In The Great Divide – Australia’s Housing Mess and How to Fix It, economist Alan Kohler pushes his way through queues of desperate renters, would-be mortgagees and the homeless to explain that a majority of Australians, investors, banks, and politicians don’t think there’s any crisis – it’s all going splendidly.
For at least a generation, our two major parties have worked tirelessly to create the mess we have now, one that increases wealth for the wealthy, and which dispossesses the rest of us of the means to live well, and with the certainty of a roof over our heads.
Labor and Liberal offer pious aspirational ‘policy frameworks’ in regard to rising housing unaffordability and homelessness (two separate but linked issues), while ensuring nothing genuine is done to wind back the system they built for those with means and money to invest in property.
Neoliberal economists will sigh and point out that property ownership creates wealth, which is, broadly speaking, a public good.
They ignore, however, that the inequities of wealth creation from property investment is increasingly unbalancing the entire economy.
The tax breaks and support we give homeowners, investors and developers – to the joy of profiteering banks, real estate industry and media that parasitise the system – are clearly inequitable, but neither major party will risk changing the system because mortgagee, investor and corporate power holds sway.
And, again, on paper, wealth is being created, not least because the risks of investing in business or stock exchange are higher than investing in property. The capital gains on passive and unproductive investment like property are greater than returns on other forms of investment that might actually grow our economy.
That’s why corporations ‘land bank’ and property investors sometimes leave properties empty – beyond a certain point, minimal capital gains tax and negative gearing work superbly to create wealth for…[checks notes]…the wealthy.
Meanwhile, the third of us struggling to find a rental property or simply pay the rent – mostly those born after 1980 and older women – can’t compete with the battalions of investor lobbyists in the corridors of our parliaments.
When Labor briefly raised the idea of tweaking negative gearing and capital gains tax settings (currently a $96 billion per year subsidy for buying houses), there was outrage from the corporate sector and homeowner investors. Labor now vows to leave both levers alone, and howls with similar outrage when the ‘extremist’ Greens suggest otherwise.
Legislative settings favouring investors, and the endless war on unions from Murdoch media and the corporate shills in our political parties, have seen workers increasingly less able to stand on the tilted playing field. Wages growth has slowed and, since 2000, the gap between the average wage and house prices has ‘gone from 3 to 4 times [average annual] income to 7 to 8 times income’ has made it a reality that ‘Australian homes have simply become too expensive for society to work normally.’.
Kohler covers all this, how other nations fare and why, our specific history, why home affordability and homelessness are separate issues, and a host of other factors, like immigration levels, the defunding of public housing programs, control of housing supply through zoning, public versus private transport, and why medium and high density housing are unlikely to happen in our vast suburban sprawl between inner urban CBD and the far outer satellites.
Our politicians largely ignore all of it.
Blaming immigration and threatening to cut or cap numbers is a similar bait and switch game, played by both major parties. Howard, for example, quietly increased immigration to provide cheaper labour for the corporate sector and undermine unions, while loudly damning refugees to whatever hell they were escaping from.
Equally, Labor agree secure and safe housing is a human right, while only offering ‘to remove the stigma of homelessness rather than removing the homelessness itself’ and ‘improving services for homeless people’
Kohler dedicates the last chapter to solutions for housing affordability. You’ll be shocked to learn the solutions on offer from the two major parties are a/ unlikely to help in any way, and b/ are likely to make things worse. For example, first-home buyer grants take money from hospitals and schools and throw it at the real estate market, already drowning in money. It makes the politician look like they’re doing something positive for struggling renters or buyers, but actually inflates house prices – a boom for banks and investors.
Actual solutions to reconnect wages to home affordability require politicians to stand up to electoral, political and media outrage for the greater good. Kohler outlines a range ofsolutions that put investors second, and our people and economy first. Investors won’t have anything taken from them with, for example, tweaks to negative gearing and capital gains tax – they’ll just accumulate wealth at a slower rate while wages slowly catch up with house prices. As Kohler points out…
‘Any serious effort to deal with housing affordability should be explicitly aimed at getting that ratio [wages to house prices] down and keeping it there.’
But, while home-owning investors and the wealthy choose property as their prime means of increasing their wealth, and a powerful cartel of banks and investors prevent any legislative changes that might threaten that, little is likely to change.
Kohler sums it up thus:
‘My view, and the basis of this book, is that there definitely is a problem, and the high price of housing is undermining social cohesion and the proper functioning of the economy and the nation.’
So far, the only party willing to look at potentially effective pathways forward are the ‘extremist’ Greens. Meanwhile, Labor blames the Greens for holding up their largely useless legislation, the Coalition blames immigrants so they can leverage white working class resentment into votes, and disenfranchised Australians will increasingly look elsewhere for answers.
They’d do well to start with Alan Kohler’s excellent and succinct The Great Divide.
The Great Divide, by Alan Kohler, 2024, RRP: $27.99, Black Inc.. 208pp, ISBN: 9781760645373
B.P. Marshall is a scriptwriter and author.
