As Milligan & Tiernan have commented (2011, 391), affordable housing and its provision is “vital to economic participation and productivity”:
Secure, affordable housing is essential to employment and educational outcomes and it has been an important source of investment and wealth creation, especially for Australian households who own their own homes …
The promise of being able to provide affordable home ownership was especially important in shaping Australian nationhood. By 1941, over half of Australians owned their own homes, and home ownership was central to postwar nation-building (Millegan & Tiernan 2011: 391-392). By 1981, 73% of adult Australians owned their own homes. (Dalton 2009: 65) Importantly, home ownership was an ‘Australian dream’ which included individuals from across a wide range of income groups (Beer 1993: 147). Post-war Australia could pride itself on being ”a unique wage earner’s welfare state that was centred on mass homeownership”, in favorable contrast to other nations (Milligan & Pinnegar 2010: 326).
As has been well-documented, by 2018 this is no longer so. Indeed, between 1981 and 2018, as (for example) the recent Grattan Institute report Reimaging the Australian Dream documents (Daley et al 2018), the picture has changed almost completely. Housing ownership as a whole has declined to something around 67%. Yet, since 1995, house prices have risen and risen by the staggering figure of about 5% a year—and from about 4 times median income to over 7 times that figure today (Daley et al 2018: 15-16). In capital cities, the rises have been most rapid, hiking about 30% in Melbourne and Sydney since the end of 2014 alone (Daley et al 2018: 16-17): effectively meaning that many properties in these cities are ‘earning’ more per annum than many low-income Australians.
To put these things in perspective, average household income rose about 10 times between 1975 and 2015: a figure which roughly tracks the consumer price index. In that time, house prices rose by something around 30 times (Mia 2015). In February 2015, the average house price in Sydney was around $850000, well over ten times median annual income. Melbourne’s median house price was about $615000 (Mia 2015). By 2018, this Melburnian figure has surpassed that of Sydney in 2015, while Sydney’s median price is presently over $1 million (Duke 2018).
As a result, Australian spending on housing has hiked after 1980. From around 10% of total pre-tax household income at that time, it is presently around 14% in early-mid 2018 (Daley, Coates, Wiltshire, Percival & Robertson 2018, 14). More than ever, this expenditure is given over to paying down mortgage debt. The figures here are again troubling: from around 70% of household disposable income in 2000, housing debt is now more than 130%. Total household debt as of 2018 is around 190% of household after-tax income (Daley, Coates, Wiltshire, Percival & Robertson 2018, 87; Soos 2016), a situation that has caught the concerned attention of international institutions (Soos 2015). In 2014, for example, the International Monetary Fund (IMF) sent an economic team to Australia to examine “the risks posed by property speculation and record-high household debt as part of a broad health check-up of the sagging domestic economy” (Fin. Review.2018) By late 2014, Australian homes were rated the third-least affordable of OECD countries’, behind New Zealand and Canada. By 2015, Australia’s housing was the second least affordable globally, following only Hong Kong (Janda 2016).
There are serious equity implications here—by which we mean social, as well as financial equity. It is not just that the steepest house price increases have occurred amongst lower-price housing stocks, as against houses in the higher ‘deciles’ (Daley 2018: 85). This is creating the kind of situation described last month in an Anglicare report on housing affordability for people on benefits in Sydney, suggesting that nearly no houses are affordable in that metropole for the most disadvantaged (Anglicare 2018). More than this, the period of the ‘housing boom’, as it is sometimes called, has seen an unprecedented intergenerational transfer of wealth: “a once-off change that is unlikely to recur to help younger generations” (Daley et al 2018: *). Rates of home-ownership rates among 25-34 year olds have plummeted. It is of course normal that the young should own less than older demographics. Yet in 1981, more than 60% of 25-34 year olds owned their own homes in Australia, as against only 48% by 2011. By 2018, the figure for 25-34s is around 45%, still going South. Grattan Institute research suggests that while 65-74 year olds were $480,000 wealthier in real terms in 2016, as against 2002, in the same period, 25-34s’ wealth has stagnated (Daley, Coates, Wiltshire, Percival & Robertson 2018: *).
Of course, multiple factors underlie these figures. Yet the principal factor is the rise in the price of the deposits necessary to enter the market. Whereas in the early 1990s it took six years to save a 20% deposit for an average-cost home, by 2018, it now will take around ten years for a middle-income Australian household to raise the capital for a deposit (Daley, Coates, Wiltshire, Percival & Robertson 2018: *). As a result, there are intragenerational equity effects emerging too, as increasing numbers of younger Australians are forced to rely on their wealthier parents (‘the bank of dad/mum’) to enter the market: a situation which favours some young Australians over others.
In these circumstances, it is unsurprising that more Australians are renting for longer. Around 2.6 million Australians, or just under one third, were renting privately by 2016; another extraordinary jump from just 12% as late as the mid-1990s. Rental prices have increased less rapidly than housing prices. Yet lower-income households presently spend a larger proportion of income on rent than previous generations of tenants, and miss out on the taxation benefits in place for owners and landlords (*). Again, this is especially the case in the big capitals, where the proportion of low-income renters allocating more than 30% of their gross income on rents (and as such, considered to be suffering ‘housing stress’) increased from 36% in 2007 to 47% by 2015-16 (*). Some Australian renters benefit from Commonwealth Rent Assistance. But, as Reimagining the Australian Dream comments:
this is less than 6% of the total housing benefits that governments provide. By contrast, home-owners and investors receive more than 90% of the benefits of major housing policies (Daley, Coates, Wiltshire, Percival & Robertson 2018:*).
The last decades in Australia have seen what Milligan and Pinnegar (2011: 326) call a longstanding “retraction of national action on housing in Australia”, if not what Dalton (2007) terms a “retrenchment”. By 1986 and financial deregulation, previous Federal governments’ direct support for low-income homeowners and first homebuyers, plus publicly-regulated mortgage interest rates, had all been all scrapped. Direct state government provision of social housing had begun to flatline, so that while in the last two decades the population has grown by some 33%, the stock of public housing remains at around 400,000. (Daley et al 2018: 62; Jacobs, Berry, & Dalton 2013; Hayward 1996) In response to a rise in low-income renters experiencing effective poverty after meeting accommodation expenses, the Hawke-Keating government introduced a direct rental assistance program. Yet the same ALP government also introduced ‘negative gearing’: the ability to deduct losses on an investment property from taxable income at the marginal rate. Ostensibly a means to stimulate private investment in rental housing, this policy is now agreed to be one source of Australia’s continuing, extraordinary house-price inflation. By 2014-15, figures suggest that 1.3 million Australian landlords reported collective losses of $11 billion on investment properties, representing (amongst other things) a significant loss in federal tax revenue (Daley et al 2018: 36).
The Howard years (1996-2007), coinciding with historic mining and real estate booms, saw Federal government intervention in housing policy rolled back. The Howard government’s 1999 reform of capital gains tax (CGT) on the sale of owner-occupied homes added fuel to the inflationary fire. (Daley et al 2018: 36-37) According to this reform, tax is levied on only 50% of the nominal capital gain on any asset, including houses, held for more than one year: Treasury in 2017 estimated that it “benefits home-owners to the tune of $35 billion per year” (Daley et al 2018: 35 n. 109) and motivates demand for home ownership, conceived as itself a form of investment. In response to concerns following the introduction of the GST, Mr Howard also introduced the First Home Owners Grant (FHOG) in 2000: albeit without either an income test for claimants or any upper limit on the purchase price of homes (Tiernan & Burke 2002: 94; Burke & Tulse 2010: 834; Eslake 2013). Little was however done on the supply-side, to balance these demand-side reforms. Immigration into Australia has increased substantially from around 2005, and Australia’s population has grown since that time by around 350,000 people per year, up from around 220,000 per annum the previous decade. (Daley et al 2018: 45) But new housing stock, especially for lower-income renters and buyers—and especially in the capitals where population growth has been most rapid—has failed to keep up (Daley et al 2018: 43-45). Indeed, for much of the decade from 2005-14, annual housing construction did not even match the average rates of the previous quarter-century. (Daley et al 2018: 43) Economic data suggests that a 10% increase in dwelling prices tends to lead to an increase in the stock of new housing of only 3-5% in Australia —an ‘inelasticity’ of supply effected by often-clunky State and local-government zoning laws, and by the resistance of residents to higher-density dwellings in their suburbs (Daley et al 2018: 43, 103, 133).
The Rudd years (2007-2010) saw a brief “comeback” for housing policy issues to the federal agenda (Milligan & Pinnegar 2011): the return of a dedicated Housing Minister, the 2009 establishment of the NAHA (National Affordable Housing Agreement) (Milligan & Tannegar 2010: 329); and the NRAS (National Rental Affordability Scheme) providing subsidies to stimulate building of low-cost rental accommodation (Milligan & Tiernan 2011: 400-403). Yet, with the ascension of Julia Gillard in June 2010, the Housing Ministry was again scrapped. Meanwhile, the NRAS, dogged by implementation issues (loc cit.) was shelved and has not been restored under Abbott and Turnbull’s Coalition governments. Today, issues surrounding homelessness, public housing, housing affordability and planning remain dispersed across multiple portfolios, and uneasily contested between the Commonwealth and State governments (Milligan & Tinnegar 2011: 339). The proportion of Australian dwellings with subsidised rental has not increased, but actually fallen from the mid-1990s peak to under 5% today (Daley et al 2018: 62-63). As we will comment below, housing affordability became an election issue in 2016, as Bill Shorten’s ALP took a proposal to roll back negative gearing to the polls. Despite the organised opposition we will address in due course, this remains the ALPs position in the lead-up to the 2018/19 vote, but remains opposed by the Coalition.
We will send an essay sample to you in 2 Hours. If you need help faster you can always use our custom writing service.Get help with my paper