2025-01-04
While an increasing number of households are in financial stress due to lack of affordable housing, it’s never been a better time to be a property investor. The housing crisis is due to inequality rather than a lack of supply of affordable homes. Although Greens policies aren’t framed as reducing inequality, they would achieve that aim if implemented.
By Rob Delves, a member of Fremantle-Tangney Greens and a Green Issue co-editor
News Item One: As I get home mid-morning there’s a letter addressed to me in the letterbox. It’s from a local real estate agent, addressed Dear Robert, but obviously going to lots of other letterboxes as well. The gushing good news reads as follows:
The Beaconsfield market continues to thrive, with median house prices climbing 3.8% in the last 12 months, reflecting strong buyer demand. Recent sales in the area have been impressive, with family homes fetching between $950,000 and $1.5 million. With rental vacancies at a low 1.2%, investors are reaping solid returns.
Sixteen recent Beaconsfield sales are listed, including a few in what I consider the very ordinary 1950s and 1960s houses in our eastern part of Beaky, all selling for around $1.1million.
I guess I’m supposed to feel excitedly wealthy at the news that the humble 100 square metre pile of bricks I bought for $120,000 in 1994 is now worth over a million. However, half a moment’s reflection tells me that that extra million isn’t wealth – it’s just useless inflation. ABC Economist Alan Kohler makes this point over and over again: not increased wealth, just inflation. Now, of course if I’d bought two houses in 1994 or preferably back in 1971 when my first house cost $10,500 (much less than three times my salary). But on both occasions I didn’t even think about it, mainly because all I wanted was a decent secure place to call home and it didn’t dawn on me that house buying was a way to get rich. As far as I could tell, this “one house is more than enough” mentality was the norm.
News Item Two: As I chuck the wonderful news about the ridiculously inflated value of my house into the bin, I turn on the TV and the following item appears (roughly transcribed from my memory):
Up to three million Australians could be at risk of homelessness or extreme housing stress, as support services report they cannot keep up with the accelerating demand for assistance and are at breaking point.
It turns out I’m only half right about the house price inflation – it is indeed merely useless to me, but it’s also extremely destructive for the well-being of millions of other Australians. It should also be obvious that the two news items are closely related, one being the cause of the other. The Housing Have Nots are in a desperate state because the Housing Haves got serious about making themselves very rich by becoming investors buying and selling unproductive piles of bricks rather than investing in productive industries and businesses.
And of course they’ve been very successful in ensuring that every government since around 1980 has used a raft of policy settings to support wealth creation for the landlord class, which means that house prices must always continue to rise (Beaconsfield-style) and investors get lots of tax breaks.
So I’d argue that it’s more accurate to say we have a Housing Inequality Crisis rather than a Housing Affordability Crisis. We have to attack the mindset epitomised by the Beaconsfield letter – ever rising prices are a wonderful thing and you’d be crazy to miss out on the wealth-creating opportunities they offer. Moreover, while policies such as increasing Commonwealth Rent Assistance and Labor’s recent Shared Equity Scheme have some merit, they do nothing to rein in house price inflation and nothing to reduce the Housing Inequality Crisis.
How do we address this inequality crisis? Although most of The Greens housing policies aren’t communicated through this Reducing Inequality lens, they do actually have this aim. Here are a few. First, strengthen renters’ rights, including through rent controls. Second, totally remove or at least seriously reduce the landlord tax giveaways of Negative Gearing and the Capital Gains Discount. The Greens support increasing Commonwealth Rent Assistance as it’s a lifeline for many desperate people. However, it does absolutely nothing to put downward pressure on rents or to address the power imbalance between landlords and tenants. The above two Greens policies do set out to achieve that aim.
Third, make a huge investment in public housing for sale or rent at affordable prices – essentially the state enters the Housing sector as a serious alternative to the private market. It’s based on the Singapore model and it’s also very similar to what Australia has historically done with Health (1980s Medicare as the alternative to Private Health Insurance) and Schools (from 1870s a large public sector as the alternative to church schools). In both cases, the public welcomed the major reform because it was screamingly obvious that the private system wasn’t delivering for at least the bottom 30% of income earners. Sounds familiar?
It’s important to note that one very clearly stated reason for introducing Medicare was to put downward pressure on what doctors and hospitals could charge – and it’s been reasonably successful in this. Having a large public housing sector alternative will do the same.
Header photo: Traditional houses in East Bunbury, WA, 2006. Credit: Orderinchaos (CC-BY-SA-3.0)
[Opinions expressed are those of the author and not official policy of Greens WA]