The latest Household, Income and Labour Dynamics in Australia Survey: Selected Findings (HILDA) report shows that the proportion of home ownership has declined in all parts of Australia, with the greatest declines in NSW and Victoria.
Thereport, released on July 20, reveals that owning a house is no longer the norm and it is likely that renters will outnumber home-owners in the next few years.
The continued fall in the home ownership rate is due to the huge rise in house prices relative to income growth, particularly in Sydney and Melbourne. Sydney now has a median house price of more than $1,000,000.The national median house price rose 76.4% from 2001 to 2014, but wages rose by only 24.1% for men and 18.4% for women.
We often hear that owning a home is the “great Australian dream”, leading to a better life, success and security. But does that mean renters have a reduced quality of life, are less successful and have less security?
Having more renters means more people competing to secure a lease on a rental property; and with demand outstripping the supply of rental properties, some will miss out on finding a place to rent.
Incentives are granted to landlords through negative gearing and capital gains tax exemptions, but there are no such protections for renters, who live with insecurity and risk, having to move every time their lease expires. Families suffer when children have to change schools and jobs can be put at risk when workers need to move house.
There is no guarantee renters will get a good landlord. Often, the landlord has little regard for the welfare of the renter unless they are dragged before the consumer affairs regulator.
Sometimes landlords leave properties vacant in the speculative hope of capital gains. In December, it was reported that up to one-fifth of investment properties in Melbourne were vacant. In March, the Homeless Persons Union began occupying vacant properties in Melbourne in protest.
There are no controls over rent payments and with the increased demand for rental properties, it is no surprise if the landlord increases the rent at the end of each lease. In this situation, for a renter, a loss of job, sickness, or other family crisis could lead to missed rent payments and eviction. If that renter has no family or friends to stay with, they could end up living in their car, if they have one, which is a common story among homeless families.
Australia has some of the weakest tenant protections in the world, with tenants at risk of big rent hikes and little security in tenure. If people are becoming renters for their whole lives, new protections need to be put in place.
On the other side of the fence, home owners who took the plunge and bought a home, particularly in the past few years, are suffering mortgage stress due to the massive loans and repayments they have signed up to.
According to the HILDA report, 50.6% of home owners still had outstanding mortgages, averaging $262,607 in 2014. Based on the number of households in Australia, HILDA extrapolates this to $760 billion in existing home loans.
As expected, the big four banks dominated the home loan market in 2014: 19.9% with Commonwealth Bank of Australia, 13.8% with Westpac, 12.7% with NAB and 12.1% with ANZ. The average minimum loan repayment in 2014 was $1736 a month while loans of more than $500,000 had average monthly repayments of $4150.
Although interest rates are at historically low levels, the massive loans that are being taken out will mean a lifetime of debt. Those with interest-only loans will effectively be giving all their loan repayments straight to the bank without ever reducing the principal on their loan — in effect becoming a debt slave to the bank for the rest of their lives.
In the recent federal election, Labor proposed changing the negative gearing and capital gains tax exemptions on properties. However, even if these were implemented, the effects would have been very gradual. Because median house prices are so excessive, particularly in Sydney and Melbourne, even a gradual reduction in prices would not be enough to bring them down to a level that is affordable for ordinary workers.
At the same time, governments are selling off our remaining public housing, such as in Sydney's Millers Point, Glebe and Waterloo. As pointed out by housing activist Dennis Doherty, the government is aiming to sell off the remaining public housing in Glebe; at the same time, the number of homeless people living in Wentworth Park under the light rail bridge has steadily increased, while just down the road at Glebe Point, million dollar yachts are moored.
What is needed is a more drastic and long-term solution, which can only be achieved by taking house prices out of the hands of the market. Fundamental to this is a massive expansion in public housing investment through construction of new houses, along with the buying and renovation of existing housing stock.
This could be funded through the nationalisation of our banking sector. Through democratic ownership of the banks, we could also control the existing loan books for which we can provide measures for the debt relief of workers who have taken out huge loans to buy their own home.
Housing is a basic human right which is currently out of reach for ordinary people. Only a people's movement with a socialist strategy can solve the housing crisis.