No interest in fixing the housing crisis

Friday, March 31, 2017

Chairperson of the Australian Prudential Regulatory Authority (APRA) Wayne Byres recently said that he would not use the “B-word” to describe the housing market, preferring instead to use “heightened risk” rather than housing bubble.

“Heightened risk” implies there is potential for harm. The question is, what harm? The harm of not being able to afford to buy a house? Not being able to pay the rent? Of living at the mercy of the landlord? Of being in debt to a housing loan you’ll struggle to ever pay back? How about homelessness while thousands of investment properties are left empty?

The “heightened risk” Byres is referring to is of a collapse in house prices, of bank loans going bad, of banks going broke and governments stepping in. The fear of a GFC-style situation developing is the stuff of nightmares to the ruling class.  

In reality, the housing market is screwed and the ruling capitalist class has no interest in lowering house prices.

But a drastic lowering of house prices is what is urgently needed. The root cause of this mess is the fact that housing, which is a human right, has been placed in the hands of the market. Until this is understood, the situation will never be resolved.

Byres’ “B-word” remark, was a response to the recent interest rate increases declared by all four big banks. According to the bank CEOs, they were caused by “increased funding costs”. That’s easy for the bank bosses to say, but good luck to the frontline bank workers who have to explain this rate increase to ordinary mums and dads struggling to pay the mortgage.

A recent bank survey found that Australians have a pessimistic outlook on housing over the next decade. Their fears are well founded. In March 1997, the median house price in Sydney was $200,000. Twenty years’ later it is $1.1 million. This is a testament to the absolute failure of market capitalism, particularly when it concerns such an important issue as having a place to live.

How about the government and political response? Labor is proposing a “reform” to negative gearing and capital gains tax on investment properties. The Turnbull government says it will make housing a priority in its next budget. Having recently axed the National Housing Affordability Scheme introduced in 2009 by former Prime Minister Kevin Rudd, they recently announced an Affordable Housing Taskforce focused on setting up a “housing affordability bond aggregator” to attract private sector investment into affordable housing.  

In reality, all these measures are inadequate and do not address the root cause of the problem: the market itself. The policies of Labor and Coalition governments over the years have done nothing to address the problem, because they are supporters of the market economy and have no plans to replace capitalism.

The real solution calls for a massive expansion in public housing. The mainstream media might mock this as a pipe dream, but there are examples around the world, such as in Venezuela where the government has built thousands of new homes to house the poor and needy.

They might ask where will the money come from? Who will fund it? The answer is that there is plenty of money out there, but it is concentrated in the hands of multinational banks and mining companies that are out to make more money for themselves. By increasing taxes on their profits and ultimately nationalising them, there will be enough for society to provide a house for everyone who needs one.

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