The housing affordability crisis is serious enough for both Labor and the Coalition to promise home-buyers financial support in the present election. According to official statistics it has never been harder for first home buyers to acquire a home.
The average home now costs nine times the average annual wage — up from six times 10 years ago; first home buyers are now spending 31.7% of their total income on mortgage repayments, up from 17.9% in 1996; and the share of homes being bought by first home owners has fallen from 21.8% in June 1996 to 17.1% today. As a result, young people are staying longer in rented accommodation, leading to increased rents and shortages of rental properties.
Green Left Weekly's Kerry Smith spoke to the Socialist Alliance national coordinator Dick Nichols about the housing affordability crisis, and the Alliance's views of proposals like Labor's First Home Saver Account.
@question = Both Labor and the Coalition are offering to forsake hundreds of millions of dollars in tax income in order to fund low-tax or tax-free saving accounts for first home buyers. What's wrong with that?
These funds are an attempt to help first-home buyers build up a deposit without the impact of the First Home Owners Grant scheme (FHOG), which helped boost demand and house prices. But even if the addition to demand will be delayed compared to that of the FHOG, it will still push up house prices unless something is done about the housing supply side.
It's also totally inadequate when we look at the scale of the housing problem: 1.2 million households in "housing stress" (having to pay 30% or more of income in housing costs), 400,000 in "extreme housing stress" (paying over 50% of their income on housing), 100,000 people homeless and 500 people turned away from homelessness services on any one night.
@question = But why can't private capital solve this housing crisis if sufficient land and urban infrastructure is made available by governments?
The developers naturally invest in those areas where there's most profit to be made, and that isn't at the affordable rental end of the market. It's where income is highest and real estate values are most likely to boom. So investment in rental housing in working-class suburbs stagnates at the same time as super-expensive housing booms in harbour-side and gentrified suburbs.
This tendency has accelerated as speculators' share of housing investment has increased, from less than 15% in 1985 to 45% by 2003, helped by negative gearing and various tax breaks.
@question = So what's the solution?
The only serious solution requires a massive expansion of social (public, cooperative and community) housing combined with a 20% limit on rent as a share of income. It requires not only a reversal of the massive cuts to the funding that have occurred to the Commonwealth and State Housing Agreement under the Howard government, but an increase of billions of dollars of CSHA funding.
Social housing at present accounts for only 5% of all housing in Australia. That compares to a European average of 13%, and 35% in the Netherlands. The housing lobby group National Shelter calls for Australia to aim for social housing to cover 6% of the national market, and estimates that would require CSHA funding to increase from $1.3 billion (2005-06) to $2.5 billion (2007-08).
This is very inadequate. If social housing increased by 1% of the total Australian housing stock it would represent an increase of about 80,000 households, when the affordable housing shortfall is 180,000 in New South Wales alone.
Moreover, any rent regulation will lead to a decline in private investment in housing, a shortfall that will have to be offset by a further increase in public housing provision.
@question = But how many Australians really want to live in social housing? Doesn't it equate in the popular mind to Soviet-style tower blocks? Don't they prefer to pay more for better quality, even if it means a bit of "housing stress", especially as their house eventually becomes an asset?
The basic problem is that quality social housing is the exception rather than the rule in this country. In other countries social housing is quality, affordable housing, and increasingly sets the example of environmentally sustainable housing. In such cases the obsession for privately owned housing becomes much less intense. It shows that people's attitudes will change when they are given a real alternative.
Never forget that the "Australian dream" of a privately owned home corresponds to the interests of the entire housing finance, real estate and developer sector, forces who have always had huge influence over the two political parties in this country.
There's nothing natural about the Australian housing model, and because of the combination of the housing affordability crisis and rising environmental and land pressures it will more and more enter into crisis.
Quality, environmentally sustainable housing, designed and developed with full input from building industry workers, environmentalists and sympathetic experts is the only long-term solution.