Show me the money: financing more affordable housing

Some solid policy suggestions at last...

Show me the money: financing more affordable housing

Here's a link direct to the policy Word document on the web:

Show me the money: financing more affordable housing (Word)

The main barrier to progress appears to be that housing continues to lie off-centre from the main economic, social and political concerns of governments at all levels. In part, this involves an inertial lag effect. For most of the post-War period, the vast majority of Australians have been well housed by historical and international standards. Housing, labour and financial markets worked together to ensure that housing standards were adequate or better for perhaps 85 per cent of the population. A similar proportion of the population became home owners at some time during their lives. The fact that this dominant housing career and expectation has broken down over the past 20 years appears to have eluded many policy makers, who still look to the housing market operating within conventional parameters to meet housing needs for all but a tiny residualised group in the population.

It is this dominant view – along with the tendency to uncritically celebrate house price inflation as a sign of a healthy economy and domestic world – that needs to be taken head on by people concerned with both Australia’s long term economic sustainability and the immediate social problems of declining housing affordability for an increasing number of Australians.

Finally, there appear to be some promising signs on the policy horizon. It is true that the current Federal Government has done little to advance matters here. The First Home Owners Scheme was introduced in mid 2000, not as an explicit housing affordability measure, but to offset the one-off cost impacts of the introduction of the goods and services tax. Nevertheless, given its timing, FHOS almost certainly reinforced the underlying speculative boom conditions in the housing market, without improving affordability for those most in need of assistance (on both points, see Productivity Commission [2004], pp. xix-xx; pp. 215-221). The government’s less than enthusiastic receipt of the recommendations of the Productivity Commission’s final report on First Home Ownership and silence on housing matters to date in the run up to the Federal Election suggest that this situation is not about to change soon.

Inquiry on First Home Ownership - Submissions

This is a link to the public submissions made to the PC Inquiry on First Home Ownership, whose draft and final reports were something of a fudge to let the Federal Treasurer off the hook, and take a broadside at Labor state govts for good measure. Handy that, given that generous Federal govt tax handouts to people who don't need them seem to have stimulated the housing bubble even further.

However, the submissions made by decent and honest people, real Australians with a social conscience, are worth perusing.

PC Inquiry on First Home Ownership - Submissions

Communique: A Call for Action

National Summit on Housing Affordability

Communique: A Call For Action

Affordable housing is crucial to Australia’s future. Without it, people are impoverished, families and communities are eroded, jobs are lost and the economy is weakened. A creeping crisis in affordability has been developing for many years. But housing affordability in Australia is now at its worst-ever level.

Keeping the Dream Alive - Professor Julian Disney

What can be done to improve affordability? First, it is crucial to acknowledge the gravity of the situation and the longer-term outlook in the absence of vigorous action. Refusals to heed warning signs more than a decade ago have already caused possibly irretrievable harm.

This damage must not now be aggravated by further denials of reality and continuing lack of political integrity. The economic and social problems caused by the crisis make it as great a problem as any facing Australia's long-term future.

Some of the more readily achievable improvements would be of greatest benefit to lower-income renters. In any event, they have been suffering from unaffordable housing for very lengthy periods. And help for them could relieve pressure higher up in the rental market.

The supply of low-rent housing could benefit greatly from targeted tax incentives or other subsidies to attract large financial investors. Processes for keeping the housing affordably occupied by low-income people would need to be strengthened, especially by expanding the use of non-profit housing managers, as is common in Europe.

Public housing can be a highly cost-effective way of helping low-income renters.
There is a strong case for restoring funding to the levels of a decade ago. This should enable wider availability for working families, even if for limited periods, rather than increasing confinement to the most desperately disadvantaged people.

Elizabeth Crouch says that sustainability requirements are making new housing unaffordable. - On Line Opinion - 20/9/2005

Elizabeth Crouch (HIA’s senior executive director) says that sustainability requirements are making new housing unaffordable. - On Line Opinion - 20/9/2005

'The bust is over' — typical unhelpful hype from self-interested spruikers

Bust is over so sit back, wait for the next boom - National - smh.com.au

Bust is over so sit back, wait for the next boom
By Michelle Singer, Property Writer
September 18, 2005
The Sun-Herald

The slide is over. Property experts say the Sydney market has "bottomed out" - though it is unclear how quickly it will climb, or how far.

That's right, Michelle — publish a 'good news story' in the Sunday paper for property investors and desperate hopefuls to try to encourage more real estate sales. Never mind that others say that the market will plateau or decline for several years to come, even within the same article — run with the 'bull' headline instead.

Who makes money out of it?
- Developers
- Lenders
- Real estate agents
- Spruikers
- So-called 'property researchers' such as APM, BIS Shrapnel, and so on, whose predictions should be taken with a grain of salt.

If I was running the place, all these people would be either shot or sent to re-education camps for a very long time, for destroying the fabric of society for their own selfish gain. They care not one whit for sustainability or affordability or social justice, they live only for the next commission or sale. Clearly inflationary spikes increase their commissions and profits, ignoring the fact that house prices and rents have to be underwritten by wages, and therefore cannot continue to rise disproportionately without household structural changes or overcrowding. One of those changes has been a shift to fewer children in families, and why? For affordability reasons... It's a vicious cycle. Therefore, the property industry and the greedies are feeding the artifact of negative population growth...

How tax system egged on property speculation - Alan Kohler - www.smh.com.au

Five years ago Treasurer Peter Costello told Australians: "Work for a living and we'll tax you at close to 50 cents in the dollar; speculate and we'll only take 25 cents.

"Not only that but, as a special deal - while stocks last - we'll pay half your speculating costs."

Naturally a million Australians have started speculating on real estate. When the money ran out they borrowed more, much more. Prices doubled, so did debt.

As Professor Cameron Rider of the Melbourne Law School put it to a recent Productivity Commission public hearing into the problem: "Everyone was exuberantly rational."

Macquarie Bank's Rory Robertson, however, describes the halving of the capital gains tax rate in 1999 as "the elephant in the living room".

To quote last week's report on first home buyers by the Productivity Commission: "Like many participants [in its inquiry], the commission has concluded that these general taxation arrangements [capital gains tax, negative gearing, capital works deductions and depreciation provisions] have lent impetus to the recent surge in investment in rental housing and consequent house price increases."

Even on its own terms, cutting capital gains tax by half in September 1999 was an egregious mistake.

How tax system egged on property speculation - Alan Kohler - www.smh.com.au

Landlords and speculators reap billions from tax rule changes - Business - www.smh.com.au

Tax breaks for property investors have delivered a far greater boon to speculators than previously thought, gouging billions from tax revenues with the benefits going overwhelmingly to the rich.

The 2002-03 Taxation Statistics show capital gains tax revenue plunged from $5.3 billion to $3.3 billion in three years following radical changes to the system in 1999. The changes were touted as revenue neutral at the time.

The Tax Office figures, published on Friday, also show the national negative gearing gap between rental tax deductions and rental income more than doubled in just one year.

The figures show it is now far more tax-effective to buy and sell assets than earn a salary, as investors receive generous tax breaks from rental losses and further tax breaks when they sell.

The capital gains tax changes announced by the Treasurer, Peter Costello, in September 1999 - against Treasury's advice - gave individuals a 50 per cent tax discount on assets sold after being held for more than one year.

The changes were a "grossly unfair give-away to the rich" and had shifted the tax burden from property owners to salary earners, said Professor Chris Evans, director of the ATAX tax school at the University of NSW.

Landlords and speculators reap billions from tax rule changes - Business - www.smh.com.au

Can the housing affordability crisis cause obesity in young women?

Obesity: the new crisis for women - Health - Specials - smh.com.au

It sounds a little strange, but the last 7 years have seen an upswing in obesity in 20-something year old women. By a coincidence, that maps to the recent so-called 'housing boom' upswing. Some of the prime culprits appear to be the amount of time young women must spend in sedentary jobs to meet their costs of living (i.e. increased housing costs), and their often very long commute times to get to their place of work. Both these problems are artifacts of over-expensive housing and inequitable allocation.

More than half of middle-aged women are also revealed as being overweight in the study, which highlights greater female participation in the workforce, longer hours spent behind desks, and increasing difficulty balancing work and family commitments as key reasons for the unhealthy trends.

"It's astounding," said Christina Lee, the co-ordinator of the Commonwealth-funded study, which will follow the fortunes of the same 40,000 women for at least another decade. "The younger women have already caught up with the older generation. We are going to have higher rates of heart disease and diabetes."

The Australian Longitudinal Study on Women's Health - launched by the federal Health Minister, Tony Abbott, yesterday - found that women in their mid to late 20s weighed an average 67.4 kilograms in 2003, compared with 62.6 kilograms when the same women were weighed in 1996. The weight of women in their early 50s had risen an average 2.4 kilograms to 71 kilograms over a five-year interval.

The young women's weight would inevitably climb even further, as only one in three had already had children - and pregnancy and new motherhood were typically times of major weight gain, said Christina Lee, who is professor of health psychology at the University of Queensland. Women gained weight "after getting married, moving from study into work, making those transitions into adulthood … perhaps they give up playing netball with their friends on a Friday night".

"You feel a bit wrong, the way you feel in clothes," said the 19-year-old receptionist. She spends more than two hours travelling by train between her home in Penrith and her city office every day. Work is hectic so she tends to choose fast food - "Hungry Jack's, Coke, sometimes I'll grab a bag of chips for lunch if I'm flat out".

By the time she gets home it is dark and she is "just too tired to exercise, and I don't have time to prepare a decent meal to take with me the next day … I'm trying to lose weight now but it's hard to find time or energy. Gyms can be really expensive, too."

So, in other words, the Commonwealth govt is commissioning studies showing these problems and highlighting them as a dreadful health risk, and on the other hand, doing nothing about housing affordability, including making housing affordable closer to where people work, preferring to just 'leave it to the market', except when they actively work to fuel housing price inflation by generous negative gearing benefits and low capital gains tax. State govts also have no interest in 'key worker' placement or changing the pattern of very expensive, cramped real estate near the high rise cities where the jobs are, and the fact of people having to commute from places like Penrith or the mid-North coast due to affordability reasons. Instead, they conveniently leave it to 'the market' to allocate housing, and watch and laugh as people die from diabetes and heart disease at ever younger ages, have children at ever older ages, but then wring their hands in public with these studies. That's how much your governments really care.

But remember, Peter Costello wants you to 'have 3 children, one for the mother, one for the father, and one for your country'. As though your country really cares for you, when all it wants to do is exploit you as a unit of labour and to make a developer or landlord wealthy in retirement.

Yes, "It's astounding", as Christina Lee said.

The Minister and the e-mail

Spoke to a 'ministerial liaison officer of the State Dept of Housing' in the Housing Minister's office today, to get a response to a previous ministerial. It's taken 2 weeks for them NOT to receive my e-mail submission, because it 'has attachments', being simply other bundled e-mails and 1 Word document (all previously stripped of any potentially maliciously HTML code by my own corporate mail filter).

Apparently all attachments flowing into the IT systems of the Minister's office are deemed to be dangerous. Scratch out that form of democratic participation then — it's a bunker mentality in government as far as the people of the state are concerned.

I work in IT, mostly in private firms, and I know how easy it is to filter e-mails for virus signatures, etc, and still let appropriate attachments, such as Word documents and e-mails through. Further, Ministers publish their e-mail addresses on the Web, presumably in the interests of democratic dialogue and the hope of receiving submissions from their adoring constituents.

So the delaying game of 'we didn't get your e-mail' can go on forever.

I also made the observation to the officer that, if state governments have no identifiable affordable housing programs and no policies either, they may as well all quit their well-paid, taxpayer-funded jobs, and do something else, perhaps real estate sales, in the spirit of a comment by John Ralston Saul (writer, philosopher and Canadian GG Consort for a while) concerning 'laissez-faire governments which like to 'do nothing', in which case, they clearly aren't needed, and they can all go home. (Search that linked abc.net article for the word 'inevitable'.) The remark wasn't particularly well received, being a threat to his lush salary'n'all. Not making friends with key bureaucrats could be a mistake. Oh well, I'd rather be truthful in this life. JRS seems to have done something right in being honest and insightful, at least.

I also remarked on the fact that Sydney is more unaffordable than New York when median salaries are taken into account, and only slightly behind LA, as the top 3 unaffordable cities out of the US, Canada, Australia and NZ, according to demographia.com. (Melbourne comes in 9th - here's the data). That's quite some achievement for a country in the middle of nowhere with no great prospects whose urban citizens have no real choice but to live in a capital city. A captive market — the dream of monopolistic capitalism — the developers love it. So, get this, Australia's housing affordability is essentially worse than the US. The officer was deeply unimpressed by this, and was also deeply uninterested in discussing matters such as social justice and fairness. However, he promised to have 'an answer' from somewhere. Apparently that's the way government works these days: a citizen has 'a question', the authoritarian government has 'an answer'. Not very postmodern, is it? Given that governments in Australia have chosen to do nothing about housing affordability, except when they are actively making it worse through tax breaks to the already well off in acquiring investment properties and feeding the boom, I suspect that I already know 'the answer' that I am going to get. Or maybe they will surprise me with a new spin answer that I just wasn't expecting — govts and their media advisers are getting better and better at that these days. They don't seem to actually do any formal studies or have any awareness of social policy, social theory, sociology, political economy, you name it, any more though, to qualify to be in govt, just be consummate liars, stonewallers and spin doctors.

I'll keep you posted on the next exciting instalment of how government deals with democratic voices in the handling of ministerials and e-mails...

Landlords and speculators reap billions from tax rule changes - a "grossly unfair give-away to the rich" - Professor Chris Evans, director, ATAX, UNSW.

How tax system egged on property speculation - "The effective halving of capital gains tax in 1999, combined with negative gearing and deductibility of depreciation and capital works, clearly has had a huge effect on the property market, and was also a huge mistake. Naturally a million Australians have started speculating on real estate. When the money ran out they borrowed more, much more. Prices doubled, so did debt."

How can you have democracy if everything's inevitable? What's the point in voting, what's the point in choosing? I mean if everything's inevitable why would we waste our time in being citizens? I mean if everything's inevitable let's just get some nice sort of, you know, not too nasty dictator to look after things! Look after the detail since everything's going to happen anyway, and all we're doing is negotiating half percentage points of the directions that we're going to take. It's not worth not going to the beach if that's all democracy is. Personally speaking it's a very tiring idea, this idea. If you live in a democracy, it's very tiring to be always surrounded by great and high abstract generalisations which are in fact the most banal and naïve cliches dug out of second rate movements of the late 19th century.

John Ralston Saul, Democracy and Globalisation