Where social housing meets the working poor

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Graph supplied by the Grattan Institute

I suppose you have been waiting for me to wax eloquent about the Federal Government’s $10 billion housing plan and why don’t they get on with it?

Don’t blame me. I didn’t vote for The Greens, who seem to think their role in government is to block legislation just because they can. The Greens MPs in Parliament want the Federal Government to freeze rentals for two years. This seems to be predicated on some naïve proposition that the Labor Premiers buddy up with the Feds and persuade the others to fall in line.

What part of States Rights do they not understand? As Prime Minister Anthony Albanese rightly says, the Federal Government could not impose a nation-wide freeze on rentals even if it wanted to. The mechanism for such a move lies with the respective State and Territory governments. I can’t imagine that telling the landlords (and developers) in their constituencies that they can’t raise rents for two years would help State or Territory government re-election chances next time round. Having said that, the Australian Capital Territory has implemented a rent ‘cap’ so anything’s possible.

The Bill, which stalled through lack of support in June, has been tabled again this week although not much has changed. There is talk (at chat show level) of a double dissolution – that is, Mr Albanese will go early to the people and let them decide. Unlikely.

There are a few things to note about the Housing Australia Future Fund. For one thing it’s not a new idea. The $10 billion fund was an election promise, which means its formation goes back well before 2020. We already had a Future Fund (which primarily invests in the share market and in commercial property). The Labor Government’s plan to co-opt this fund into investing in the volatile housing market has made it a target for the Coalition and dissident independents.

One of the issues as I see it is the Bill has been designed as an economic/financial policy instrument. Given the size and severity of the housing problem in this country (affordability, rental housing shortages and homelessness), it should have been designed foremost as social policy, letting the numbers take care of themselves, as numbers do.

The Greens are not alone in their critique of the Albanese government’s housing policy. Numerous housing advocates say that despite the size of the Housing Australia Future Fund, it will scarcely touch the sides of the problem. The legislation promises 30,000 new social and affordable houses in the first five years. Once the fund starts generating returns, more social and affordable projects can be started.  And as Housing (and Homelessness) Minister Julie Collins added, this will include 4,000 homes for women and children affected by family and domestic violence, or older women at risk of homelessness.

That’s all very well, but numerous reports concur that the current social housing need is for more than 100,000 dwellings. A report by the National Housing Finance and Investment Corporation (NHFIC) showed that Australia is facing a shortfall of 104,000 houses in the next five years. This is brought about primarily because the construction industry can’t keep up with demand. Then there are mitigating factors like rising interest rates and the ever-increasing cost of raw materials.

This glum forecast came at a time (April) when rental vacancy rates in every capital city in Australia were at or below 1% (Ed: and likewise in regional cities and towns). Bad weather in 2022 added to the woes of builders; some of whom closed their doors, leaving home buyers with half-finished dwellings and cost over-runs.

The NHFIC is forecasting 1.8 million new households over the next decade, with just 148,500 new dwellings added this financial year. The total will drop to 127,500 in 2024-25, with the biggest drop in apartments and multi-density dwellings (40% down on levels experienced in late 2010).

In 2021, the Grattan Institute took a futuristic look at how we could build 100,000 social housing dwellings by 2040. As you can see by the table above, this would depend entirely on State and Territory government assigning matching contributions.

Grattan Institute economic policy director Brendan Coates wrote:

“If matched state funding was forthcoming, the Future Fund could provide 6,000 social homes a year – enough to stabilise the social housing share of the total housing stock. It would double the total social housing build to 48,000 new homes by 2030, and 108,000 by 2040.”

Four Corners should do an investigation on what exactly is meant by the terms ‘social, affordable and community housing’ and who benefits. Once upon a time there was just public housing. It was owned by the government and traditionally leased to people who were on government pensions and unlikely or unable to find paid work. The rental for people in these circumstances was traditionally struck at 25% of income. The Department of Human Services also calculates rent assistance for people in this category. Now, however, we have public/private partnerships which develop ‘affordable’ or ‘community housing’ properties. While the rents charged to these properties still look attractive (to those in the private market), it can represent up to 40% of disability or aged pension income. The properties are typically built new by private developers on land bought or provided by the relevant Government (or Council). These projects are financed by investors, so even though the housing provider may be a ‘not for profit’, the profit motive is inherent, whereas with public housing it is not.

Whatever the Federal Government and its State and Territory counterparts are going to do about social housing, they’d best get on with it. The Australian Housing and Urban Research Institute (AHURI) has estimated that the need for future social housing will be 1.1 million dwellings by 2037.

The 2021 Census recorded there were almost 350,000 social housing dwellings across Australia (just under 4% of the number of all households), at the end of June 2021.

AHURI recently reported there were 165,000 applicants on the waiting lists for public housing, more than 40,000 applicants for community housing and just over 12,000 applicants for State owned and managed Indigenous housing.

“If we add together all the households on the waiting list and those already in social housing, we find that over half a million (close to 565,000, or just over 6%), Australian households were living in, or had requested to live in, a form of social housing.”

All that aside, there is the ever-growing cohort of ‘working poor’ – Australian families where one or both parents have jobs. But their household income can’t keep up with high private market rentals and the cost of living in general. Not to mention the 1.8 million Australian households Roy Morgan Research says are at risk of mortgage stress.

No quick fixes in sight although the CFMEU (one of the country’s last robust unions), wants the government to impose a Super Profits tax on the top echelon of companies.

The Guardian reported that CFMEU says a super profits tax of 40% of excess profits would ‘comfortably’ cover the cost of building more than 750,000 new social and affordable homes.

The CFMEU revealed this bold plan last week at the National Press Club, tabling a commissioned report by Oxford Economics. The report assumed that a permanent 40% tax on excess profits on companies with over $100m annual turnover, would raise an average $29bn a year, enough to fund the construction of 53,000 new homes each year.

Yep, that’ll happen.

 

 

Pork barrels and billboards ahoy

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Image: Welcome to Queensland – an apolitical billboard

You can tell there is an election looming when the government promises to reduce the price of beer – a classic example of ‘pork barrelling’. The move to halve the excise on draught beer would save beer drinkers 30 cents on the price of a schooner (a New South Wales term for three quarters of a pint of beer).

Pork barrel, or simply pork, is a metaphor for the appropriation of government spending for localised projects, usually designed to bring money to a representative’s district.

According to Investopedia, the phrase ‘pork barrelling’ harks back to the 1770s when people who owned slaves gave them pork in barrels as a ‘reward’. Before refrigeration, pork was salted and preserved in large wooden barrels.

But in the cut and thrust of 21st century politics, the phrase now means trying to win votes by appealing to voters’ basest instincts.

Social media, being the untamed beast it is, was quick to condemn the wafer-thin beer excise promise. What about spirits and wine, they asked (not unreasonably). Sexist, said others. DISCRIMINATION, said another post (words in capital letters means shouting).

As pork barrelling goes, 30 cents off a schooner of beer amounts to little more than a head of froth. More to the point, we could use some excise relief on the cost of fuel, don’t you think?

On a five-day round trip towing a 14 ft caravan through New England and back last week, we totted up a $350 fuel bill . The most expensive diesel was sighted at Wallangarra on the Queensland/NSW border ($1.79.9 cents a litre). In Brisbane this week $1.85 seemed to be the going rate.

I’m surprised the government would even risk attracting attention to the $46 billion it earns through excise and custom duty on petroleum, alcohol and tobacco (budget projection for 2021-2022).

Election campaigns are usually fought over relatively lightweight matters such as the cost of beer or fuel. But as we all should know, there are more pressing matters, domestic and global.

Mike Scrafton, writing in Pearls & Irritations, says the media can play a role by simply not repeating the trivial utterances devised by politicians to seduce voters.

“Election campaigns never rise much above budgetary baubles, three-word campaign slogans, pork barrelling, name-calling and personal slurs, and straight-out deceptions. The electorate and the media have been conditioned to expect nothing more profound or visionary from their leaders.

Scrafton, a former senior bureaucrat in the Victorian Government, was commenting on Scott Morrison’s National Press Club speech, which “typically infantilised voters and kept the focus on economic growth”.

“We’re facing a climate calamity, yet the PM believes Australians are more focused on the next holiday than threats to their children’s future.

Scrafton says the federal election should be about global warming, increasing wealth inequality, irreversible environmental degradation, widespread species extinction and the seemingly inexorable march to great-power war.

FOMM feels obliged to add to this list the most immediate social issues of our times – housing affordability and our appalling treatment of refugees/asylum seekers.

Pork barrelling aside, even in these early stages, with the election yet to be called, the major parties are throwing out none-too subtle hints about what to expect.

In late January, Labor’s leader Anthony Albanese promised $440 million to help teachers and students navigate the challenges mounted by Covid-19. He is also promising a Royal Commission of Inquiry or similar into the handling of the pandemic. An Albanese government would also tackle Federal reform. At the time, Albanese skilfully scooted around questions about whether this would include an overhaul of the tax system.

Prime Minister Scott Morrison will continue to pledge financial support for smart technology, particularly that which can help meet our net zero climate change targets. The big question is can he keep to a 2019 promise to establish a Federal Integrity Commission? Ironically, Morrison was roundly defeated over an election promise he tried hard to deliver.

We can expect some kind of a re-run of the Religious Discrimination Bill, whichever party wins the election. It was Labor’s amendments (protecting the rights of trans students), that saw the bill shelved indefinitely. (Some wag suggested that ‘Scomo’ had suffered splinters from his own wedge. Ed)

Election promises often return to haunt the leaders who made them. The most egregious of broken promises was former Liberal Prime Minister John Howard’s distinction between ‘core’ and ‘non-core promises to explain why they did not materialise.

In 2014, Crikey compiled a list of the worst ‘porkies’, (as opposed to Pork Barrels. Ed) that is, political promises made and not kept. It is worth repeating that in 1995, John Howard said there would “never ever” be a GST then introduced one in 1999. This list makes fascinating reading at a time when we are being asked to trust what politicians tell us. The ‘porkies’ include then Health minister Tony Abbott’s promise before the 2004 election not to change the Medicare ‘safety net’ (This is meant to limit the annual amount a person must spend on medical treatment and medications before paying a subsidised rate- currently about $6 for a prescription.) After the election, the Coalition raised the ‘safety net’, leaving Abbott to say, “I am very sorry that that statement back in October has turned out not to be realised by events.”

Even further back, Bob Hawke’s 1987 pledge – “by 1990 no Australian child will be living in poverty” didn’t happen and still hasn’t happened.

Crikey’s investigative unit recently compiled a ‘dossier of lies and falsehoods’ – an analysis of 48 statements made by Prime Minister Scott Morrison. It’s here if you have the time and inclination. There has been no comment from the PM’s office.

As history shows, it is easier to offer voters something they will like, or promise not to do something they will hate, than it is to reveal complex policy ahead of the vote.

Honest politicians who come out with carefully costed plans to introduce necessary but controversial legislation don’t win elections. Remember John Hewson, who as Opposition Leader in 1993 lost the election to Paul Keating, after trying to sell a plan for a GST? Likewise former Labor Opposition Leader Bill Shorten paid the price in 2019 for campaigning on a long list of complex policies.

I am not expecting Anthony Albanese to fall into the same trap. Thus far, his modus operandi appears to be to criticise and rebut most things the government does or tries to do. The problem with that strategy is that voters don’t really know what he stands for, as this week’s Four Corners programme tried to establish.

While I was trying to escape to the bush and disengage from media, the Canberra protest filtered through via the all-pervasive ABC and social media. It did not surprise to learn that Clive Palmer’s United Australia Party has hitched its wagon to that loose collective. If you travel through the backblocks of New England, it is hard to miss the yellow and black colours of the UAP on billboards set in paddocks along the highways and byways.

Freedom…freedom” is the common slogan. I’m pretty sure there is no link between that and the song by Beyonce and rapper Kendrick Lamar (the lyrics of which empower black women).

Nevertheless, the billboards are out there, spreading the gospel as understood by anti-vaxxers, sovereign citizens, religious zealots, conspiracy theory followers, ‘preppers’ and genuine if misguided people whose lives have been severely disrupted by Covid-19 controls and mandates. It falls to me to remind readers that protests like the one in Canberra last week happened simultaneously in places as far removed as Ottawa (Canada), Wellington (NZ) and Paris (France). Van Badham’s overview of the global movement is required reading if this issue troubles you – and it should.

 

 

 

 

 

Affordable housing – a key election issue

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A roof over your head – image by Capri23 at Pixabay.com

Wherever you go in Australia to visit friends and family, the conversation very soon turns to the scarcity and high cost of rental housing. The topic will then quickly shift to the ever-rising cost of houses and why parents worry about their adult kids taking on seven-figure mortgages. As residential property analyst Michael Matusik recently said, it comes down to the Bank of Mum and Dad.

Few cities or towns have escaped the 20% rise in residential real estate prices (for the year to September) or the inevitable rental hikes that followed. Stories that circulate about landlords taking advantage and tenants deciding they’d be better off sleeping in their cars are not uncommon. Check in with any emergency housing agency and they will tell you things are as tough as they have ever been.

AMP Capital chief economist Shane Oliver says that while housing affordability has always been an issue in Australia, it has moved from a periodic cyclical concern to a chronic problem.

“The 20% rise in prices over the last year has put the spotlight on the issue again. With the surge in house prices since the 1990s has come a surge in debt which brings with it the risk of financial instability should something go wrong in the ability of borrowers to service that debt.” 

Oliver said the gains have been driven by record low mortgage rates, buyer incentives, a tight jobs market, a desire for more home space as a result of the pandemic and working from home, numerous government home buyer incentives, the “fear of missing out” and lower than normal listings. This has pushed average prices to record highs and real house prices to 23% above their long-term trend.

Oliver says the average capital city dwelling price rose 200% over the past 20 years, compared to an 82% rise in wages. The disparity has become more telling in the last 10 years with dwelling prices increasing by 58% and wages rising by only 26%.

The popular wisdom, if your parents taught you such things, was to spend no more than a quarter of your gross household income on housing. Over the decades, this figure has risen to 33% and in the major cities has peaked at 50%.

As we are now in pre-election mode, it’s appropriate to mention the Affordable Housing Party, a single-issue party which is on a membership drive to avert the risk of de-registration. Led by Andrew Potts, the party had its first tilt at Federal politics in 2017, fielding a candidate in the Bennelong By-Election.

The party’s policies include phasing out negative gearing, ending the capital gains discount on investment properties, stopping foreign investment in Australian property, taxing investment properties which are left empty and cracking down on full-time AirBnB operators.

Radical? Yes, but the problem needs some radical thinking before we end up with 200,000 people couch surfing and sleeping in their cars.

The AHP’s research on the housing sector focuses on negative gearing, which means the cost of owning an asset exceeds profits, resulting in  investors claiming this loss to reduce other taxable income.

As the research suggests, one ought not to expect the Federal Government (or any government), to shut the scheme down. As of April 2017, Federal MPs and Senators owned a total of 289 investment properties.

This could be a good time to bust a few myths about negative gearing, Tax Office statistics from 2017 show that 64% of the 2.2 million people who own investment housing have an annual income of less than $80,000. This seems to scuttle the argument that only the wealthy benefit from investment housing. Less than 10% of Australia’s 2.2 million property investors earn more than $180,000 a year. Likewise, 71% of investors own only one home, with 19% owning two and 10% owning three or more houses.

Labor Leader Anthony Albanese upset some of the affordable housing campaigners in July when he abandoned pledges to impose restrictions on negative gearing. The opposition went to the 2016 and 2019 elections promising to halve the 50% deduction on capital gains and limit negative gearing to new properties only.

National Shelter chief executive Adrian Pisarski said by ditching its commitment to reforming negative gearing, Labor had “abandoned” would-be home-owners and low-income households wanting to buy homes.

“It took 15 years of campaigning by many to get the ALP to find a spine on CGT and negative gearing and commit to helping reduce house price inflation,” Mr Pisarski told the SMH at the time. “This is a sad day for affordable housing.”

In May Mr Albanese launched the Opposition’s $10 billion Housing Australia Future Fund. The fund would build social and affordable housing and create thousands of jobs now and in the long term, he said.

Annual investment returns from the Housing Australia Future Fund will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to pay for social and affordable housing projects.

Over the first five years, the investment returns would allow the building of 20,000 social housing properties, 4,000 of which would be allocated for women and children fleeing domestic and family violence and older women facing homelessness.

Residential property analyst Michael Matusik has a few ideas to fix housing affordability. He says part of the problem is the focus on new builds rather than the existing market.

Matusik-style reforms would include removing negative gearing (a policy set when interest rates were sky high) and charging stamp duties at a flat $2,000 per transaction.

Matusik suggests a 20% tax on all property transactions – including owner stock if sold within, say, three years. This would stop ‘flipping’ (buying a house, renovating it and selling again within a short period of time) which is a major driver of prices. The government should limit foreign buyers to new dwellings and they must also have a 50% Australian business partner who pays 20% tax. These new rules would also include measures to stop developers land-banking.

“If they don’t start building the project within five years, they lose development approval. After 10 years, if there is no action the site is sold underneath them. In short, you cannot buy a home (new or existing) unless you have an Australian passport and pay 20% tax. No Passport no buy.”

As for new housing, Matusik says all housing related incentives should be removed because they distort the housing/building cycle. He also suggests that greenfield developments be required to provide minimum levels of community infrastructure set as targets. No doubt he will extrapolate on these ideas in a future Matusik Missive.

More radical ideas from Gwyn Hooper, writing for a Byron Bay newspaper (the median house price in Byron is $2.8 million (units $1m):

Under Hooper’s affordable development plan, the Federal and State governments would provide finance and free land. Local Government’s role would be to manage the buildings and tenants and waive its usual development fees.

The tenants would have a secure tenancy, pay an affordable rent (based on income), and would importantly be able to live and bring up their families without financial stress – an issue that can cause family breakdowns that only compound these issues.

As these examples suggest, this issue needs to be de-politicised and brought out into the sunlight with an ‘open to new ideas’ sign attached.

Written in the comfort of my freehold home, ameliorating some of my baby boomer guilt, I think.

Last week: People who lived in the UK for more than six months between 1980 and 1996 are prohibited from donating blood because of Mad Cow disease.

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