There is a housing crisis in Australia. Renters have seen prices sky rocket. Mortgagees are struggling under the weight of relentless interest rate hikes. Public housing waiting lists are in the thousands or tens of thousands in every state. The ranks of the homeless swell. This is the anarchy of the market on full display, with everyone in furious agreement that there is a serious problem, however, few can see a way forward. Socialist ideas offer an alternative view based on the fundamental right of all people to a decent quality affordable home.
Often quoted of the Australian economy is that this country has just experience three decades of uninterrupted growth. It is one of the wealthiest nations on the planet. In fact the picture is less rosy. The Australian economy benefits from high rates of immigration. If you take a look at per capita GDP, which adjusts for the impact of changes in population, you will see that in fact Australia followed the rest of the western world into recession in 2009 following the Global Financial Crisis and has experienced aenemic growth of around 1% through the 2010’s. This is more in keeping with the experience of ordinary people who have seen living standards go backwards over the past decade.
Notwithstanding, Australia’s boundless plains would seem to offer plenty to house the people that live here. But Australian capitalism is paralysed by this issue. All agree the issue exists. No government is willing to solve it.
There are several central aspects to the great Australian housing crisis. The cost of rental accommodation. Renters rights and the quality of housing. The price of housing.
National median weekly rent has now reached over $600 with rents increasing by almost 10% year on year over the last three. Sydney tops the chart as the most expensive capital at $745 a week, Canberra’s median is $650, Perth and Brisbane sit at $630, Darwin $610, Melbourne and Adelaide are next with $565, and Hobart is $535. The average weekly wage in Australia is $1,431. If someone earning the national average wage were to rent in the cheapest capital their rent would eat away over 37% of their income. At the national median rent that’s 42%.
The numbers demonstrate that the cost of rental accommodation is out of control. The proportion of low income households in the private market in rental stress was 58% when the latest Survey of Income and Housing was conducted by the ABS in 2019/2020. In the years since we have seen an explosion in rents which only exacerbate the problem.
The federal government, through the Housing Accord, will build 30,000 social and affordable homes through the Housing Australia Future Fund and a further 10,000 from the budget over the next 5 years. The states and territories will top this up through various measures for up to 20,000 additional homes. Nationally there are over 170,000 people on public housing waiting lists. The Albanese government, led by a man who grew up in public housing, plans to deal with a 170,000 home problem by building 60,000 homes. It seems almost too obvious to point out, but must be said nonetheless, this is utterly inadequate. That’s without delving into the slippery difference between public, social, and affordable housing.
Crux of problem
Socialist solutions look to the crux of the problem. There must be a massive investment to build enough public housing to eliminate the current wait lists. Nationally that means at least 170,000 good quality public houses must be constructed. In fact, the figure is a little higher as this doesn’t account for internal transfer requests and the intentionally deflated applications for public housing created by long waits, difficult to navigate systems, and social stigma associated with last resort public policy. Not only would this address the acute crisis faced by those on the public housing lists, but it will also contribute to other issues in the housing crisis. By providing decent quality homes at affordable prices public housing can set the minimum standards that must be met by the private rental market. Building new homes will also contribute to the current shortfall in housing. Importantly this should be public housing, fully owned and managed by governments, with the accountability that also provides. Social housing, run by not-for-profits, or affordable housing, where the price is set at a notionally ‘affordable level’, normally around 30% of incomes, are not adequate.
To look at another Labor government; in Victoria the state government has plans to tear down the remaining public housing towers in Melbourne. The government has been extremely careful in their language around these announcements. They boast that the redevelopment will see the current 10,000 tenants increased to 30,000, however, public housing is not mentioned once, instead it will be a mix of social, affordable, and private, with no commitments even to the proportion of social and affordable. In reality this will be, if not defeated by a community campaign as has happened with similar proposals in the past, the end of public housing in Victoria.
Rental rights in Australia compare poorly to other advanced capitalist countries. Common issue across states include good quality and timely maintenance, length of contracts, and no-grounds evictions. A number of states and territories claim to have addressed issues around no-grounds evictions in recent years, however, the rules are weak and in practice they provide little protection for renters.
The shortage of housing for rent and requirements for extensive references when applying for a house have also contributed to an environment where tenants self-police and don’t raise issues for fear of retribution, whether in the form of excessive rent increases, poor references, or eviction. When issues are raised it is often time consuming and frustrating to have basic issues addressed, if they ever are.
Around 30% of Australian households rent (as reported at the latest Survey of Income and Housing in 2019/2020) and this proportion is increasing, it was around 25% in 1999/2000. The welfare system in Australia is not designed to support people in the private rental market. If you retire in Australia and you don’t own your own home you will almost certainly live in poverty. If you find yourself on unemployment benefit you cannot afford a rental anywhere in Australia. In many European countries it is a viable option to rent for your entire life, not so Australia. Benefit payments must be increased to cover the cost of housing and life people out of poverty.
The additional Coronavirus payments introduced in 2021 effectively doubled the unemployment benefit, lifting hundreds of thousands of people out of poverty. Incredibly this was introduced by a conservative government led by Scott Morrison, who as social services minister was responsible for the introduction of robodebt – an illegal scheme that saw welfare recipients hounded for fictitious debts. The payment was initially reduced and has now been cut altogether. However, it demonstrates that the money is there, it’s about what you decide to spend it on. In 2022/2023 the Australian government provided $11.1 billion worth of subsidies to fossil fuel industries. Priorities.
The corresponding figure for households owned in Australia is decreasing, around 65% now from 70% at the turn of the millennium. This still represents a significant majority of households and is a result of policies following the second world war. The Menzies government saw home ownership as a way of shoring up the conservative vote and put in place policies to promote home ownership over renting. The success of these policies is in part responsible for the poor standards around rental accommodation in Australia.
Housing affordability is a big issue and is regularly discussed in the media and by the major political parties. House prices in Australia have skyrocketed in recent decades. In 1990 the ratio of house prices to average income was around 3, meaning that the average house price was 3 times the average income. Now that ratio is around 8.5. This is the fundamental issue that is putting home ownership out of reach for younger Australians. Alan Kholer, in his recent Quarterly essay, pointed to the absolute paralysis of the political class on this issue. As he noted, to resolve the problem house prices either need to half, or stagnate for 20 years while incomes catch up, both these options are completely unpalatable to both the major parties.
Changes enacted by the Howard government saw the rate of capital gains reduced which, in combination with negative gearing, promoted investment in housing and resulted in the massive spike in the house price to income ratio that is causing such issues today. It beggars belief that the Howard government is commonly lauded for economic management. In reality Howard benefitted from the accident of being in power through the rise of China and the massive mining boom that accompanied it.
To stop the problem getting worse the liberal press point to addressing the combination of capital gains tax and negative gearing. Property investors get a windfall by using negative gearing to offset rental losses against their taxable income, thereby reducing their income tax bill while they own a property, and then getting a massive tax break when the property is sold through the low rate of capital gains tax, about half the rate of income tax. The problem for the major parties is that since Bill Shorten took policies on these issues to the 2019 federal election and lost conventional political wisdom is that touching negative gearing and capital gains is electoral suicide.
Mortgages increasing
While overall rates of home ownership have been decreasing, the proportion of home owners with a mortgage is increasing. In 2019/2020 there were around 37% of households who owned their home with a mortgage, up from 32% in 1999/2000. For this cohort the relentless interest rate rises from the reserve bank are the biggest cost in the cost of living crisis. The cumulative impact of interest rate rises means that a household with a mortgage of $500,000, which is fairly typical, is paying over $1,000 a month more now than they were at the end of 2020.
The government, and in particular Treasurer Jim Chalmers, likes to point to the independence of the Reserve Bank of Australia (RBA) , conveniently ignoring that the government has the ability to overrule the decisions of the RBA, at least until proposed reforms remove this power. More fundamentally the RBA is only acting in accordance with government policy, which sets an inflation target range for the bank to achieve through interest rate settings. This is not to absolve the RBA board, which is stacked with business executives and has no working class representatives.
The Greens have tapped into the anger over the housing crisis are calling for rent freezes and $2.5 billion a year to be invested in public, community, and affordable housing. This would make a good start, however, their plan is not ambitious enough, and reflects the trap the Greens fall into of asking for a few more crumbs rather than the whole pie. In response to the Victorian Labor governments plan to demolish the remaining public housing stock the Greens have correctly opposed the proposal, however, their tactics fall short with the calling of an inquiry but little organising presence on the ground. Only a disciplined community led campaign can see Labor’s scandalous plan defeated. Lessons should be taken from the community campaigns that defended Richmond Secondary, that stopped the East-West Link toll road, and which prevented previous attempts to sell off public open space at the public housing towers.
Under capitalism the anarchy of the market will continue to deliver crisis in the housing ‘market’. Socialists support reforms to relieve the immediate pressure on working people, however, we also recognise that system change is required. For instance the banking system should be nationalised under democratic control to provide affordable finance to working people. Prices, for instance rents, should be regulated to ensure that people can afford to live fulfilling lives, not just scrape by on the bare minimum. If the full resources of society were under the democratic control and management of the majority we could direct the hoarded wealth of the mine owners and bankers to improving wages, making good quality affordable housing, and addressing issues such as climate change.
