You might have noticed that I’m a little concerned about the housing affordability issue at the moment. I think I’ve gone so far as to suggest it as one of Australia’s most critical problems that will do enormous damage our community in the medium term.
And, insincere expressions of concern by politicians who just use it as an excuse to bash immigrants, or by the real estate industry who use it as a cover to bully governments to give them more of what they want (which nobody but an idiot would think is lower prices) aside, it’s felt like very little genuine push for reform on the issue has made it anywhere near our advertising-dependent newspapers. Or the national broadcaster that so often simply parrots them.
So I was glad to see yesterday that a group of angry young people have set up Prosper Australia, to draw attention to the plight of this houseless generation – and that it’s finally being reported. Steve Keen supports it. GetUp! might well pick up the campaign and run with it.
Now, I don’t think that the immediate proposed action – a purchasing strike – will do very much. For one thing, the people promising to strike aren’t really able to buy a house at the moment anyway. (I will protest against the high price of Ferraris by not buying one!) For another, if that’s the only reason that house prices drop, then they’ll lunge upwards as soon as those people start buying again.
But I do think the noise being made on the issue is vital, because we’ve created a serious crisis for this and future generations that’s only getting worse.
What can we do?
It’s silly to blame it on immigration or population growth – this is an enormous increase in prices well ahead of any increase in population. Nor is it – as the real estate lobbyists self-interestedly suggest – slow approvals for subdividing ever more remote packets of land. It’s to do with the amount of borrowed money to which people have access in order to bid each other up with at auction, and the number of people with enormous access to such finance via equity in their already inflated homes outbidding homebuyers to buy their own investment properties. The numbers of people with multiple houses have surged at the same time as the house prices – hardly a coincidence. In fact, it’s a vicious circle – the more the prices go up because of investors, the more investors want to get in on this cash cow and the more equity they have so the more they can borrow so the more they push up prices.
So that’s what government needs to tackle. It needs to take into account the people who’ve just jumped on the property ladder at the present inflated prices who will be affected by an actual drop in prices in the sense of negative equity – but it needs to resist their calls to keep the market as inflated as it was when they hopped on. It needs to stop the ponzi scheme and try to minimise the damage to the people who’ve been stuck with it. It doesn’t need to protect investors – part of the reason why all this capital is being stuck economically uselessly in housing is because investors think it’s safer than the stock market. Disabuse them of that misconception.
Raise CGT to something closer to income tax – why should you work hard all day and be taxed at a certain rate where somebody just sitting on property and doing nothing earns more and is taxed less? Consider a higher CGT rate for property investments that aren’t adding to the housing supply (but of course maintain the zero CGT rate for a person’s primary residence). Remove negative gearing. Get rid of inflationary grants like the FHOG that simply go straight to vendors and in fact, by increasing the amount people can borrow, inflate prices by more than the value of the grant. Increase renters’ rights at the expense of landlords’, so that becoming a landlord is a less attractive proposition.
Won’t that increase rents? No, because it’ll enable a whole generation desperate to buy a home presently stuck renting to escape the rental market, reducing demand.
Make no mistake, this is a real problem, and if not addressed we’re going to become a nation of landlords and tenants, with all the social problems associated with massive inequality.
Let’s hope GetUp! and Prosper Australia can make the waves that are needed. They’ve already achieved one important coup: the Real Estate Industry of Victoria is vigorously opposed to them. That’s a definite good sign.