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Housing Affordability :: (Howard S. Emanuel)

There has been plenty of talk, plenty of discussion in Australia over the past 2/3 years concerning current levels of housing affordability.....

By Howard S. Emanuel - 27th August 2006 - Back to News

HOUSING AFFORDABILITY

14 AUG 2006

There has been plenty of talk, plenty of discussion in Australia over the past 2/3 years concerning current levels of housing affordability. Predictably one has to unfortunately say, the federal and state governments are playing the well practiced "blame game" that always accompanies this issue, and doing little else.

Yet the provision of comfortable, secure and affordable housing is one of the most innate needs of human kind and in a nation as wealthy as Australia should be in reach of every member of the community. You could argue that it throws into complete question the very nature of contemporary Australian society and its accompanying values if one of the most fundamental needs cannot be met. Clearly we are used to congratulating ourselves on the equal and egalitarian nature of our community in this country, equally clear when one exposes the underbelly is the increasing myth of such a claim.

Of course one must realise that free market economies by their very nature often create inequities and governments can only influence the outcomes in those market places to a certain degree. This is especially true in Australia where the ever loudening call of "hands off of our affairs" to governments, has them doing exactly that. The market dictates just who gets what in the way of housing; namely if you can afford it, you can have it, if not, well who knows; and it seems to me governments are saying, who cares.

 A tough call you suggest, well consider the following. When the Brack's Victorian government first came to office in October 1999 they could never have foreseen the massive spike or increase that subsequently occurred in house prices, supposedly peaking late in 2003 and continuing on at steady levels with gusto today. Although by the early part of this current decade with low interest rates having been entrenched for a few years and unemployment falling it was pretty obvious that pressure would be mounting on house prices sooner rather than later.

House prices increased massively in the 5 years to December 2005 up to 120% in some cases and much more in selected markets such as coastal housing and delivered a virtual bonanza to the treasury coffers in Victoria by way of stamp duty and other receipts from house purchases. As the purchase price of a house climbs so does the state levied stamp duty (or purchase tax) increase.

The Bracks government began to see substantial and considerable increases in its revenue streams related to stamp duties on house purchases, to levels it could never have dreamed of or imagined. So the state is doing very nicely from all this but the inevitable flow on effect of all this price activity is affordability issues beginning to raise their head.

As prices increased, affordability for many declined to the point where a great many can now genuinely claim that they cannot afford to purchase there own home.  First homebuyers have been hit particularly hard where the deposit required to purchase a home just gets bigger every day.

How can we ever manipulate the housing market in a country such as Australia with its near rabid support for "free market economics" where governments are told in no uncertain manner to keep out of the market place, and most other things that we do in fact.

Well governments can actually do a great deal if there was the moral willpower to execute such actions. First homeowner grants, as welcome as these supports and stimulants are, are just not substantial enough to make a real difference to enable most to enter the market.

Public, Community or Social Housing is the area in which governments can do plenty but tragically in Victoria at present and Australia in general governments are doing virtually nothing in real terms to offer public housing to the many that cannot afford to buy. Currently these people have little alternative but to consider entering the private rental market, or a more appropriate term might be trap, in some cases remaining in this section of the housing market for near ever, if current trends continue.

Social housing stocks have declined in the past 2 to 3 decades in Australia and are looked upon as a quaint relic or antique from the past, something we no longer needed in this country as the affluent years of the 1950s and 60s supposedly saw an increasing amount of people become financially secure and therefore able to buy their own homes. As unbelievable as this may sound I am convinced this was at least part of the rationale behind public policy in the 70s, 80s and 90s that mandated a selling off of public housing stocks with no effort to keep up with demonstrable demand from the many in the community stuck on low wages or unemployed who could not enter the housing market. (Seems to me an entire generation of Australians was in denial about levels of affluence in the community in the 70s to 90s.)

Of course now that the housing boom has left the dream of home ownership in tatters for a great many we have a huge backlog of potential clients for public housing, but we have governments who not only do not respond to need by fast tracking public housing infrastructure projects, but also do not even accept that a crisis situation exists.

I believe that the Bracks Labor government is culpable in the decline of housing affordability in this state for one very simple and straightforward reason.

Increasing house costs have made home ownership unaffordable for many, but those very same increasing house prices have landed the state administration a treasury receipt bonanza. The government has grown fat on the back of disadvantage. Revenues from housing taxes have been pouring in for at least 5 years. The best action the government can take, indeed the obvious and moral thing this government must do is return a percentage of its housing taxes back into the market place in the form of social housing, thereby allowing those forced out of home ownership to move into secure, modern and affordable housing funded by the manifest treasury resources of Victorias housing boom.

For the past 3 years or so stamp duty receipts alone in Victoria have reached the level of around $2.5 billion annually. That’s a lot of money, a great proportion of which Mr Brumby could never have foreseen finding its way into the states coffers. So this is a windfall gain, money not factored into the state budget and therefore not directed into any particular area of service provision. The money is literally sitting there without a home (no pun intended).

My view is that a minimum 10% of this annual sum of $2.5 billion must be directed straight into public housing infrastructure, forthwith. This will create housing stocks toward the levels now required in this state, it will also provide building activity and related flow on effects such as employment and offer a much needed boost to this states manufacturing industry by way of production of building related products. Under this scenario everyone is a winner. But currently there is only one winner, the state government.

 If the government fails to act there are a great many losers notably all of the above but especially first home buyers currently caught in the private rental trap, giving away each fortnight to a landlord what they should either be giving to a bank by way of mortgage payments or to the government by way of public housing rent, that offers them in return access to modern and comfortable accommodation that is secure in tenure unlike the private rental market where sub-standard housing exists in abundance and tenancy agreements abound that are literally not worth the paper they are written on. Try taking legal action against a recalcitrant landlord when you are broke and dispirited and struggling to find the energy to just keep going.

Rents from public housing tenants can be returned into an increasing amount of public housing infrastructure. (If only governments weren’t so obsessed with "Centralised Revenue") Once there is a fixed number of public houses in the market place, rental returns and the like can offset initial building costs and allow the government to continue to invest in this sector at little ongoing cost.

All that’s needed for Victoria to take a progressive move forward regarding providing social housing in this state is for an initial investment of funds to occur, public funds secured by the Bracks government from house purchasers. This is public money, it is sitting in the state treasury and the public should insist that this investment takes place. The time to be resolute and demand that this occurs is of course in November of this year, at the upcoming state election.

Right now the Victorian community is sitting smack bang in the middle of an unprecedented opportunity to take a major social step forward. This state is in a strong financial position. There may not be such fortuitous times forever and we should lock in now the investment we must make in affordable housing. To miss this opportunity will obviously leave the government of the day exposed to accusations of not only serious mismanagement but also will throw into question the entire value base of the broader Labor movement in this state, of which the current Labor administration is so obviously a major component. These values of course have long espoused equality and justice for all in the community, especially the less well off, the disadvantaged and the underprivileged. The availability of comfortable, affordable, secure housing for all is by any measure a manifest expression of equality and justice.

Internationally recognised socially progressive societies such as Sweden and Denmark to name several have significant proportions of housing held in public hands. These societies generally have less affluence than Australia yet are able to provide one of the fundamental needs to most in the community when Victoria fails to do so. Social division is also less pronounced in these Scandinavian nations that here in Australia and it seems to me their governments are also more prepared to ask the broader population to support the provision of affordable housing by way of public funding, than is the case here.

Perhaps this reflects governments of extraordinary vision or more likely I think it reflects the broader values of that society that sends a powerful message to the government of the day that social division is not appropriate, that greed is an evil and destructive thing and importantly that all people deserve an opportunity to live with dignity, not just the fortunate and those strong enough to wrestle their way to the top of the heap in communities that are increasingly resembling the make-up a jungle rather than a community. The strong and the cunning survive, the weak and the less fortunate, the ill, the sick, the unemployed, the frail, the poor, well they just have to get on the best they can. In the meantime the rest of us can continue to perpetrate the myth of egalitarianism.

To be fair the current Victorian government has achieved in significant areas, but the broader record of the Bracks government will stand for little if it stands accused of being culpable in the denial of one of the most fundamental human needs to an increasing number of its citizens.

The solution is not so difficult really. To address a profound morale issue such as housing affordability all one really needs is a government with some real moral values, a sense of fairness and decency, some political vision and courage. You decide if the Bracks Labor Government in Victoria currently fits the bill.

I have!

Sincerely,

Howard Emanuel

Mobile: 0400 158 896

E-mail: howard@howardemanuel.com

Web: www.HowardEmanuel.com

Source: http://gippsland.com/

Published by: howard-emanuel@hotmail.com

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