Researchers have argued that Australia needs a national housing strategy to ensure that adequate housing is available to everyone in the country. Their report titled Towards an Australian Housing and Homelessness Strategy: understanding national approaches in contemporary policy, found that Australia’s incoherent and fragmented housing policies have become so unworkable that a circuit-breaker is needed.
They argue that in the years after World War II, widespread homeownership in Australia was regarded as a means for having stable housing during one’s working life and in low-income retirement and was encouraged by an array of preferential policies by governments. Since the 1980s housing has taken on additional financial features that have changed the landscape for younger generations and low-income households.
Over time, many of these supportive post-war policies were dropped, while new policies were added, and the modern array of preferential treatment for housing no longer supports home ownership so much as existing homeowners.
The authors argue that the tax expenditures represented by these special treatments make owner-occupation the most subsidised sector in the housing system, and in turn the wealthiest the most subsidised cohort.
Their solution to provide adequate housing for everyone, with Housing Australia acting as the lead agency driving national strategy. Similar as to how the RBA independently sets interest rates. This would form part of a national project to end the fragmentation of responsibilities for housing policy between different levels of government and agencies. Such a strategy would acknowledge that the Australian government has a special capacity to finance public projects and to use public money for public good.
However, any intervention by the Government must thread the eye of a needle by ensuring that any fall in house prices, does not result in most households with a mortgage being tipped over into mortgage stress and thereby losing their homes.
The most recent available data reveals that out of 10.5 million dwellings in Australia, about 37 per cent of Australians are owner-occupiers with a mortgage, about 29.5 per cent own their home outright, 27 per cent rent from a private landlord, while 3 per cent rent from state or territory housing.
One-way affordable housing could be achieved would be by the construction of 950,000 social and affordable rental dwellings by 2041. This figure is far higher than the current government target of 8,000 dwellings a year over the next five years. Ideally, this would allow those on the margins to leave the private rental market allowing rents to moderate and in time facilitating renters to potentially purchase their own homes.
The other option to be considered would be to wind back housing tax breaks such as negative gearing and halving the capital gains tax discount. However, given the backlash the Labor Party experienced in the 2019 election over these policies it is unlikely that they will be keen to bring them back into policy discussion.
Ultimately, given the clear market failure in the Australian housing market, government leadership is needed to restore sense to the market. This calls for brave leadership and a willingness to separate Australians into winners or losers to improve the overall public good of society, something that recent Australian governments have been tremendously wary about doing.
In the short term, I think it is unlikely that there will be any policy changes absent an external shock and, thus we will continue to kick the can of affordable housing further down the road.