Life on the West Island - House or home?

It seems that every day on the West Island we are bombarded with media stories about the nation’s “housing crisis.” The problem, we are told, is that there is a nationwide lack of housing, and that the major issue is a supply shortage. We are exhorted to urgently build thousands of new houses. Yet, on average there are one million vacant homes every night on the West Island. At the same time, the statistics of homeless people continue to rise. Just what is going on and how might we fix the apparent housing crisis? Perhaps the starting point is to look at how the nation’s housing market apparently came to be in a dire state.

Essentially, it was conscious housing policy of the previous coalition government to deliberately shift wealth from the poor to the privileged. In doing this, they followed the lead of the earlier Howard government which gave owners of investment properties a range of tax concessions on their capital gains compared with ordinary workers who were taxed at much higher rates on their wages. This week, new Liberal Senator Maria Kovacic blew the whistle on the coalition’s intentions when she said on ABC television that their policy was to shift from workers being supported in retirement by lifelong savings in superannuation, and instead for all to live off the profits of investment in “bricks and mortar” residential property.

The rationale for this is being brutally exposed by the current housing crisis. Senator Kovacic, a former president of the Liberal Party in NSW, claimed that giving massive tax concessions to property investors would mean that they would then make homes available to lower-income renters. This myth powered the Morrison government’s supercharging of property prices, effectively locking younger and middle income home buyers out of the market. Added to this was the sop to tradespeople and construction companies of giving grants to home owners for renovations, supposedly as a job creation programme during the Covid pandemic. This has resulted in a further boom in property prices and the conversion of many previous rental properties into expensive Airbnb holiday rentals instead.

There is no evidence that this range of initiatives has produced more affordable homes available for sale or rent – in fact the reverse is the case. Homeowners have instead pocketed the capital gains and paid lower taxes than those depending on wages as their primary income. The private sector construction industry has also ensured that we continue to be the nation where new private houses are the largest in the world, with multiple bedrooms and bathrooms and huge family/entertainment spaces in households with an average of less than four occupants.

Then there is the massive boom in house prices, driven again by conscious coalition policy to keep interest rates at very low levels. This encouraged many buyers to over-commit to purchasing overpriced real estate in the belief that their mortgage payments would remain affordable. As the Reserve Bank steadily increased interest rates in its obsession with fighting inflation, many of these homebuyers fell into mortgage stress, and in some cases into negative equity as house prices levelled off or even fell. The response, enthusiastically driven by the real estate industry, was to encourage rental property owners to meet increased interest costs by raising rents at up to four times the rate of inflation, or to shift from long-term renting to Airbnb instead.

Almost universally, according to both media and political sources, the West Island’s problem is a shortage of supply of housing, and the solution is to quickly build lots more residential properties. This fails to recognise that the market has been so distorted by existing policies and programmes that a million houses remain unoccupied each and every night, while the number of homeless people continues to grow. Put simply, government and industry have become fixated on building houses rather than homes.

This has been exacerbated by an almost complete lack of focus on public housing for at least two decades. New social and public house building rates have fallen to historic lows, replaced by a vague reliance on the private sector to construct “affordable” housing. This can be seen in all of the nation’s major cities, where large social housing estates have been sold and demolished, to be replaced by multi-storey private apartment blocks. Some replacement public housing has been constructed, usually on urban fringes or in poorly-serviced low-income suburbs. But the numbers of new public and social housing starts has continued the decline which began over twenty years ago. Consequently, waiting lists have grown to the extent that applicants face delays of many years before being offered a public home at an affordable rent.

Some countries experiencing similar housing issues as the West Island, and even a few of our local government bodies, have responded with action to limit Airbnb rentals such as restrictions on how many properties in a defined area may be rented on a nightly basis, and parts of Britain have even imposed higher council rates on vacant properties and taxes on “unoccupied beds.”

On the West Island, we have plenty of residential properties to house our entire population. There is not a housing crisis. But under current policies and tax arrangements, we have a deliberately created a severe shortage of available homes, especially for those on lower incomes. Will West Island governments of all political persuasions have the courage to tackle the inequitable transfer of wealth from the poor to the rich and introduce meaningful tax reform? Or will we continue with current policies and pretend that building lots more unaffordable houses and flats will fix the problem? Only time will tell.