HA Housing Insights: A Policy Perspective on the Housing Crisis
“The underlying causes of the crisis are complex and layered, meaning fixing the crisis is also very complex and difficult”
The housing crisis remains a critical issue in Australia.
A coordinated effort between all levels of government, the private sector and community housing organisations is required to tackle the crisis and boost supply.
In this HA Housing Insights series, our social and affordable housing team speak with key industry experts – including developers, builders, community housing providers, investors and property and tax specialists – to gain a well-rounded perspective on the challenges faced in delivering housing outcomes and potential solutions.
To open the conversation, we speak with Mike Myers, who has 42 years’ experience working in the UK and Australia across all aspects of social and affordable housing in the community, government and private sectors, including policy, delivery, finance and executive leadership.
After 15 years as Founder and Managing Director of a leading community housing organisation, Mike is now taking on a number of new voluntary roles and building new policy and delivery alliances to initiate further innovations to address the housing crisis, including Chairing the Queensland State Committee for Housing All Australians and undertaking projects to bring empty buildings into social use with business partners and without government funds. For the purpose of this series, Mike speaks about his personal views (and not those of Housing All Australians) on the housing crisis.
Mike Myers
QLD Chair of Housing All Australians
housingallaustralians.org.au
Q. In your opinion, what are the main factors contributing to the current housing crisis in Australia?
A. The housing crisis in Australia has been over a generation in the making and in the opinion of many policy experts will take a generation of the right kind of policies to fix it.
The underlying causes of the crisis are complex and layered, meaning fixing the crisis is also very complex and difficult, with a fundamental truth that fixing the system will lead to losers as well as winners. This, in itself, is one of the greatest political barriers to action and we are not just talking about voters, but also addressing the powerful interests in real estate, banking and construction that have strong business interests in the status quo.
The basic truth is that house prices, whether to buy or rent, have become significantly disconnected from incomes and the multiple of annual incomes required to acquire housing has grown to unprecedented proportions. Each year, economists say that this situation is unsustainable, and some have called it a the longest “bubble” in modern history, but each year and each decade it is getting worse.
The list of factors that have contributed to this are well documented, but I have flagged a few below:
The rise in two income households and financial deregulation. The key question is how much of this extra income ended up captured by the property and banking industries, generating house price inflation above income growth.
A taxation system that distorts housing, pumps demand, enhances wealth inequality, promotes over capitalisation in house sizes and increasingly locks out the next generation.
Market power through construction and finance that can slow supply to enhance price and protect the major banks that are, at any one time, often over exposed.
A confused planning culture that has not resolved the political tensions over issues like density, diversity of built form, the creation of new towns, regional development and urban footprint growth.
A ‘forever’ game of residential related infrastructure catch-up and a version of “Utopia” played out across the nation each political cycle.
No national housing plan with a clear goal of meeting the housing needs of all Australians including embedded system wide mechanisms for affordable housing that are not dependent on small scale and uncertain funding programs like the Housing Australia Future Fund (HAFF).
Many of these issues underpin our current supply shortfall which is exacerbating price inflation. Increasing supply is certainly one policy goal in the National Housing Accord, however a narrow focus just on supply alone may not improve housing affordability overall. Interestingly, the last time we had 5 years averaging 1 million homes per year, affordability actually declined. In addition, residential market focus and housing distribution is likely to continue to fail to meet the needs of lower income people.
Q. In your experience, what State and Federal Government policies have been most effective or ineffective in addressing the need for more affordable housing?
A. If we take a historic view, then an era of direct government house building was an effective policy. Unfortunately, as governments largely exited supply, the remaining stock became increasingly targeted leading to concentration of people in high need. This in turn led to a subsequent fall in public support for public housing….and so on…and so on. A vicious circle of decline in a good public policy mechanism.
Recent and current policies supporting community housing are very welcome, but the limited nature of these policies is not going to transform the sectors scale, role and capacity to something akin to the UK sectors. The sector remains largely a cottage industry with a handful of medium enterprises leading the way.
There are some good examples of States seeking to address the crisis where they have the powers and resources. Some examples are:
Victoria’s Big Housing Build and particularly the role played by low-cost finance through Treasury Corporation of Victoria’s lending to community housing providers (CHPs). This is nation leading.
A number of States introducing Ministerial ‘fast-track’ planning pathways for affordable housing, although these are not always as speedy or effective as hoped for.
Land-lease arrangements that bring State & Local Government land into use at a peppercorn or discounted rate, offering another Community-Government supply model.
The Federal Government packages, including National Housing Accord, HAFF and shared equity home ownership (SEHO) all have merit, but do not address the causes of the crisis. These programs are important because we need the Federal Government to lead and they will assist thousands of people in need, but these programs will not deliver the housing system Australians need.
We need to remind ourselves that the housing system is in crisis and the key ‘difficult’ policy areas listed above are not on the agenda of the current national leaders. The efforts of State Governments is at best just slowing the rate of decline in our system.
Q. What role should the State and Federal Government play in increasing affordable housing availability?
A. The government should address the key issues above in taxation, co-ordinated growth planning, infrastructure first policies and supporting industry and financial sector transition towards long term national policy outcomes and not just continue with a ‘follow the market’ setting.
If we are looking at current areas that could be addressed in the current electoral cycle, I would nominate these 4 areas:
All major social infrastructure projects, from schools and hospitals to public transport and major facilities, to be required to produce a ‘WorkForce Housing Plan’ linked to tenders and back into a lead State co-ordinating entity (for example, Economic Development Queensland);
Assisting affordable housing by helping de-risk key elements. This could include a model similar to the Western Australia Government’s initiative, whereby government-owned land is developed to on-sell to CHPs, or clearer step-in rights and rules that would significantly reduce the cost of finance, including institutional finance in approved affordable housing developments;
Under the Federal Government’s economic plan, ‘a Future Made in Australia’, establish a system to build modular homes, involving at scale factories in the major States with a part government shareholding, funded through superannuation funds, as the major supplier of social and affordable housing to the CHP sector with a committed minimum pipeline over 5 year cycles to underpin modest but low risk returns. This would reduce costs and risk in our supply chain while creating new national modular capacity at scale; and
Exclusion of affordable housing investments from superannuation benchmarks to unlock investment on a social impact / ESG basis.
Q. What country’s housing policies could serve as a model for Australia to follow?
A. Lots of countries have similar problems to us, but there are elements that can be considered from Canada’s national housing plan, the UK’s housing associations sector, Germany’s long term leasing and regulatory system and the USA’s 40 years of Low-Income Housing Tax Credits alongside their build-to-rent programs (known as multifamily and single family housing in the USA).
Interestingly, our own National Rental Affordability Scheme (NRAS) delivered 36,000 new affordable homes in 5 years using tax credits and around $11b in private investment. With a few lessons learned - like variable lengths of terms and variable market related credits – another scheme akin to NRAS for new build affordable homes could be an ideal and targeted replacement for negative gearing.
The information provided in this article is for general informational and conversational purposes only. While we strive to ensure the accuracy and relevance of all content, we make no guarantees about the completeness, reliability, or suitability of the information for any particular purpose. The views and opinions expressed in this article or associated materials are those of the respective contributors and do not necessarily reflect the views of Harwood Andrews or any of its affiliates.
This article is the first in a series of Housing Insights. Follow us to be notified when the next instalments are released.
For more information or to be featured in our HA Housing Insights series please contact:
Briget O’Callaghan
Principal Lawyer
0457 117 925
bocallaghan@ha.legal
Evelyn Zeglinas
Associate
03 5225 5245
ezeglinas@ha.legal
