Home ownership, social housing, & progressive housing policy for changing times.

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Lionel Orchard.

Posted 28 November 2019.

The foundations of a balanced and equitable housing system in Australia have been corroding for some time to a point at which ways forward are becoming increasingly vexed. Questions about how to respond are difficult, because of the legacy of neglect over recent times, and changing economic and social conditions making for increased complexity in delivering effective policies.

Debate about the shape and direction of Australia’s housing system has always been vigorous, particularly from the 1970s on. Depending on your point of view, the priority given to home ownership has either been seen as rational, sensible, and deserving of the political and policy support it attracts, or an emphasis conferring too many undeserved benefits to owners over renters. Some argue that the price we have paid for this emphasis has been to marginalise the needs of low-income people unable to access home ownership, or those who prefer to rent.

Rental housing plays less of a role than it could, particularly public and social rental housing. For others, home ownership is unique in facilitating choices and freedoms, while at the same time enabling wide asset ownership in Australian society. Provided it is well distributed, home ownership can reconcile liberal and social democratic values positively. Some have argued that, without it, Australian society would be less equal than it would be otherwise. Nevertheless, the issue of public policies to facilitate that equality of access are always with us.

The tensions between home ownership and rental housing and private and public options were perhaps better managed in earlier times than they are now. In the 1950s and 1960s, wide access to home ownership was facilitated by full employment and cheap finance from public and private banks, while government directly intervened to provide a supply of housing both for public rental and for home ownership for those with low incomes. The latter intervention was larger in some States than in others.

Shifting political and policy priorities from the late 1970s on have increased the difficulty of this balancing, and contributed to worsening divisions and inequalities. Perhaps the most significant policy shift has been from direct concern about housing supply to indirect management of housing demand through various subsidy policies. Direct government activity in public housing supply has been effectively abandoned and replaced by income-based assistance for low-income private and public renters.

To the extent that low-income housing supply has any presence, it centres on social and community housing models which, as yet, have not developed to anywhere the size needed. Then there are the heavy subsidies to private housing investors for rental housing, provided by negative gearing and capital gains tax concessions, and various policies (eg first homeowner grants and related financial arrangements) which support access to home ownership in difficult economic times.

Private housing markets disabled sensible housing policies

The problems that beset the system have been front and centre in recent political and policy debate. The turbulence surrounding the various subsidy policies shaping private housing markets has reached a level of dysfunction and disagreement that has basically disabled the development of sensible ways forward – a not uncommon condition in Australian policy debate. For many, the subsidy emphasis has fostered excessive private investment in the housing system fuelling excessive house price inflation. Negative gearing has perhaps been the main focus of attention here. The level of subsidy entailed in negative gearing is very large and not limited in its application. Many worry about the market distortion that goes with it. Private investment for private investment’s sake trumps private investment for genuine use as in mainstream home ownership.

Nevertheless, the policy is so entrenched that, as we have recently seen, critics and those who want to curtail its influence have no political traction in part because of claims that any shift away from the policy would undermine rental housing supply. So, the perpetuation of reliance on the private market for the supply of rental housing continues without government having much capacity or influence over the nature of that supply. The recent emergence of Build-to-Rent schemes relying on greater levels of private investment and providing rental housing at normal market prices will continue the private dominance.

In the absence of additional housing supply, the focus on investment for investment’s sake has the added consequence of crowding out those, in particular first home buyers, who simply wish to enter private home ownership for the uses and freedoms it allows. Those most impacted here often face less secure employment and are less able to afford the costs associated with access to home ownership in inflated markets. This adds to the inequalities in the Australian housing system between those fortunate enough to have gained access in easier times and those now excluded.

Massive shortage of housing for low income groups

Through all of the pressures created by a largely unfettered and increasingly private housing system, it is widely acknowledged that we have a massive shortage of housing for lower income people. The numbers here are large – some suggest that across Australia upwards of 300,000 housing units for low income rental and 200,000 for affordable home ownership are needed. There is currently no convincing level of response to this need.

Public housing still survives but in decreasing amounts and without much support. The ageing of the remaining public housing stock means lower standards in the absence of proper maintenance. Better quality public housing is being transferred to non-profit social housing providers. Poorer quality public housing is often turned over through privatisation for private redevelopment albeit with attention to maintaining some level of affordable housing in the process.

Non-profit social and community housing entities are growing in influence across the country and are seen by many as the great hope. Nevertheless, while their activities are important, they are not providing the levels of new low-income rental housing required.

The supply of affordable homes for ownership is of concern to policy makers and politicians but the main responses continue to centre on schemes relying on conventional approaches – witness the Morrison Government’s new policy on mortgage insurance concessions for those with low deposits seeking loans from private banks. Taxation changes are often put forward to help with access including removing stamp duties on house purchase. There is not much effort on direct public mechanisms to augment housing supply for affordable home ownership.

Need to change direction for equitable housing policies

What to do? It is pretty clear that continuing to do what we do now needs to change and fairly dramatically. It is one of the tragedies of this era that the longer we leave changing tack, the more difficult the problems become. This is especially so in the area of housing policy because of the long lead times and inherently incremental nature of change in the housing system. Establishing flows of finance and institutions for new housing supply are difficult enough. Restoring better balance between public and private interests, and direct supply and indirect demand management in national housing policy would take even greater effort.

Neoliberal free market and communitarian precepts continue to crowd out the social democratic case for direct public activity and institution building in this as in other areas of Australian public policy. This is not to say that communitarian principles are incompatible with social democratic ones, just that not much effort is being made to bring the ambition of the latter to bear on the social and community housing mission.

Beyond these problems, the questions of how resolution of housing needs links to urban and environmental policy are also large. New housing supply at the scale required will mean continuing growth in both established and new urban areas with all the consequences for urban planning, infrastructure, and the proper integration of employment, transport and services while respecting environmental limits.

The dilemmas are great while the case for changes in the direction of housing policy can’t be avoided for much longer.

Lionel Orchard holds academic status as Associate Professor in the College of Medicine & Public Health at Flinders University. He previously taught public policy in the Graduate Program of Public Administration at Flinders.
This article is republished from Pearls & Irritations 18 November 2019.
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