A Minister for everything except housing

It’s the biggest gubmint since Malcolm Fraser with 23 Cabinet positions and another seven outer ministries, courtesy of The Australian:

As well as the usual portfolios, there’s a:

• Minister for H2O
• Minister for Pork
• Minister for White Coats
• Minister for Bucolics
• Minister for Gina
• Minister for Shielas
• Minister for Painting
• Minister for Piss-ant Islands
• Minister for Terror
• Minister for Population Ponzinomics
• Minister for ANZAC Day

What there isn’t is a Minister for Housing. The number one social, economic and inter-generational challenge in the country has nobody looking after it. That’s not to say that it has been ignored. Oh no. This mahussive omission is quite deliberate and tells us precisely what the Coalition thinks about the issue. It will do anything, everything, to prevent change in this segment of Australian life. It is bald-faced corrupt on housing with many ministers neck deep in property investment, including the Prime Minister, and with questionably cosy links to the real estate industry that run right up to the Treasurer.

As Leith wrote recently:

With the Australian housing market at its most expensive level ever relative to incomes and rents, household debt at its highest ever level, and first home buyers largely missing in action, Australia desperately needs coordinated policy action and leadership at the federal level.

The key driver for the rapid appreciation of Australian home values is the hyper-inflation of land costs:

So far, the Coalition has pinned the blame for this land cost escalation on the states for the lack of land supply and infrastructure, dysfunctional planning systems, and excessive tax burdens. This is a cop out.

It is the federal government that has chosen to open the immigration spigots, leading to strong inflows of new residents into Australia’s cities (especially Sydney and Melbourne). And given the massive vertical fiscal imbalances present in the federal system, it is no surprise that the states have attempted to prevent growth of the urban footprint in a bid to save on infrastructure costs. They simply cannot afford to fund this growth without federal help.

This is where the federal government should be playing a leading role in housing policy to assist in boosting affordable supply for the expanding population, rather than ignoring the issue altogether.

For example, the federal government could offer incentive payments to the states to free-up land supply, relax planning, and build housing-related infrastructure. The federal government could also pay the servicing and development costs of bringing the land to market and then recover part or all of the cost from rates or taxes on the land over the next 20-30 years (explained here and here). Alternatively, if the federal government remains reluctant to fund such vital infrastructure, it could instead set up a Municipal Utility bond model (explained here and here), like the one operating in Houston Texas, and then let the growing self-managed superannuation fund sector do the funding.

These are just three potential policy options out of many. The important thing is that the federal government stops ignoring the whole supply-side issue and takes a genuine leadership role, as well as providing the states with funding and resources to cope with the growing population.

New Zealand has shown us how reform can be done. The current National Government has a dedicated housing ministry, led my housing minister Nick Smith. New Zealand’s parliament has also reached broad political agreement on freeing-up Auckland land supply (see here and here), thus sowing the foundations for reform.

The RBNZ deserves some credit, too, since it has placed intense pressure on policy makers to get their acts together on supply, shaming them into action and providing them with political cover. This is in stark contrast to the limp-wristed RBA, which chooses not to issue direct statements on housing policy, thus giving our politicians a free pass to ignore the issue.

In short, Australia desperately needs genuine leadership from the federal government to drive supply-side reform and improve housing affordability for the growing population. This all starts with the implementation of a genuine housing ministry.

The good news is that Turnbull’s Office of the Prime Spruiker has just handed the Australian Labor Party an election winning strategy in two years time. It already has an excellent negative gearing reform policy that resuscitated Bill Shorten’s political career virtually single-handed. Now it’s time to wrap that inside a fully dedicated Shadow Housing Ministry with plans to reform supply-side bottlenecks, integrate local, state and federal policy, reform financing of local infrastructure, reform Australia’s failed “twin peaks” monetary regulators and many other issues.

Bill Shorten and his Housing Minister can now conduct a two year debate on housing in completely clear air. It is a gift of a wedge, beautifully consistent with Shorten’s new policy-driven politics, an issue on which social and economic leadership come together literally in people’s living rooms. It is immensely divisive for a corrupt Coalition that will tear itself apart if its progressives aim at even minimal housing reform, and the only answer that the Office of the Prime Spruiker will have is more fear, driving voters further from the only reason that they liked Turnbull in the first place, his history of reasoned argument.

Get on with it, Bill, you cannot make this portfolio senior enough. It needs the complete reverse of Coalition neglect, very special attention. Perhaps make it your own portfolio.