As we know, the Morrison Government has launched another housing affordability inquiry – this time examining ‘supply-side impediments’.
Independent economist Saul Eslake has lodged a submission to the inquiry shredding the “crocodile tears” displayed by politicians pretending to care about housing affordability [my emphasis]:
As a multiple of average household disposable income per person aged 15 and over, average residential property prices rose from less than 6 times in the early 1990s to over 11 times by the end of 2017 (Chart 1).
For the roughly 3.2 million Australian households (out of a total of almost 4.5 million) who owned at least one property – and especially for the almost 750,000 Australians who owned at least one investment property – at the beginning of this period, this dramatic escalation in residential property prices was unambiguously a Good Thing.
For the additional 2.2 million Australian households who managed to become home-owners during this period – and again, especially for the just under 2.2 million individual Australians who by the end of it owned at least one investment property (and even more so for the 600,000 or so who owned two or more investment properties) – this huge rise in property prices undoubtedly made them financially better off…
But for the 1.1 million Australian households (almost one-quarter of the total) who were living in rented accommodation at the beginning of this period – a number which by the time of the 2016 census had risen to almost 2.6 million (or almost 31% of the total) – none of this eye-glazing increase in wealth came their way…
Between the 1991 and 2016 Censuses, Australia’s home ownership rate fell from 68.9% to 65.5% – the lowest it has been since the Census of 1954. But for people aged between 25 and 34, the home ownership rate dropped by 11 percentage points between 1991 and 2016, to a lower level than it had been in 1954, indeed to only 3 percentage points above where it had been in 1947 (Chart 2)…
For people aged between 35 and 44, the home ownership rate dropped by 12 percentage points, to a level just 1 percentage point above where it had been in 1954…
Hundreds of thousands of would-be first home buyers – a group for whom politicians of all persuasions routinely profess profound concern – were effectively squeezed out of home ownership by cashed-up immigrants and, even more, by investors able to take advantage of more readily available credit and more generous tax breaks…
As always happens in Australia whenever it is feared that property prices might fall, governments at all levels and of both major political persuasions moved heaven and earth to ensure that they didn’t… And as it always does, it worked. The property price escalator has started up again…
Indeed, it is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their ostensible objectives.
The only plausible explanation for that is that the real reasons for the housing policies which governments at all levels and of all political persuasions have pursued for so long are not the ostensible reasons.
For all the crocodile tears which politicians of all persuasions routinely shed about the difficulties facing those wishing to get their first foot on the property ladder, deep down they know that there are far more people who already own at least one property (and who therefore have a very strong interest in policies which result in continued property price inflation) than there are who don’t, but who would like to (and who would prefer, at least until they succeed in their aspiration, policies which would restrain the rate of property price inflation).
And, sadly, there’s no reason to think that political calculus is going to change. Nor, therefore, are the housing policies which have resulted in created the housing system which Australia has today.
As I noted last time, Australia’s governments have run numerous housing affordability inquiries over decades, including but not limited to:
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Menzies Research Centre: Prime Ministerial Taskforce on Home Ownership 2003;
The Productivity Commission’s First Home Ownership Report in 2004;
A Good House is Hard to Find Report from the Senate Select Committee on Housing Affordability in Australia in 2008;
Western Australia’s Affordable Housing Strategy 2010-2020;
NHSC: State of Supply Reports (2008, 2010, 2011, 2012, 2013 onwards);
Senate Inquiry into Affordable Housing, 2014-2015; and
Parliamentary Inquiry into Home Ownership 2015.
On top of these we have gotten many reports from think tanks like the Grattan Institute, the McKell Institute, and others.
Thousands of work-hours and millions of dollars worth of salaries and consultants’ fees have been spent on these reports and absolutely nothing has come from them. So what is the point of wasting more taxpayer dollars? Nothing will come from this inquiry because our politicians don’t actually want more affordable housing, since this requires prices to fall.
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Why waste everybody’s time and money pretending to care?
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
