2 April 2024

How to stop worrying and learn to love the housing crisis

| Ian Bushnell
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apartment under construction

Build, baby, build. Supply is the only game in town. Photo: Region.

Apparently, Australia, including the ACT, is experiencing a housing crisis.

You know, with exploding rents and house prices so out of reach that many young and not-so-young people are just giving up thinking about ever buying their own home.

It’s turning families out on the street and lengthening waiting lists for already stretched public housing.

There are warnings of the economic, social and health impacts of an embittered generation disengaged from the rest of society. Of a return to Dickensian times of landlords and tenants. The best of times and the worst of times.

READ ALSO Developing licensing laws, government contracts on table for building industry roundtable

How did we get here, many are asking. It’s complicated.

But how do we fix it? That’s easy. Just build more houses.

Don’t overthink it. It’s just a matter of supply and demand.

Don’t be distracted by lefty economists’ talk about capital gains and negative gearing being a tax scam that distorts the market and keeps prices on the up and up.

Where will we get all those rental properties if we stop supporting our mum and dad investors? You know, the ones who can borrow to the hilt and outbid anyone at auction to accumulate portfolios with dozens of properties?

If anything, we need to provide more support to the property industry, not less.

And the last thing we want is for government to get back into the housing game, building their affordable homes with cheap rents (read ghettos), lowering property values and allowing anyone to move into the neighbourhood.

It’s their fault anyway for holding up land release to inflate prices, strangling enterprise with red tape, and imposing their wretched energy efficiency requirements on perfectly reasonable homes. If you can’t afford the bill, just put on a jumper or lie on the bathroom tiles.

Government can’t be the solution. Leave it to the private sector. Build 1.2 million homes? Easy, just get out of the way.

But who’s going to build them? What about the skills shortage?

That’s what immigration’s for.

Yeah, but where are they going to live?

They’ll find a way. They always do.

So, when we have all these houses, townhouses, apartments, studios, tiny houses, and dog boxes, that’ll bring prices down, right? Supply and demand?

Hang on there! It’s not a charity, and you don’t expect the great Australian homeowner to take a bath, do you?

Anyway, I think you’ll find enough cash and bonafide buyers in the system to keep prices tickety-boo. It may be a Ponzi scheme, but there are enough in it to keep it going for a while yet.

And there is always the bank of mum and dad.

Remember, in every crisis, there are opportunities.

READ ALSO Who’s going to build the 1.2 million homes? Pocock calls on government to protect subcontractors

There’ll be plenty of places to rent. Just get another job or two.

Fortunately, ever since honest Bill tried it on in 2019 and came up short, everybody is now on the same page.

Yes, it’s absolutely a crisis and aren’t the statistics alarming but you have to look at the big picture.

You can’t solve anything from opposition and you fiddle with the tax system at your peril.

No, supply is the only game in town. Aspirational, of course.

What a great word that is. Thanks, John. Thanks, Peter.

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Incidental Tourist11:57 pm 30 Mar 24

Give people free land.

Capital Retro3:15 pm 31 Mar 24

You mean no lease fees? No one owns land in the ACT.

devils_advocate1:56 pm 30 Mar 24

People are living longer these days. If we allow them to pay off their houses in a mere 25 or 30 years, what leash do we have to tie them to their jobs in the name of “productivity”?

The population cannot be trusted with freedom. In order to keep the wage slaves in line, we must forever escalate the cost of housing, food, commuting… and keep them indebted and obedient.

Even better if we can keep them from even obtaining debt in the first place. Create a society of renters, handing over their wages in full for their measure of housing, streaming and insect protein.

Of course this doesn’t apply to the wealthy, the rules never have. But the rest of you can eat the bugs.

Mel Anderson3:49 am 07 Apr 24

Create a nation of renters in an unregulated, volatile, and unpredictable market. Ensure that their living conditions are barely adequate, and they pay enough tax to supplement their landlord’s mortgage. If they don’t like it, they can always work harder.

Limit negative gearing for investors to new devolopments or even just undeveloped land. The only “value” that investors add to the market by buying existing dwellings is that they can outbid first home buyers and indirectly have prices go up even further.
Rent should be the main income on investment properties not capital gain. This will motivate landlords to keep tenants in the house and provide certainty for the tenants.

@Hest Lars
Oh surely you jest.

After all, property investors and developers aren’t in it for the personal gain, they are only performing their civic duty by providing affordable rental accommodation out of the goodness of their hearts. They are not intentionally using their advantageous purchasing power to push up existing housing prices. Nor do they have any intention of gaming the tax system – it’s just that in performing such magnanimous contributions, occasionally things don’t quite go to plan, so of course the government should prop them up.
Imagine what the property and rental markets would be like if it were not for these generous pillars of society.

Seriously? I once owned 5 investment properties at the same time. I did it to unashamedly make money, using the negative gearing and capital gains to do so. No one is doing this as a civic duty. Where did you get the idea that there are masses of benevolent people doing this? No negative gearing and I would have invested in shares or something else. Then there 5 less house for rent just from me. That’s less houses being built, less rentals for people to rent, less jobs in the building industry.

I’m betting you think Yes Minister was a serious drama about the British civil service.

Mel Anderson3:41 am 07 Apr 24

Thanks for such an informative and thought provoking article, Ian. It’s such an easy fix, I agree, and with so few words, a simple ‘supply and demand’.

Absolute music to my ears, especially as the construction industry’s inability to build is due to the other sound-bytes ‘materials shortage’, coupled with ‘labour shortage’.

And of course, the mantra: that philosophical, moral, and economic truism, ‘just work harder’.

If we all just ‘pull our belts in’, I think we could really help our brave property investors grow their nest eggs and retire early.

We must embrace high density housing to allow for growth. Especially in the city/town centres.

Each new development has a set footprint. Stop wasting space by building a few stories high when you could go massive. A dumb design/build will sit around for 30 to 50 years. We have the ability to fit a lot of people on it. Go high. That’s what our town centres are for.

Let’s let the developers build organically and let our city grow up.

This 100%. Well said.

Canberra needs to get over it’s phobia of tall buildings. High-rise buildings are a much better use of our land, preserve valuable green spaces and reduce the constant urban sprawl we’re forced to put up with by the current ‘leadership’.

They also reduce the need for cars, whilst encouraging walking, biking, and the use of public buses and the tram set.

What are we worried about here? The skyline? Get over it.

GrumpyGrandpa9:51 pm 29 Mar 24

“But how do we fix it? That’s easy. Just build more houses”.

Yeah, we kinda need governments to release land; not just 70/30 restrictions. And while some of the immigrants might have or could be trained to work in the building industry, there is a long lead time and in the meantime, more people have arrived…..

HiddenDragon7:29 pm 29 Mar 24

Sixty years on, that’s still a good line.

So sad that Kubrick did not live to make the sequel, in which Dr Strangelove survives the nuclear holocaust and becomes a billionaire property speculator and developer Down Under – a mad, evil genius who manipulates and corrupts politics and the media against the public interest, relentlessly crushing and silencing all resistance in his manic pursuit of ever greater housing density and profits. “We’ll flip again, don’t know where, don’t know when……”

Back in the real world (sort of), we hear that whichever bunch of stooges and muppets is ostensibly in power, it’s the federal Treasury which is driving the Big Australia agenda and the resultant housing crisis thanks to the “three Ps” (population, participation and productivity) recipe for economic growth, in which only the first is ever fully embraced.

Maybe the Treasury (and other relevant bits of the federal bureaucracy) should be relocated to western Sydney where all of them (regardless of where they originally sprang from) can fully embrace the Big Australia blessings of suffocating congestion, over-stretched services, chronically inadequate infrastructure and housing which is even worse value for money than Canberra. That might focus the hearts and minds on more equitable and sustainable ways of growing the Australian economy.

There’s homelessness everywhere, and already we are seeing rising rampant youth crimes, many of which are daylight robbery and assaults committed against new migrants and which tend to go unreported due to fear and the new environment they found themselves in.

We need better governance, and better policy makers who have foresight of the consequences of their policies.

Currently new person arrives in Australia every 40 seconds.
That translates to building a new dwelling for 9 people every 6 minutes.

This is all while we teach about sustainability. At the current rate, we’ll be a population of 50 million in 20 years.

Why are we letting in hundreds of thousands into the country for starters

Any new dams on the horizon for all those extra people? Nope. Greens won’t allow it. Any additional base load power stations? Nope. Greens won’t allow it. 1,000,000 extra people, same old infrastructure. Good one, useless pollies

Stephen Saunders11:08 am 29 Mar 24

Because of mega migration and big tax lurks, severe rental distress and homelessness are now structural features. They will never go away.

It is shocking, that Riotact wants to make a funny joke of this. It’s a given, Albanese and Chalmers have no empathy, for our tent cities. But why be like them?

How did we get here?

Through Geed. Unfettered greed, around which and toward which so many throughout the whole of the society, across so many sectors, collaborated. And that also includes many of the self-proclaimed lefties.

Problem of supply? We’ll stoke up the demand if the problem is not there.

What sort of country have we turned it into in just some 25 years?

We put all our money into bricks and mortar. So boring to say the least.

devils_advocate8:47 am 29 Mar 24

Well of course supply is the only way to reliably put downward pressure on prices in the long run. Any first year econ student will tell you that.

But don’t go telling anyone. You’ll ruin the game!

What we need to do is:

-Raise the barriers to entry higher. Capital, regulatory and tax. We don’t want any pesky “competition” coming in and disrupting the market (and lowering profit). The incumbents fought hard to get where they are, let’s not rob them of their economic rents.

-tax the landlord even more. Rates, land taxes, stamp duties, hell invent some new taxes. Increase the risks and impose new costs. Remove their ability to deduct the costs of their rental properties so that only incumbents can offset loss making properties against profitable ones. Again, they’ve gotten to a privileged position as landlords – it’s only rational to want to pull the ladder up behind them and cement their incumbency. Added bonus if we can make renting so unaffordable that renters can’t save for a deposit.

-rather than adding to supply, we should instead just stimulate demand with policies like first home owners grants, government co-ownership and stamp duty exemptions. Sure, these subsidies go straight into the pocket of existing owners, but rising home prices increases both stamp duty revenue and land taxes/rates, so OF COURSE this is a great idea.

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Elle Cehcker9:49 am 29 Mar 24

Genius idea…make it next to impossible for landlords…so who will supply for the rental market? Good Samaritans? Government? Developers out of the goodness of their heart?

devils_advocate8:35 pm 29 Mar 24

Oh there will still be landlords, don’t worry. However the landlord class will become consolidated into those who are able to harness increasingly large amounts of capital while at the same time foreclosing on prospective homebuyers or “new money” investors. Alternatively or additionally you will see the rise of the corporate residential property landlord.

Over time this incumbency will become entrenched through generational wealth, creating a two-class society of landlord and serf. Landlords will command an increasingly large proportion of their serf’s wages for increasingly smaller, “sustainable” homes built vertically or increasingly further from major cities and services.

You will own nothing and be happy.

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