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Jemmy Is Off (with Gratuitous Thoughts)

By jemmy - 27 March 2008 93

[Ed. the discussion on this is great, and as housing is an issue that affects all Canberrans as either renters or owners i thought this was worth wider exposure.]

Jemmy is off, scuttling back to where he grew up, tail between his legs. The reason? Housing prices, pure and simple.

I moved here two years ago to semi-retire. I’d been visiting relatives here for years and knew about Canberra’s beautiful landscape, great facilities, easy lifestyle and, best of all, no crowds. I also knew housing was disproportionately expensive for a small country city, but figured I’d adjust. What I hadn’t counted on was housing prices in the ACT becoming the most expensive in the country, ahead of Sydney and Perth. This in a small population surrounded by land! Although my salary when I was working was in the top 1% of the workforce, I can’t afford to buy a house as a divorced single man in his 50s. There is something fundamentally wrong.

You learn in 1st-Yr Politics about the “tyranny of the majority”, which is where a majority acts to further its interests at the expense of a minority. This is different from a government having a mandate from the voters; it is where, say, a majority of 60% acts against a minority of 40%. This is generally held to be bad government since a very high number of citizens are adversely affected.

In Australia, and especially in the ACT, we are seeing home owners form a tyranny of the majority against non-home owners. Home owners in the last 30 years have changed from wanting a home to wanting a home that is also an investment. Home owners already get very significant tax breaks (no capital gains tax being the main one) in return for the recognition that the house and property is a home and not an asset or an investment. Yet owners demand it be an investment as well. You can’t have both tax breaks and investment income, since it distorts the market and drives up demand and prices in that sector, to the point where homes are unaffordable. So, we are now starting to see signs of the social conflict that will continue for the next one or two decades. Since most home owners are older, 30s+, this will be the main inter-generational war for Australia from now on, and governments will struggle, really struggle, to find an equitable solution that is politically do-able.

I know that the home owners are reading this and thinking, “I’m ok, I’ve moved into the majority and am sitting sweet.” If you get nothing else, get this. People need somewhere to live. Either they own or they rent. Rents are tied to house prices (historically 10% of value, higher (much) in the ACT), so high house prices means high rent means fewer private renters and a higher proportion of public renters, who don’t pay market rent. The government, then, has to bear two costs: cost of providing public housing and the opportunity cost of not getting a market return from the asset. When governments bear costs, it simply means we pay through taxes or reduced funding in other areas. This must happen because people need somewhere to live, it’s not like other government services that can be cut back.

The correct answer is that tax breaks for home ownership are removed and that land is released for housing (supply increases to bring down prices). However, no government can implement that as they would be voted out by the 60% majority at the next election. I honestly don’t know the answer. I do know that more and more people will rely on public housing and that governments will end up bearing the cost through having to build more public housing. This is not good policy as both the ‘victims’ along with the ‘oppressors’ end up paying through their taxes, whereas it should be only the ‘oppressors’ (who as a group have benefited for decades) who should pay.

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The main issue facing the ACT is the complete lack of scrutiny of government. This is because the public is quite laissez-faire: lifestyle is good, and the media is uncritical and inactive in stirring up local passion. We can’t blame a good lifestyle, so I sheet home the blame to the media. (Older RAers may remember my rant against the ABC when I first moved here.) Neither the CT or the ABC subject our politicians to any sort of competitive hard criticism. In fact, IMO, the Riot-ACT is the most politically critical forum in the ACT. The media is always trumpeting its status as the fourth estate, and it needs to be called to account for the privileges it enjoys from that.

Government policy-making and public administration in the ACT is the worst I have seen anywhere, and I worked in government in Perth during the Brian Bourke era! My gratuitous advice is that you become politically active. Demand better scrutiny by the media. Write or ring the ABC to complain after yet another soft interview by Alex Sloan in the Morning program. Demand from government that public administration be best practice. Demand well-designed roads. Demand funding into needed areas. Demand government focus on the ACT and stop posturing on the national stage. Demand that government get the basics right. Start acting like a local council for a start. Plus, a few more seats to allow in new talent would really help.

I’ll stop before I start frothing. (It’s only because I care.)

Jemmy thanks you, especially johnboy and Thumper and the admins for RA, and ex-pat Ralph who made such entertaining reading.

What’s Your opinion?


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93 Responses to
Jemmy Is Off (with Gratuitous Thoughts)
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caf 10:56 am 02 Apr 08

I commend this recent series of article at Possum’s Pollytics to all interested in this issue: Part 1 and Part 2.

Thumper 2:25 pm 01 Apr 08

It was pretty good 😉

Gungahlin Al 12:46 pm 01 Apr 08

Yeah right – and Wayne Bennett will coach the Dragons. As if…
Oh – hang on…

I did forget about all the Liberals for whom the indignity of the opposition back bench is too much to bear, thereby forcing Australia into a round of exepnsive by-elections…

Thumper 12:38 pm 01 Apr 08

GA,

It appears that it is true! Bolt will run for the seat of Higgins which is Peter Costello’s seat.

In fact the CT rang Costello at about 10.30 to get his reaction.

Now, I wonder where the CT got there information from?

Oh well, someone to balance Bob Browne 😉

Gungahlin Al 10:05 am 01 Apr 08

Oo you are awful Thumper. Got me. I should have clicked – Bolt being one of those hyper-critical journos who’d *never* have the guts to put his money where his mouth is…

Thumper 9:57 am 01 Apr 08

April fools day?

Who knows. I’d say surely not.

Gungahlin Al 9:43 am 01 Apr 08

Off topic Thumper? I’d say that’s a bit of an understatement…even for RiotACT.

Bolt – politics – what as? One Nation?

Thumper 8:40 am 01 Apr 08

Off topis, but I have heard it in the wind that columnist Andrew Bolt is about to enter politics.

Do what Special G said.

Special G 5:34 pm 31 Mar 08

It comes down to this – Time in not Timing.

If you are trying to save faster than house prices are going up you are never going to get into the market. Take what you have and invest into a property you can afford. Then as previously stated rent a room to help cover the morgage and suck it up for a couple of years.

I did that for a couple of years renting out rooms until I could afford to cover the mortage by myself – it took almost 5 years but eventually my salary caught up.

Just for those who are interested in property price predictions, I saw this article earlier today…

http://www.news.com.au/adelaidenow/story/0,22606,23445297-5006301,00.html

Mælinar 4:36 pm 31 Mar 08

Ant – the concept is based upon the illusion of ‘wins’. There isn’t actually a significant difference in how much you will earn on the bottom line.

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