Housing Affordability

Housing affordability has been in the media again recently.

The media and politicians are very good at pointing fingers in all sorts of directions.

An interesting recent example of this are the thoughts of Kevin Bell, a former judge of the Victorian Supreme Court.

A Blast from the Past

Before we get to that, I want to revisit an article on this topic that I wrote a number of years ago.  You can access that article here.

The article explored a number of positive steps that government might take to help reduce property prices.

Some of the key ideas from that article:

• Reducing Stamp Duty – stamp duty hasn’t been reduced.  It has only increased with rising property prices, new surcharges and other changes that have increased aggregate stamp duty;
• Reducing Other Taxes – the various levels of government have only increased taxes and introduced new ones on property subdivisions and development.  I quoted the figure at the time that new housing lots included more than $100,000 each in taxes and government charges;
• Reducing Property Outgoings – again, council rates, water rates, land tax and owner’s corporation fees continue to increase;
• Streamline Bureaucracy and Regulation – once again, it is hard to see any positive steps taken by any level of government towards reducing bureaucracy and regulation.

That is, the government has done nothing within its power to reduce property prices….

Kevin Bell

In addition to being a judge of the Victorian Supreme Court for 15 years, Mr Bell is a patron of Tenants Victoria and the author of a book entitled “Housing:  The Great Australian Right”.

Mr Bell is reported to have stated that the housing system in Australia comprises 4 prongs:

• Home Ownership – for which affordability has never been worse;
• Rental Housing – Mr Bell notes that there are areas of Australia with no affordable housing for people on an ordinary income;
• Public Housing – government expenditure on public housing has fallen to pitifully low levels; and
• Homelessness – Homelessness is at very high levels.

Mr Bell looks to European examples and concludes that Australia needs more government investment, more regulation and less ‘landlordism’.

In short, Mr Bell wants to elevate housing to the level of a human right.  If you want to read more of Mr Bell’s thoughts – you can access the article that this summary is drawn from here.

This is a wonderfully convenient perspective.  Government tax increases, immigration increases, government delays and compliance costs increase – but Mr Bell seems to believe that the cause of the lack of affordable housing is the market economy. 

Residential Property as an Investment

It has been reported that elements of the Victorian Labour Party don’t regard residential property as a legitimate investment class.  Housing is a human need (or right) and not something that should be the source of profit.

We have seen numerous examples of this over the past few years.  Those who rent properties are no longer landlords (an evil feudal term) but rather “Rental Services Providers”.  If you don’t make your residential property available for rent you will increasingly face the vacant residential land tax.

These steps are, in my opinion, consistent with a broader trend towards socialism and a departure from capitalism.

I for one, find the media’s infatuation with socialism hard to understand.  It is hard to point to a society where socialism has worked well for an extended period of time.  Notwithstanding this, the solution adopted by all socialists to any problem seems to be more taxes, more regulation and more government control. Does Australia’s economy have to collapse to the same level as Argentina’s before we reconsider this approach?

Capitalism isn’t perfect – but in my opinion, it does offer the promise of long-term increases in national wealth.  Ultimately increased national wealth is the only sustainable way to provide higher levels of support to those in our society who need it.

Let’s hope that our politicians come to their senses and realise that more regulation, more taxes and more costs are obvious reasons why housing is less affordable.  Hopefully, they will realise that we need a change in direction and reduce taxes, regulations and costs and allow the free market to respond and increase the supply of housing.  As even Mr Bell admits, the size of the need for housing is beyond the ability of the government to fund in the near future.

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