Housing Affordability inquiry starts hearings

Public hearings for the Senate Inquiry into housing affordability got underway in Canberra today. The Inquiry is due to report by June 16.  The first day of hearings included evidence from people such as the newly expanded Housing section in the Department of Families, the Master Builders’ Association, the Planning Institute, the Urban Development Institute, Housing Industry Association, NATSEM, and Treasury. Submissions and the transcripts of hearings can be read by following this link.

The housing affordability crisis is serious and long-standing. There’s no doubt it is seriously biting many people. It was reported that “housing affordability and health were the topics most asked about” when Kevin Rudd held a community cabinet meeting in Narangba, which is in the middle of a major growth area on Brisbane’s northern outskirts.

Many people – including me – have their favoured one or two key actions they feel will make a big difference, but in reality, the solution will have to be multi-faceted to be effective. It’s not just going to be a choice between reducing fees such as stamp duty, releasing more land or trying to reduce interest rates. Last night’s 4 Corners program about dodgy lending practices by financial institutions adds another contemporary element to be considered, but there are many components of the problem which have long been ignored. 

As this article in The Age a month ago reminded us, “the average Australian family can no longer afford the average home mortgage, according to new figures that paint a devastating picture of how unaffordable housing has become in capital cities like Melbourne.”

A recent piece by Professors Kath Hulse and Terry Burke from the Institute of Social Research pointed out that “recent research by Associate Professor Judith Yates and Dr Vivienne Milligan for the Australian Housing and Research Institute suggests we do not have a short-term cyclical problem — we have a more fundamental structural problem that began about 1970.”

Yates and Milligan show that the “deposit gap” for full-time workers on average earnings buying a median-priced house has been trending upwards for almost four decades, notwithstanding cyclical changes in real estate prices.

If we have a long-term problem and not a cyclical one, what sort of solutions should we be looking at? How can we go beyond some of the measures offered by Canberra, such as release of government land, funding for infrastructure to encourage new supply, and a scheme to attract institutional investment in affordable rental housing?

Let’s start with tax. Many people have made sizeable capital gains on their homes which they did nothing to earn, apart from being in the right place at the right time, and it is untaxed. If introducing at least part taxation of capital gains from home ownership is taboo, let’s think about turning stamp duty into something more sensible. Stamp duty at current levels is not really a tax on a real estate purchase transaction anyway. Why not levy it on sale when it could operate as a de facto capital gains tax and work out a sensible graduated rate.

Then let’s have a look at negative gearing, which is essentially applied to turnover of existing housing and arguably has added to competition among house buyers and helped inflate prices. This could be restructured to send signals about additions to supply with preferential rates for those prepared to invest in new housing.

Negative gearing seems to be the great untouchable as far as politicians are concerned, but I will be interested to see what the Senate Inquiry uncovers in regards to evidence about the positive value that this expensive tax break has on housing availability and affordability.

Writing on his blog, Canberra Times economist Peter Martin has called negative gearing, when combined with the 1999 changes which halved capital gains tax, as “a rort crying out for reform.”

Why bother earning money by producing something when you could borrow to the hilt to buy a rental property, make sure that your repayments exceeded your income from rent, cut the tax you paid on your other income along the way, and then sell the property for a very-lightly-taxed capital gain?

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43 Comments

  1. To home buyers & FHO

    Following is part of a letter I sent to the RBA. The argument highlights the main cause of Housing Unaffordability (HU):

    Recent comments by media in regard to HU prompted the writing of this letter.

    Someone needs to set the record straight with some relevant maths.

    First a quote:
    RESERVE SAYS STOP SPENDING – Courier Mail, 04 March 2008

    AUSTRALIAN consumers have been given a blunt warning to stop big spending or risk more interest-rate pain.

    Reserve Bank of Australia chief Glenn Stevens yesterday declared households and companies needed to stop buying for the economy’s sake.

    My published comment:
    Let me get this straight, RBA chief Glenn Stevens declared households and companies needed to stop buying for the economy’s sake.

    Would the exception to this request be property investors buying more properties?
    ROOT CAUSE of HOUSING UNAFFORDABILITY:

    Assume a residential property investor buys a new $300k house.
    Tax credit on new property at $6000 for 10 yrs = $60000
    Loan Interest deduction for 25 yrs at 9 percent = $340000+
    Rates, repairs, RE fees, insurance, etc over 25 yrs = $50000+
    Approximate Tax credit & deduction for investor over 25 yrs = $450000+

    Deduction/credit for Home Owners, renter = $0

    Investors ahead $450000+, renters and HO get no assistance, $0.

    So is it clear? Or do I have to make it more explicit?

    In case I do, HU is mainly caused by preferential Residential Property Investor tax treatment and associated debt surge.

    Massive tax deduction advantage ($450k on $300k debt above) has spelt the virtual death of home buyers and condemned renters to status of permanent rental underclass – all by deliberate tax design.

    Treasury, Board of Taxation – you are responsible for tax rulings

    Stand up, do the right thing – unless you are happy with slowly destroying the fabric of the community

    How will history record your discriminatory legislation? Kindly?

    zzalanz – google it

  2. It will be interesting to see what the Senate inquiry into affordable housing comes up with. I will be very surprised if it goes beyond the typical conservative analysis of housing we have come to expect in Australia which has a tendency to play up the extent which homeowners pay market prices and play down the extent of homeowner subsidisation. Poor public housing does not get a guernsey as both labour and Liberal appear to be too preoccupied with the subsidisation of public housing.

    Yet other advanced economies see public housing differently. In the UK the revitalisation of the social housing sector is forming a key part of the recipe for economic stabilisation. More affordable housing means more people are encouraged to rent and as rents are paid from current income rather than credit, the overall effect is that the housing system will have less impact in forcing up interest rates. In Australia, the relative shortage of private rental and a rigorously means tested public rental sector, forces those households for whom such tenures would be a logical choice (i.e. younger mobile and low income workers) into homeownership- artificially inflating demand and stimulating the current consumption boom

  3. Andrew Bartlett:

    One of the biggest problems is that it is almost impossible to get an affordable loan for an affordable dwelling yet the banks and their ilk throw money at anyone who will sign up for a bloated, inefficient, impractical, overpriced bludger palace.

    Despite the increasing demand for modest dwellings in rural areas, it is still near impossible to borrow money to buy one. There must be a major prize going for whoever conjures up the most inventive excuse to knock back a loan application for a simple dwelling in a rural area.

    “Allowing the market to operate”. What a joke! Housing finance in Australia is now far more “socialist” than anything Mao or Brezhnev could have dreamed up.

    “Free market” – pig’s what!! It’s as close to command economy as you’ll ever get.

    Let’s take this grossly perverted housing finance system to its illogical conclusion and NATIONALIZE the whole residential housing finance system.

    Lock the banks, building societies and the swindlers right out of the housing industry altogether. They have been given dozens of second chances and each time they have come back worse than before – so let’s put an end to all their second chances; they’ve had more than enough. Let them make their fortunes elsewhere. We can no longer afford the terrible social costs of their money-making.

    Once we have given the plunderers the flick, how about we bring in a few people, from South Africa, with hands-on experience in building affordable housing to show us how it’s done?

  4. Immigration blamed for housing crisis

    April 1, 2008 – 6:34PM

    A massive, uncontrolled increase in immigration in the past three years has fuelled the housing affordability crisis, home builders say.

    Housing Industry Association (HIA) managing director Ron Silberberg blamed the shortage of private rental accommodation on net immigration he estimated at 250,000 people a year.

    “There has been an uncontrolled expansion of the immigration program,” Dr Silberberg told a Senate committee in Canberra.

    “The pace in which it’s increased has been massive over the last three years.

    “Do we need an explanation as to why there’s pressure on private rental housing?”

    He described the immigration program as a federal government lever which could be used to address the housing crisis.

    Asked if he blamed the squeeze entirely on immigration, Dr Silberberg said its effect was substantial.

    “It’s a very significant influence on the demand for housing and accommodation.”

    Full article

    Will you be calling for a reduction in immigration, Andrew?

  5. I just stumbled upon this gem from the good senator:

    “Migrants and refugees do not ‘take Australian jobs’. They enhance our economy, and often that of their home countries. With adequate settlement support, they also have a very positive social and cultural impact,” Senator Bartlett said.

    “They enhance our economy”

    Of course, immigration ‘enhances’ the size of our GDP, but that’s largely irrelevant. What really matters is whether immigration ‘enhances’ GDP per capita.

    Now, if you had of been doing your job properly, you would have come across a 2006 study by the Productivity Commission, which found that the effect of immigration on GDP per capita is negligible (a mere $335 extra per year or 0.6 percent).

    Realistically, this almost non-existent contribution has to be balanced against the enormous strain immigrants place on housing, infrastructure and public services.

    In all, I would argue that the record immigration levels inflicted on Australia over the last few years have brought close to zero economic benefits to native-born Australians. If anything, many Australians are worse off.

    “With adequate settlement support, they also have a very positive social and cultural impact..”

    Such as?

    Do you consider ethnic ghettos and white flight to be a very positive social and cultural impacts? What about ethnic politics? Or how about barbaric Third World traditions such as African female genital mutilation or Asian cruelty toward animals?

  6. I think Senator Bartlett is 100% correct here. Its a massive issue and will have to be looked at from a far wider base than the basic reasons of land etc.
    We need clean,green, affordable housing like they have in Germany.

  7. Negative gearing’s a difficult one. If you have negative gearing it pushes the cost of buying up, but the cost of renting down – since investors will have multiple houses, can’t occupy them all, and the competition between them for tenants will help keep rents down. If you don’t have it, vice versa.

    Basically you’ve got the upper classes who can buy a house whatever the price, the middle classes who can afford 3-7 years’ wages on a house, and the working and poor classes who can afford only 1-2 years’ wages on a house.

    Whatever you do the working and poor classes will rarely own a home, they’ll rent. So whether you have negative gearing or not just affect middle class home ownership.

    So the basic choices are,
    negative gearing – help upper classes get richer, hurt middle classes, help working and poor classes.
    no negative gearing – stop upper classes getting richer, help middle classes, hurt working and poor classes.

    It all depends on whether you’re more worried about middle class people being able to buy homes, or working and impoverished class people being able to rent homes.

  8. Ralph, you are right.
    Kiashu, I almost agree.

    Ralph
    High immigration is part of govt plan to fossilise the social order and is made explicit in the govt’s IG2 Intergenerational Report.

    IG2 – basically an artificial method of increasing population based on an infantile agrarian model or concept, ie: more children will provide more labour in the fields and therefore a better retirement lifestyle for Mr. Farmer.

    You may have heard of this in lead up to 2007 elections under the slogan title – ‘Go for Growth’.

    It’s a fine piece of feudalistic thought and embodies the central concept of “Slowing the rate of population ageing” – see Intergeneration Report:

    http://www.treasury.gov.au/igr/at_a_glance/IGR_2007_at_a_glance.htm

    This reduction in the average age of Australians is achieved through increasing the “size of Australia’s migration intake, shifting towards more skilled migration.” (IG2)

    Apparently migrants won’t add to the aging process in the long run. How that is to occur I do not know. There I was actually believing over time every body ages.

    Am I naïve? Or is it just a pyramid scheme to boost inflation?

    Or, perhaps I am wrong and Mr. Farmer is right.

    I have googled some stats for Sweden & Norway. Both countries appear to have strong, healthy economies and govt committed to social equity, ie. fair living standards.

    In 1970,
    Sweden = 8 million, now 9.1 million – up 14%
    Norway = 3.6 million, now 4.6 million – up 21%
    Australia = 10 million, now 21 million – up 110%

    Why would anyone believe there is a nexus between a good standard of living and the exaggerated population increase that Australia has weathered?

    Without laughing, can someone from within government explain the logic behind ‘Go for Growth’ and IG2?

    Kiashu
    If neg gear was intended to add to supply of dwellings I’d almost agree with you. Now it’s just a preferred method to dodge tax.

    Is it time to re-introduce PROGRESSIVE TAX as a reality?

  9. I can only assume you’re not an economist Raph, because 0.6% is quite a significant effect when it comes to GDP per capita.

    But I agree with Andrew and Daniel – housing is a very complex issue with many different factors affecting it. Anyone who says it’s not and is the result of one factor is either lying or doesn’t know what they’re talking about.

  10. So animal cruelty is a function of the total arrivals of people to our shores!?Or is it a function of a breeding of very boring roosters!?I have some problems with the generalities of Senator Bartlett about matters of new people to our shore,but to lump all social and economic problems with that smells of being preposterous.If miners keep claiming there is a skill shortage,and they use father and son combinations off farm at mine sites…and these family members may not have qualifications in the exact work they do on minesite..is it possible to think,the newly arrived themselves are being conned!?In part,I think so.I have also heard some unacceptable arrogance from these people too.

  11. Negative gearing is the single biggest worst aspect of housing affordability.

    I’ve been trying to buy my first home and have placed offers four times. So far all four have been too low because investors have out bid me.

    I’m single so I’m severely restricted in how much the banks will loan me. This means I’ve been aiming low and only looking at the relatively ‘cheap’ (

  12. What a cheek some people here, have expressed,somehow Senator Bartlett because he put up the subject,is then some sort of boogey man himself.The homeless are an excuse for some to brandish their own whip,to others like the Senator it is a deeper issue,and I am sure,if he felt certain there,was a simple solution he would take it.I for one suspect those with negative geared houses,do not want to be opposed to the middle-class or find they are the sole arbiters of wether the working class,and people like myself.. rent or not.Being greedy for housing and land may not mean,the same attitude to others ,being house proud simply means that!What else could it mean!?I supposed some may think I am that desperate I am coming on friendly for the sake of myself in the longer term!?Could be true,but I havent had a path made in this paddock of landlords,impressed by my attitude,and would find me living there a privilege!?I just am simple enough not to want to interfere too much in peoples attitudes to houses and land,because,after all I could be the same,I suppose under different conditions.I dont ask anyone to include themselves in my attitudes,life is a strange thing.All the presented statistics and analogous comparisons,are not in anyway find or suggesting either interim or long term objectives,which is sort of silly if the Senator becomes the boogey man!Perhaps someone should trying building a Bucky Fuller Dome out of rooster feathers!?

  13. Agree with the fact that there are huge underlying issues, but I do think the expectations people have are sometimes not realistic. Where has the idea come from that every family has the right, whether they can afford it or not, to own a 4 bedroom, 3 garage, 2 bathroom mcmansion with fully landscaped gardens? Why aren’t other options being promoted, at least as first homes? Our first home was a 1 bedroom semi with combined laundry/bathroom.

  14. Liz [13]:

    I suggest you re-read my post [3] above.

    As the why other options are not being considered, there are two obvious causes:

    [a]. Donors of loot to political parties having far more influence on policies and laws than the elected parliamentarians in those parties.

    There would not be an MP anywhere who has not seen for themselves, through contact with their own constituents, the realities of housing in Australia today …. yet nothing practical is done.

    Where are the urgently needed policy changes and enforceable laws? Nobody is game to upset the party bosses so urgent reform cannot happen. As someone once said “The finest politicians money can buy”. [Sorry Andrew Bartlett but you are keeping company with a right-royal bunch of wimps in that Parliament of yours].

    [b]. The banks and the like are a law unto themselves in all but a few ritual and token matters. It is they who fight tooth-and-nail to prevent people moving into affordable, energy-efficient housing …. because they are richly rewarded by governments for forcing homemakers into unaffordable bludger-palaces instead.

    That situation will persist – even though the massive social costs are becoming more and more obvious and onerous – because NOBODY in either the Liberal-Nationals Coalition or in Labor has the guts to get tough with the finance industry over the residential housing disaster.

    That’s two. No doubt others can come up with more reasons why alternative housing is not being considered.

    This is why I suggested, in sheer frustration, that the whole personal residential housing finance system be NATIONALIZED.

    I don’t give a damn what happens in the luxury and speculative housing market …. it is basic personal residential housing that is in urgent need of thorough reform.

  15. For the ordinary home owner, there is no capital gain on selling your house, even if you are trading down, or buying a similar house in an area with lower land values.

    If you move some of the proceeds of the sale into other investments, returns will generally be less, especially if you are a pensioner – subject to taxation, income and assets tests, and loss of Council rates subsidies.

    If you are trading up to a better area, you will generally suffer a capital loss.

  16. Dan 11, Liz 13, Graham 3

    Dan
    It is no surprise you are outbid by investors

    Read the math example in my original post # 1 on 01st April and you will see that a residential property investor bidding for a $300,000 dwelling receives in the order of $390,000 in tax deductions over 25 years on an existing property and $450,000 if the property is a new construction.

    You as a home-buyer do not have a hope in competing with this govt largesse.

    It is deliberate discrimination against home-buyers by tax rulings.

    Treasury is responsible for sanctioning these discriminatory rulings, they should fix it.

    For some reason, residential property investors now believe they have the right to have the tax system pick up part of the tab for the debt they knowingly took on when they bought an investment property.

    Loan interest deductions should be available for all residential property buyers,not just some, the wealthiest in the community.

    I would like to hear from an investor – Why do you think the rest of the community of tax-payers owe you a living?

    In the words of Liz 13 – I do think the expectations people have are sometimes not realistic

    Graham 3
    You say it is still near impossible to borrow money to buy a modest dwelling in a rural area.

    Would the reason for that be the banks want you continue to part with your income as a Rental Milch Cow rather than a home-owner?

  17. This page has really transpired to Friday s offering.But the last page about being a milch cow renter,needs some comparative statistics.Including home renovation stats. involving renters.With all the problems of families today ,the McMansion,could be worthy real estate, if people took on responsibility for fostering and teenagers outside of their immediate families.This was a regular behaviour in the past.Unobstructed by gathering information about it.With occasional emergencies in city areas,and country like drought flood and fire,even the recent horse flu epidemic,to put up some individuals for a longer term seems eminently sensible re McMansioned realities.Is there any evidence McMansion dwellers are social misfits and their kids!?Maybe not,the problem for those looking from the outside ,but cannot see in, are they invariably helpful citizens when they want to be,because someone has informed them in a manner that seems a worthy challenge to accept.!?I will confess to a form of jealousy,if the McMansionisto, declare war on unacceptable over-priced housing for the rest of us,or,something that says,they are ready to stop,silly divisions, on what house you come from,if something else is of grave concern to meet the requirements of the common and necessary.

  18. And we have helped to make 4.5 million Iraqis homeless and never say a word. What a bunch of whingers we are here.

    Oo…..I can’t buy my dream McMansion with 6 bedrooms and 7 bathrooms. Oh woe is me.

    Get a grip people.

  19. In response to Ralph at #4 – why would I call for a reduction in immigration? As you reiterate – perhaps without realising it – immigration is usually a long-term good for our economy and society. If you seriously believe it isn’t, then feel free to do your bit for the country and leave.

    At the same time the person you quote was suggesting migration numbers might be partly responsible for housing affordability problems, he was also saying we needed to significantly boost the number of tradesman who migrate here to meet skill shortages in the building industry.

    The notion that migration is the key reason why we have a housing affordability problem – with the ‘logical’ follow on that reducing migration would reduce the housing affordability problem – can only make ‘sense’ if one pretends that migrants are somehow not like everyone else (it also relies on a very limited idea of what constitutes demand pressures when it come to housing markets, but I’ll leave that for now). People need housing – the issue is making sure enough are available at an affordable price in the general location where it is needed. If you want to make the argument that reducing the numbers of people is the way to reduce housing demand, then the only logical policy response is to tell people they shouldn’t have babies (or at least impose a user pays charge) – babies and children are of course also far less productive for our economy than migrants.

    In response to Alan’s comment (I’ll just assume the comment that “High immigration is part of govt plan to fossilise the social order” is some sort of joke); I have never placed much weight with Peter Costellos’ inter-generational report. It seemed to me it was mostly just a way to provide some loose intellectual cover for buying some votes by giving some payments to people who were having babies. Very expensive and not very equitable

  20. Alan,
    The removal of negative gearing was tried and failed prevously. All that lead to was industry decline and a further shortage of housing for both purchases and renters. The govt costs and regulations add an enormous amount to the cost of a house today. I know in the Redlands area in Brisbane the govt costs associated with a residential block in that area is about $75-80K. (Paid for by the purchaser) and then the council charges them rates for the services that they paid to have installed. First home buyers dont pay Stamp duty in Qld (Investors pay about $6000 on a $380K home) first home buyers get a $7000 FHOG and that assists them to get a start. What about the couples that dont qualify for first home buyers (Same a divorced or remarried couple) that is where the real problem arrises. It is almost impossible to re-enter the market.
    I have 2 housing commission blocks in my estate that have been sitting there for 20 years and no attempt has been made to build any homes there.
    In the Beattie/Bligh user pays and coninues to pay attitude built up in Qld with little or no return from the enormous cash flows into the state it is any wonder that houses are rising.
    There’s no doubt that we as Queenslanders will have to suffer for many years to come from the total missmanagement of this state over the last 11 years.

    Tony

  21. Dan:

    Have you considered buying a one or two bedroom unit? It might suit your purposes better while you’re single. You might also have more chance of competing with investors.

    A larger property will not only cost more, but require more housework, yardwork and general maintenance, which can be very costly.

    In the future, you would probably get an excellent price for your unit, with more and more people electing not to marry or have children.

    Graham Bell:

    I watched the show you recommended on Monday night. It became clear that financial institutions are deliberately lending people more than they can afford to repay.

    A Sudanese family got caught out because of their difficulty in understanding the contract.

    The main family featured had bought a 4 bedroom house with large living areas and a swimming pool in what appeared to be an upper crust suburb. They only had 2 small children.

    In this instance, Marilyn is definitely right.

    People need to moderate their expectations and take up Andrew’s suggestion of some kind of savings plan as soon as they go out to work.

  22. Lorikeet [22], Marilyn [19], Alan [17]:

    Expectations of most genuine house seekers don’t need moderating.

    If you want to buy an affordable modest house of two small bedrooms, a small kitchen/dining-room and a bathroom/toilet, with a laundry tub under a back awning and a carport instead of a double lock-up garage – and further, if such a house is in an unfashionable area, especially a rural area, and it is in need of a coat of paint and new lino and a bit of gardening …. then you must have CASH to pay for it – whether that cash is your own savings or a loan from your own family or dodgy money from a loan shark …. it is cash or nothing.

    You will get nothing from the overly fussy – and disasterously ignorant – mainstream housing finance system, a system that has been pampered by successive governments for far too long. This ignorance comes, in part, as a result of closing so many bank branches in country areas and having to rely on second-hand, unreliable and downright inaccurate information to make decisions about whether to approve a loan application.

    Dan [11], Alan [17] and Tony [21]:

    So then, we pay taxes so that we can be locked out of the affordable housing market. Brilliant.

    Whacking capital gains tax on the family residence [a sure-fire starter for the next Budget] will make a lot of potential sellers flee the market and make the severe housing shortage during and after the Second World War seem like nothing at all. Gloomy prospect, isn’t it?

    Ken [16]:

    That was a very silly comment – for reasons that you do not know and I will not explain here. Do you have an informative comment instead?

  23. Graham Bell:

    “Expectations of most genuine house seekers don’t need moderating.”

    Sorry, I can’t agree with that at all.

    Developers should also be encouraged to build more modest, affordable homes – and without the water-guzzling pools.

  24. Hi All, I stumbled across this site today as I was attempting to do some research on the history of housing interest rates in Australia and became engrossed in listening to the thoughts of the contributors here.
    I must confess to a lack of economic knowledge and I can’t comment on the benefits of a socialistic approach to lending as has been suggested, or to the abolishment of Negative gearing as an incentive for the private sector to provide housing for those who can not afford to purchase. ( I am old enough and can still remember the ghettos that the Government provided through Housing commission and fear that if they were to again be the providers of affordable housing, it would be ok with me provided it is not in my back yard.)
    Having been involved in the housing industry for over 30 years, I can agree with those who state that the real problem with housing affordability is that people’s expectation of a first home perhaps in some cases exceeds reality.
    In 1978 $35,000 would buy you a brand new three bedroom, one bathroom house with a lock up garage on 24 perches or bigger, now, 30 years later it is difficult to find a new house in the same area under $550,000. At a glance it would appear that prices have risen beyond inflation, however if we were to analyse the mathematics of the situation we would see that those 10 square houses built in the late 70’s are now selling in the mid $300.s equating to a value of $35,000 per square while our new Mcmansions at an average of 25 squares are only costing $22,000 per square. Sure this is a simplistic analysis and holes can be shot in it from many directions as there are many other factors which need and should be taken into consideration, however the basis of the argument remains – Are people attempting to enter the housing market trying to start at the top?

  25. Jon Chown [25]:

    Good points. Lived in a vertical ghetto many years ago …. the facilities were adequate and they worked. The difference between a vertical slum and high-rise affordable housing was almost entirely determined by the attitude of management and the extent to which they encouraged or discouraged expressions of individuality [such as having pot-plants for pete’s sake!].

    Lorikeet [24]:

    Perhaps we move in different circles. Some people I know would be happy to have any sort of affordable housing – but then, they might prefer the sorts of houses described in Owner-Builder, Grass-Roots and Earth-Garden too.

    You cannot blame many people for having unrealistic expectations of what “normal” housing should be. They have been subjected to thousands of hours of aggressive advertising and quasi-advertising. For them, a huge “family room” is normal; having separate kitchen, breakfast room, dining room, lounge and tv room is normal; having a master bedroom the size of a small cottage is normal. For them, having only one toilet is “weird”, not having a swimming pool is “poverty-stricken”, etc., etc. Getting them to change their expectations would be similar to cult-busting and de-programming.

    So let’s start cult-busting and de-programming before this housing mess gets a lot worse.

    Which brings me to two nasty question: why do the government – federal and state – allow housing marketers to inflict their propaganda on people unchallenged …. and how much of our tax money goes towards creating and sustaining these unrealistic expectations?

  26. Graham Bell:

    Yes, you seem to be agreeing with me in part about people’s expectations. On the whole, most young (and even older) people are used to being spoilt.

    The government could start by re-regulating the eternal thieves – the banks.

    Before the current level of uncontrolled greed set in (commencing many years ago), the percentage of interest paid to depositers was quite a lot closer to the interest collected from borrowers.

    That’s why the banks are making such huge profits, and also deceiving people with information control so they can collect even more.

    Why collect interest from mortgages, when you can take the houses back, keep collecting shortfall from original borrowers, and resell the houses to other suckers at higher purchase prices and interest rates?

    Perhaps the modest home you mention at post #23 is a dump/unlivable? Please enlighten us further.

    BTW most people I know live in 3 bedroom/1 bathroom houses.

    Jon Chown:

    Yes. No shots will be fired by me. It could easily be said that developers build the kind of houses people request.

  27. TONY,

    If the removal of negative gearing was tried and failed previously then all that means they did not think it through properly. Imagine if each child gave up walking after failing once.

    What you say is true, investors pay about $6000 on a $380K home and first home buyers get a $7000 FHOG and that assists them to get a start.

    However, in the example I gave an investor in a new residential dwelling is going to be subsidized to the tune of $450,000+ (tax deductions and tax credits).

    FHO gets $6000 + 7000 – $13,000 benefit.
    Investors gets $450,000+ in deductions/credits.

    I think a grade 2 primary school student could say who is better off they financially.

    But our Treasury cannot. Amazing.

    GRAEME,

    I agree, the media can just not help itself.

    6:00pm News – read with a sad face “Australia’s housing is amongst the most unaffordable in the world”

    6:30pm – Upbeat presentation – “How to get on the investment property bandwagon”, or “Next Real Estate Hot Spots” etc

    7:30pm – time to super-spruik the DEBT LEMMINGS with “LOCATION, LOCATION, LOCATION”, or “Renovation Rescue” or “The Block”

    What about tuning into one the breakfast shows and listen to the resident financial guru set up a petition against the RBA for doing its job – trying to control inflation caused by a now Regressive Tax System.

    LORIKEET,

    Agreed – Developers should also be encouraged to build more modest, affordable homes – given the number of people now living singly or in childless families.

  28. Lorikeet [27];

    No. Definitely NOT uninhabitable. This is the whole point. The houseS I mentioned earlier [23] are all in reasonably good structural condition but do need a bit of tidying up; relatively inexpensive work that is well within the capabilities of any householder – re-painting, laying fresh floor coverings or sanding and staining the floorboards, gardening, that sort of thing.

    The residential housing market in Australia
    is perverted and corrupted and skewed, it is a parody of an “open” market.

    The blame for this goes straight to governments on BOTH sides of politics – Labor and Coalition have been as bad as one another – they have taken our tax-money, failed to give leadership, neglected to protect us from predators in the housing market and then licenced these same predators to rob us blind.

    Alan [28]:

    And if the ABC tried to run programs NOW that encouraged people to be happy with a modest dwelling and to do affordable renovations [not ugly $30 000 “make-overs”] then the ABC network would be flogged off immediately to the Berlesconi clones in the Australian media industry.

  29. Graham:

    Thanks. In that case, it’s truly disgusting. The banks probably can’t be bothered with low value homes – not enough profit for THEM.

    I think if there’s enough television coverage of the negative effects of expecting to buy the Taj Mahal, some people might respond. One can live in hope.

    Alan:

    How do you “fossilise a social order”?

    Is that where you cause several simultaneous volcanic eruptions whose lava buries all of the people? Sequestration might do it.

    I find your points about negative gearing to be very valid.

  30. Lorikeet [30]:

    You will never ever get the Australian news and entertainment industry to say anything naughty about those who conned their victims into thinking they could own their very own Schloss Favorite or Chateau de Cherverny on an outer suburban block at – what? – 3% interest forever.

    No journalist here will ever be game enough to rock the boat.

    Four things could be done – but will never be done by either Labor or the Liberal-National Coalition: [1]. Standardized [by government!] Real Estate and Mortgage contracts written in Plain English, 12-point or larger clear font and no longer than 600 words. [2]. All such contracts to be reviewed by a statutory authority prior. [3]. Training in how to avoid credit traps be given to all upper-Primary students. [4]. Hang at the crossroad the first two hundred lawyers, finance wallahs and swindlers who object to the new measures protecting home-makers …. so as “to encourage the others”.

  31. Alan, you are on the right track.

    In Norway you get a 28% rebate on all interest payments you make on a residential property, investment or owner/occupier. The top marginal tax rate is around 50%. As in Aust, CGT is not payable on your primary owned dwelling when you sell.

    This means that owner occupiers get the same current account tax breaks as investors.

    I don’t have figures but I have lived in Norway and I know that home ownership is very high, owning a home is not a financial burden and there are plenty of rental properties available. It is all about balance.

    The Aus government has to reduce the benefit of negative gearing on investment properties as it is distorting the market in favour of the rich. The extent of this reduction can be adjusted, the same way income tax rates are adjusted, to stabilise the residential property market.

    Or do we want to continue following John Howard’s dream of becoming USA#2? Where the rich get richer and the poor get poorer. It’s happening to the education system, it’s happening to the health care system and it’s happening to the residential market too.

  32. Reduce NG

    Good solution – a gradual phase out or means-test on NG or allow NG only on new residential construction plus means-test or allow access to NG for all home-owners (also means-test).

    It is not beyond the scope of the current government to sort it out. In fact, whichever government comes out with a solution that includes the next generation will find themselves in favour for a long time to come. Not so much with the more extreme investors (about 2-5% of population at a guess) but with the general population.

    It appears that a good place to look for workable models, not just for affordable housing, but, for education and health are the Nordic countries.

    The down side in the eyes of the vested interests and their voice-piece (town criers/mainstream media) would be the prospect of all Australians actually paying taxes within a progressive tax regime. If one follows the logic of current tax rulings (such as NG) then progressive tax payment should only be the lot of below average income earners. Continuance of the present regressive tax format is a long term recipe for an economic train crash.

  33. Andrew Bartlett said: “In response to Ralph at #4 – why would I call for a reduction in immigration? As you reiterate – perhaps without realising it – immigration is usually a long-term good for our economy and society.”

    You evidently have a very warped view of what constitutes a “long-term good”.

    Socially, immigration is deleterious. It destroys social cohesion and community solidarity. Economically, growth for growth’s sake is not an ‘argument’ for ever-increasing levels of immigration. As I’ve already stated, immigration may increase GDP, but it has little positive impact on GDP per capita. And that’s the only measure that really counts.

    I think it’s a safe bet to say that Australians want cheaper housing, more water per capita, less strain on services and infrastructure, less congestion, less sprawl, less pollution, less ethnic tension, and stronger, more cohesive communities. High immigration impacts none of these areas positively.

    “If you seriously believe it isn’t, then feel free to do your bit for the country and leave.”

    And if you actually mean that, then you’re spectacularly unfit for an elected position in any democratic country.

    Please, enlighten me. Why should I be forced to leave my country because of foreigners?

    “At the same time the person you quote was suggesting migration numbers might be partly responsible for housing affordability problems, he was also saying we needed to significantly boost the number of tradesman who migrate here to meet skill shortages in the building industry.”

    Note that Silberberg was calling for an increase in the number of tradesmen immigrating here, not an increase in overall immigration levels. In fact, he explicitly noted that total immigration numbers could be reduced as a means of alleviating the housing affordability crisis. Australia could easily reduce its overall immigration intake while simultaneously boosting the number of tradesmen coming here, thereby easing pressure on housing stock.

  34. The government is also trying to recruit more apprentices among the young people already living here.

    On Thursday night, our dance coach said his uncle had to wait 5 months to see the Cardiac Specialist at the Prince Charles Hospital.

    My mother recently waited 6 months, with 2 cancellations.

    The place is absolutely burgeoning with patients, and although the staff are highly efficient, they’re flat out like a lizard drinking!

  35. Actually Ralph, I think there are many things that count other than GDP – per capita or otherwise. Quality of life, healthy environment, democratic freedoms, vibrant cultures – but a good economy can intertwine with and enhance those things.

    To blame migrants for expensive houses makes as much sense as blaming them for rises in the price of food.

    You cite research suggesting migration has had only a small benefit on per capita GDP – (although I can’t see why that is a bad thing, and it’s hardly an argument against migration. I don’t think the research took the positive externalities of migration sufficiently into account.

    Modern Australia is built on migration – our economy has grown significantly per capita, and migration has played a key role in that. To suggest we would have had the same per capita economic growth without migrants is fanciful.

    It is not just builders coming in as skilled migrants. The capacity constraints the HIA is blaming for housing costs also apply across many other industries. If you want to argue the merits of stagflation by blocking the entry of all of these people, feel free Ralph, but its not something I’ll back.

    “Please, enlighten me. Why should I be forced to leave my country because of foreigners?”

    No one is forcing you to do anything Ralph. All I did was suggest that if you thought extra people coming into Australia was a bad thing you could always go elsewhere. After all, unless you have 100% Indigneous Australian heritage, you’re descended from a recent migrant yourself. You say that “socially, migration is deleterious.” Surely you aren’t suggesting it’s bad that migrants (i.e. “foreigners”) are coming to Australia now, but it was fine back when your forebears migrated here?

  36. Housing affordability has been the real indictment of 1980s-2000s free market policy by both major parties.

    In the early 1980s, a family could afford a house mortgage with one income earner. These days, it takes two. (Were the trend to continue further to the next few decades, the children would need to be out sweeping chimneys too.)

    I don’t have much hope that we’ll see anything significant from either of the major parties: they’re far more likely to sympathise with existing home owners and landlords wanting to keep their property valuations up.

  37. You are probably right, the majority of politicians, and I exclude Alan Bartlett here, are out to feather their own nest and the rest can go and find a lake to jump in.

    Few in positions of power care much for the next generation. They no longer even pretend, every policy announcement favouring the tax-breaks-r-us brigade proves that statement.

    Looks like the government, media puppeteers and housing lobby are trying to implement the Japanese model of home ownership where debt is passed down to the children.

    Having two adults pay off a debt where once upon a time one could manage is a step in that direction and is backed by a solid theory of servitude. Make the population time poor, servile and in need of shelter and they will jump through whatever hoop.

    To complete the illusion and in the words of Bob Seger – ‘keep them entertained with $100 toys’. Then keep telling we are doing everything we can to improve the situation.

    If the next generation can be unwittingly conned into selling their soul for debt, all the better. Mission accomplished.

    The emporer has no pants on.

  38. Andrew wrote: “To blame migrants for expensive houses makes as much sense as blaming them for rises in the price of food.”

    Andrew, it’s obvious that if the population increases then so does the demand for housing, and if this population increase occurs too rapidly then demand will outstrip supply. Even you touched on the fact that the building industry cannot construct new houses fast enough to keep up with the extra demand. The problem is that you stubbornly refuse to make the logical connection between all this extra demand and all the extra people currently flooding into the country.

    “You cite research suggesting migration has had only a small benefit on per capita GDP – (although I can’t see why that is a bad thing, and it’s hardly an argument against migration. I don’t think the research took the positive externalities of migration sufficiently into account.”

    Firstly, the research I cited didn’t take any of the externalities into account. Even if the externalities were taken into account, any positive externalities would have to be balanced against the many negative externalities, some of which I’ve already listed.

    Secondly, you claim that GDP per capita doesn’t matter. That begs the question: If we aren’t running an immigration program for the tangible benefit of the existing population, then why are we running it at all?

    I may be a humble serf, but I’d like to see a statement on exactly how all this immigration is supposedly benefiting us – us being the existing Australian population. Nowhere in your posts do you actually outline the specific benefits of mass immigration to this country’s host population. I want to see numbers. We’ve concluded that immigration has little positive impact on GDP per capita. What about the effect of mass immigration on wages? I want to see the full economic costs of immigration taken into consideration. And the social and environmental costs, too.

  39. Andrew wrote: “Modern Australia is built on migration”

    Oh, for goodness sake, how many more tired open-borders clichés are you going to trot out?

    Modern Australia was built by British colonists. Immigrants came later to add to the nation and economy already established by those colonists and their descendants.

    “..our economy has grown significantly per capita, and migration has played a key role in that.”

    Yes, Andrew, our economy has grown per capita over the years, but there is absolutely no evidence to suggest that immigration has played any major role in that.

    “To suggest we would have had the same per capita economic growth without migrants is fanciful.”

    Utter rot. Advances in productivity and technology, not immigration, have been the keys to higher GDP per capita. Only an economic illiterate could seriously suggest otherwise.

    “If you want to argue the merits of stagflation by blocking the entry of all of these people, feel free Ralph, but its not something I’ll back.”

    No, Andrew, what you’re backing is a Ponzi scheme dependent on a never-ending cycle of immigration. Do you understand that immigration creates more demand for labour than it adds to its supply? Therefore, if the response to “shortages” is to import labour, extra demand for goods and services and further shortages of labour will inevitably arise. In short, immigration ad infinitum. Is that your intent?

    “All I did was suggest that if you thought extra people coming into Australia was a bad thing you could always go elsewhere.”

    Again, why should I? This is my country, Andrew. I have a democratic right to oppose Australia’s current immigration policies.

    Telling Australians to “go elsewhere” if they don’t like high immigration simply shows how arrogant and disdainful of public opinion you really are. It seems that you’re more interested in serving the interests of foreign peoples than the interests of your own constituents.

  40. According to someone from the finance industry speaking yesterday on TV, housing values in the USA are being cut in half, with entrepreneurs snapping up the cheap booty after people have lost their homes.

    The spokesman blamed “carpet baggers”.

    He said the same thing will happen in Australia within 2 years.

  41. Andrew wrote: “After all, unless you have 100% Indigneous Australian heritage, you’re descended from a recent migrant yourself. “

    European people have been on this continent for over two hundred years. Most are clearly not ‘recent migrants’.

    As for leaving the country, where would a high immigration refugee such as myself go? Even though I am indeed descended from a recent migrant, my ancestral homeland in Europe offers no right of return. And only a handful of countries accept permanent immigrants. Australia may invite the world to our shores, but judging by the lack of reciprocity in other countries’ immigration policies, the rest of the world clearly isn‘t interested in returning the favour. Mass immigration is a one-way street.

    “Surely you aren’t suggesting it’s bad that migrants (i.e. “foreigners”) are coming to Australia now, but it was fine back when your forebears migrated here?”

    Claiming that you can’t object to current immigration policy because your forebears were immigrants is a bit like saying that, because you were once a foetus, you must be against abortion.

    The fact that previous waves of immigration from a narrow pool of European countries were deemed a success is largely irrelevant to whether the current wave of immigration is in the country’s best interests. Economic, social and environmental parameters have changed significantly in the interim.

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