There is certainly a very determined attempt being made around the globe by some of the more ideologically motivated commentators to create a mythology that the genesis of the financial crisis in the USA is somehow due to government measures promoting affordable housing for lower income earners (read: minority groups).
The Australian has carried another article trying to make this link, this time by the Director of the Adam Smith Institute in the UK.
This crisis was not caused by capitalism being fatally flawed. It was caused by politicians forcing the banks to give out bad loans, monetary authorities flooding the West with cheap credit and regulators being asleep at the wheel. Indeed, one can date its origin precisely, to October 12, 1977, when US president Jimmy Carter signed the anti-redlining law. Before then, lenders generally denied loans to people in poor neighbourhoods, believing that the local mix of low incomes and a weak housing market would lead to many people defaulting. But the politicians – with good intent – wanted to make home ownership available to all Americans. So lenders were forced into giving out risky mortgages, what we call sub-prime loans.
The notion that lenders were forced to make sub-prime loans is simply not correct. US based media monitoring website Media Matters has done a thorough debunking of those arguments. You can read the full thing here.
I mention this not because I’m in interested in how partisan US talking points spill over into the Australian media. Rather, I am concerned that the long overdue debate we have finally started to have about how to sustainably address structural housing affordability problems in Australia does not get derailed by the same sort of shallow rhetoric.
Last Friday I attended a meeting in Canberra of housing organisations who have been working together on housing affordability issues for many years. It is largely due to the work of these wide-ranging groups that the federal government pledged to develop a national affordable housing strategy and has already started to implement measures such as the National Rental Affordability Scheme (NRAS).
State and federal governments are meant to be on the cusp of signing off on a National Affordable Housing Agreement, with a CoAG meeting planned next month. Whether it will all be ready by then is debatable, particularly given the current economic and budgetry uncertainty. It won’t be the last word in housing affordability measures, but it will certainly set the framework for the next few years.
While we’re come a long way in a short time, given the previous federal government wouldn’t even put forward a comprehensive housing policy at all, the recent misguided expansion of the First Home Owners Grant (FHOG) under the guise of stimulating economic activity in the housing sector and maintaining artificially inflated housing prices makes me concerned that there still isn’t the political will to really tackle the structural underpinnings of the housing affordability problems in Australia. The fact that many of the people who led the policy debate on the issue for so many years in Australia while there was zero political interest are not more closely involved in determining what happens now there is some policy action doesn’t fill me with confidence. But as with any policy issue, people have to keep putting the arguments out there and looking for every opportunity – the current review of the tax system is one – to keep making their point.