Why the housing crisis is here to stay

An economic strategy that emphasises increased public housing is urgently needed to remedy the worsening housing crisis, writes Mark Allen.

AUSTRALIA IS IN the midst of a worsening housing crisis. Solving it will require a massive shift in the way we approach town planning, population policy and economics in general. Otherwise, the crisis will continue to worsen with huge social and environmental consequences.

This situation was borne of neoliberalism and the current response is straight out of the neoliberal rule book, which for the most part, is about channelling public money into private hands.

For example, the Federal Government’s decision to increase the maximum rate of the Commonwealth Rent Assistance program by 15 per cent in the recent Budget will do little to prevent opportunistic real estate agents from encouraging landlords to increase their rents accordingly. This is what happened in Western Australia when the State Government undertook a homebuilder scheme for first-time buyers, leading to massive price gouging.

Government action urgently needed as housing crisis escalates

With Australia's housing crisis growing, there is a dire need for an economic solution that will rectify the situation in the long term.

The same Western Australian Government recently celebrated its budget surplus by giving every householder in the state $400 off their power bills. While this is a welcome short-term respite for those who are struggling with the cost-of-living crisis, the fact that it is not means-tested is a wasted opportunity to invest public money into community assets such as public housing.

A substantial investment in public housing is both urgent and crucial for the thousands of welfare recipients and other low-income earners who are currently struggling to break into the highly competitive rental housing market. Those who are fortunate enough to find a home must often make do with substandard accommodation as there are few laws in place to ensure that houses are well insulated, mould free (or even safe from being exposed to friable asbestos).

So, the need for more public housing cannot be overemphasised and the Federal Government, which is the sovereign wealth provider and the driver of ever-increasing housing demand through migration, has an obligation to fund the bulk of it.

However, attempting to achieve even a modest level of investment in public housing is already a huge political undertaking. Under the current paradigm, we can be sure that there will be zero political will to invest in sufficient affordable housing for the vast majority of low to medium-income earners who are currently doing it tough in the private rental market.

Quite simply, these are the people who must pay the mortgages of the property investor class. The very last thing that the private rental industry wants is to find itself competing with well-designed, well-insulated affordable housing. Demand for private rental housing must remain high in order to prevent potential renters from having the ability to be “choosy” about where they live. Otherwise, landlords (many of whom plan to demolish and subdivide in the long term) will be under increased pressure to invest in home improvements in order to compete for tenants.

Housing woes to worsen with upsurge in migration

With housing rents rising and construction times on new homes blown out to over a year in many cases, Australia will struggle to provide the infrastructure to absorb 400,000 migrants this year.

One common neoliberal response is to say that we can simply build our way out of the crisis and that increasing supply would reduce house prices. This is a lie designed to manipulate the public into being complicit with the development lobby and powerful influential figures such as Harry Triguboff. It is crucial under the current paradigm that house prices continue to increase. Otherwise, many property investors will risk finding themselves in negative equity and this can never be allowed to happen.

Property investment is about making money. This requires an increase in capital gains coupled with the knowledge that there will always be someone to pay off the mortgages on investments.

So how does the Government placate the development lobby while ensuring that our already over-inflated housing bubble does not burst? The answer is high economic-driven immigration. This is why any politician who says that they are against high population growth in opposition, such as Prime Minister Anthony Albanese and now Opposition Leader Peter Dutton, is either lying or will quickly have their minds changed once they are in power.

Meanwhile, neoliberal apologists for a Big Australia will claim that the housing supply issue can simply be solved by importing construction workers, but as Crispin Hull points out:

‘...every skilled construction worker brought in requires health, education, transport infrastructure... And every health worker brought in creates extra demand of construction workers and a business bleat about labour “shortages”. The vicious circle goes on and on.’

It is not even remotely possible to construct a new Adelaide’s worth of housing every three or four years and that has never been the intention. Nevertheless, even though that demand must never be allowed to be met, we can be assured that the construction of housing will be rapid and ongoing until such time that the economic paradigm changes or we exceed our limits to growth to the point where the whole Ponzi collapses in on itself.

Population growth fuelling the housing crisis fire

While Australia's booming population is a contributing factor to the housing crisis, other elements are also adding to the dilemma.

Australia does not have to become an anti-immigrant nation. It simply needs to change its approach from one that uses migrants as units of growth to prioritising refugees, family reunion visas and proactive foreign aid whereby people do not feel the need to migrate. Right now, there are many nations across the world with huge amounts of empty housing while Australia builds ever more to drive a politically driven population boom.

Meanwhile, the massive environmental impact of having a system that is reliant upon importing people in order to grow gross domestic product coupled with ongoing development takes us closer to environmental tipping points. A common response to environmental concerns is that we can densify rather than sprawl outwards but densification requires a lot of up-front emissions as well as the loss of the embodied carbon in the many buildings that are often demolished to make way for new developments.

Densification is also a relatively slow process. Building medium density in the existing suburbs often requires the cooperation of multiple adjoining homeowners. It is piecemeal and sporadic. Even brownfield site regeneration is considerably slower than greenfield development. A relatively well-thought-out example is the proposed fisherman’s bend development in Melbourne, which will take decades to build while accommodating less than one year’s worth of Melbourne’s population growth.

The city of Adelaide has recently released a huge amount of land for development on its fringes, despite having made a determined effort to densify in the past two decades. So, under the current scenario, densification will not stop sprawl and as there is no political will to work towards an endpoint to Australia’s population growth, densification can only delay it at best.

Australia’s reliance on property development and real estate speculation has led to a housing crisis that will continue to worsen, while our cities and towns continue to sprawl and densify. This can end in only two ways: either through economic/environmental collapse or massive systemic change to a form of post-growth society.

This systemic change is required for a multitude of reasons in the face of the accelerating climate and ecological emergency.