Opinion
Two weeks after the budget, I’ve realised I missed its most surprising revelation
Ross Gittins
Economics EditorLast week, a fairly ordinary place in our street, similar to ours, sold for $4.7 million. I suppose I should be congratulating myself on how well I’ve done in the capitalist game. And it’s only fair since I’ve “worked hard all my life”. In truth, all we’ve done is pay the exorbitant price of $180,000 for our place, then hung around for 40 years. This makes sense? Surely, this crazy game can’t keep going onward and upward forever.
It’s now been two weeks since Treasurer Jim Chalmers delivered his budget, but I’ve only just realised its main content is not the one-year $300 electricity bill rebate we’ve obsessed over, it’s the evidence the government has finally accepted our housing system is dysfunctional and must be fixed. The budget papers include a long statement spelling out what’s wrong with housing with a candour I’ve not seen before.
The hard truth is that, until now, the pollies on both sides have only pretended to care about how hard the young were finding it to afford a home of their own. Why? Because the number of voters who own a home – whether outright or still with a mortgage – greatly exceeds the number who’d merely like to become a home owner. As John Howard used to say, he’d never heard any home owner complain about the rising value of their property.
All the things pollies do in the name of helping first-home buyers – such as cutting stamp duty on the purchase price – don’t actually help, and probably aren’t intended to. When they claim to be helping you afford the high price, they’re really helping to keep it high. If they helped you and no one else, you’d be advantaged. But when they also help the people you’re bidding against, it’s actually the seller who benefits.
It’s the same with the bank of mum and dad. The more parents help their kids afford the high prices – as I have – the higher those prices will stay. Again, the sellers benefit.
When the value of the oldies’ homes just keeps going up, this constitutes a transfer of wealth from the younger to the older generation. The bank of mum and dad transfers some of the wealth back to the youngsters. The losers, however, are those kids who didn’t have the sense to pick well-off parents.
Illustration: Andrew DysonCredit:
But what makes me think the Albanese government has seen the light?
Well, for a start, it makes more political sense than it used to. Not only are younger people having trouble affording their first home, they’re being hit with big jumps in rent thanks to an acute shortage of rental accommodation.
The budget statement admits that the median price of homes in the eight capital cities has more than doubled since the mid-noughties. So have advertised rents. It now takes more than 11 years to save a 20 per cent deposit on a house.
Politicians have been favouring the old at the expense of the young for decades, but the young are getting restive. Labor has more than its share of the votes of young adults. It risks losing those votes if it doesn’t start delivering for the younger generation.
Labor sees that house prices and rents are rising because the supply of homes has failed to keep up with growth in the population. Part of the reason for this is what the statement admits has been a “long-term, chronic under-investment in social housing”.
Why all these frank admissions? Because the Albanese government has decided to do something big to ease the problem. The budget announced new measures worth $6 billion, which added to those already announced, amount to a $32 billion plan to deliver 1.2 million new, well-located homes in the five years to June 2029. This would be equivalent to a city the size of Brisbane.
As with so many of our problems, the feds have most of the money needed to fix the nation’s housing, but the actual responsibility for housing rests with the states and even local government. The plan’s attraction is that it’s been agreed with the states and includes monetary incentives for them to co-operate.
The words “well-located homes” are code for many of them involving medium and high-density housing in the capital cities’ “missing middle”. It requires the states to take on their local government NIMBYs (see monetary incentives above).
It would be wrong, however, to see this plan as the simple solution to a housing system that’s been performing poorly for decades. It will be some years before it makes much difference, and experts have questioned whether so many new homes can be built in just five years.
It’s an advance to see the new emphasis on improving the system’s ability to supply more houses, but the vexed question of fixing the distortions to demand caused by misguided tax concessions remains to be faced.
Ross Gittins is the economics editor.
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