Modern Australian



Housing policy reset is overdue, and not only in Australia

  • Written by Duncan Maclennan, Professorial Research Fellow in Urban Economics, UNSW; Professor of Strategic Urban Management and Finance, University of St Andrews; Professor in Public Policy, University of Glasgow

Federal and state elections in coming weeks provide a timely moment for Australians to reflect on the increasingly obvious failure of governments to manage the triple crises of inflated property prices, lack of affordable housing for people on low to moderate incomes, and property market volatility. The likely prominence of housing in the federal poll at least, if not in New South Wales, perhaps signals welcome political recognition that decades of complacency and inaction are to blame for housing system under-performance. And it’s costing the country dearly.

There’s a growing sense that core aspects of the governmental mindset that have underpinned housing policy since the 1980s are long overdue for a rethink. And not just in Australia. Our recent knowledge transfer project, involving academics, policymakers and professionals in Australia, Britain and Canada (the “ABC countries”), tapped into these debates.

Read more: Home ownership foundations are being shaken, and the impacts will be felt far and wide

A misplaced faith in markets

Our Shaping Futures report identifies important common housing features across the ABC countries. These include their overarching “liberal market” approach (for example, relatively light regulation of private rental housing) and the challenges of managing population-driven growth in cities.

In all three countries, a similar set of foundational beliefs has dominated housing policy for decades. One is an increasingly misplaced faith that housing markets are well-functioning systems. Another is that issues of poor housing and high housing costs are seen purely in terms of redistributive welfare. The impacts on growth and productivity are largely ignored.

Governments of the ABC countries have increasingly delegated responsibilities for coping with national and global pressures on housing. At the same time, they have provided little more autonomy and limited resources for cities and regions to respond to these pressures.

All three nations have seen falling home ownership rates for young adults and long-term declines in home ownership affordability – among the most severe in the OECD. Household debt rates are close to the highest in the OECD.

Inflated demand is increasing stress in private rental markets. It’s coming from growing numbers of frustrated middle-income aspirant homebuyers and from low-income tenants denied access to social housing by a proportionately smaller supply.

In Sydney in 2017, moderate-earning and low-earning tenants paid, on average, more than A$6,000 a year in rent over and above 30% of their incomes. And that still didn’t spare them the growing costs and lost productivity of commutes commonly exceeding 90 minutes.

Research in Sydney, Vancouver and London demonstrates that to quantify the real burdens of city housing shortages we need integrated analysis of housing and transport outcomes.

Housing failures have broader consequences

Housing outcomes, including quality, price and location, have significant impacts on the “big goals” of governments.

Regressive subsidies (such as tax concessions for property owners) have worsened rather than offset the effects of rising rents and house prices on income inequality and wealth distribution. In all three countries inequality indices have increased over the last two decades. And in the UK, at least, social mobility is lower than in other developed countries. Housing systems have been at the heart of these changes.

Read more: How the housing boom has driven rising inequality

We should aim to boost economic productivity by enhancing human capital – that is, maximising people’s opportunities and capabilities. Instead, there is an emerging sense that growth dividends have been sunk into raising housing and land prices, through investor speculation. This rentier-driven, rather than entrepreneur-led, economic growth has reduced the housing market’s resilience to cyclical instability.

Piecemeal policies aren’t enough

At least until very recently, longstanding systemic housing problems have generally failed to evoke major policy responses. When interventions have been considered necessary, these have tended to be restricted to homelessness and to helping marginal homebuyers. This has often been done in ways that have proved counterproductive by pumping up demand.

With the possible exception of the UK devolved nations, government housing policymaking capacity has been largely emasculated across all three ABC countries over the past 10-20 years. Housing ministries and agencies have been abolished or “integrated” into human services departments.

Likewise, Shaping Futures stakeholders were unimpressed with recycled policy proposals. One example is suggestions that income allowances for individuals should replace direct supports for housing supply. Another is that planning is the prime cause of supply-side “stickiness” that holds up the delivery of new housing.

Read more: Affordable housing policy failure still being fuelled by flawed analysis

One response would be to join some of our academic colleagues in attributing such shortcomings to a misguided faith in managed markets. We might even echo calls to restore pre-1980s housing policy instruments such as big public housing, deep rent controls, tied subsidies and the like.

However, the reality is that markets are likely to remain a preferred basis for our housing systems. The above diagnoses and prescriptions also overlook the possibility that some post-1980s innovations have produced significant policy progress. The emergence – particularly in the UK – of regulated not-for-profit organisational models is an important case in point.

Nevertheless, minor tinkering will resolve none of the major housing system problems that have become all too apparent in the ABC countries since the turn of the century, and especially since the GFC.

Key features of a solution

As well as a commitment to housing as a higher priority for government spending, a new understanding of how housing systems operate and what housing outcomes achieve is urgently needed. In particular:

  • The housing sector needs to make stronger economic cases for support, while treasury and finance ministries must improve their comprehension of housing markets. Advocates need to voice the productivity case for housing; policymakers need to take it seriously.

  • As failed economic thinking for housing policies has generated unstable and expensive housing outcomes, the conventional wisdom finds easy scapegoats in the regulatory planning system. Yes, unduly tight regulation will hinder supply, but no more so than failure to invest adequately in infrastructure and, indeed, shortages of construction labour and materials. Again, the challenge for treasuries is to resist the simplistic “economics 101” analysis that fails to recognise the special qualities of housing and land markets.

Read more: Facts sink glib housing supply mantra – the focus must be on affordable rental

  • Far from further downgrading its influence, planning needs to be cast in a more central role to extract infrastructure-and-planning-induced gains. Critical here is the recognition that “inclusionary zoning” essentially taxes “scarcity rents”. And – unlike tax-funded housing expenditure – it creates no drag on growth and productivity.

  • Governments in Australia and Canada need to fully recognise the potential of non-profits to deliver not just low-income housing but mixes of renting, owning and shared ownership. This creates opportunities for younger households as well as better neighbourhoods.

  • Governments must reshape young adult routes into home ownership. At the same time, they must avoid over-reliance on crudely designed central bank policies on deposit limits and lending ratios uniformly applied across diverse local housing markets.

Reforms to ensure better housing outcomes in the ABC countries are possible. Significant modernisation of private rental regulation in Scotland, Victoria and British Columbia provides recent cases in point.

Read more: An open letter on rental housing reform

Most such steps will depend, however, on governments providing additional or redirected resources. Even more, they require housing systems to be administered at regional and local level with evidence-based understanding and commitment.

Many of the housing problems that distress urban communities across the ABC countries stem from “a veil of ignorance”. There’s an official disregard for evidence and mistaken adherence to simplistic narratives that play down significant market failures.

Households, communities and cities deserve better futures. Shaping them is feasible.

A convincing pitch to do so could well prove critical in swinging young voters’ allegiance and, as a result, the results of Australia’s imminent elections.

Read more: Ten lessons from cities that have risen to the affordable housing challenge

Authors: Duncan Maclennan, Professorial Research Fellow in Urban Economics, UNSW; Professor of Strategic Urban Management and Finance, University of St Andrews; Professor in Public Policy, University of Glasgow

Read more http://theconversation.com/housing-policy-reset-is-overdue-and-not-only-in-australia-112835

NEWS

why Commissioner Hayne wants mortgage brokers to charge fees

Wes Mountain/The Conversation, CC BY-NDThe Royal Commission recommendation that mortgage broker commissions, currently paid by lenders, should be replaced by up-front fees paid by borrowers, has been controversial to say...

Frydenberg should call a no-holds-barred inquiry into superannuation now, because Labor won't

The Coalition is running out of time to do worthwhile things.Facing overwhelming odds of defeat in the election due within weeks, one of its last throws of the dice should...

Aussie parents are under pressure to buy their kids academic advantage too

Allegations of parents cheating and bribing top-tier universities in the US to secure their children’s admission have caused a media storm in recent weeks. Those indicted included members of the...

Missed something the doctor said? Recording your appointments gives you a chance to go back

It's often hard to comprehend complicated medical information from your doctor – particularly if you've just received bad news.From shutterstock.comYou’re in a consultation with your doctor and you’ve just been...

young people need better parks to get out and play

Poor quality and access are common barriers to young people using parks. FamVeld/ShutterstockWho wants to play sport in the mud and muck? Or have to climb a fence to play?...

Stowaway mozzies enter Australia from Asian holiday spots – and they're resistant to insecticides

We might not be able to use common insecticides to kill mosquitoes that arrive from other countries. from www.shutterstock.comPlanning a trip to the tropics? You might end up bringing home...

women's masturbation in early England

Battita Dossi, Nymph of Spring (16th century).Wikimedia CommonsIn our sexual histories series, authors explore changing sexual mores from antiquity to today.In the 18th and 19th centuries, masturbation was thought of...

NSW result gives federal Liberals a boost in the mind games

Scott Morrison couldn’t wait for NSW opposition leader Michael Daley’s concession speech on Saturday night. Morrison leapt to the stage at the Liberals’ function, speaking ahead of Gladys Berejiklian, to...

NSW Coalition scrapes back in as minor parties surge – but delivering on promises will not be easy

Having been returned to power, the Berejiklian now has to deliver on its big promises.AAP/Lukas Coch“It’s not a game of SimCity,” NSW treasurer, Dominic Perrottet assured viewers on the ABC’s...

Coalition wins a third term in NSW with few seats changing hands

Gladys Berejiklian has led the Coalition to a third term in office in NSW.AAP/Dean LewinsWith 54% of the vote counted at the New South Wales election held today, the ABC...

Funding boost for policing finance sector, in budget that warns of economic softening

Treasurer Josh Frydenberg will deliver the 2019 budget on April 2.LUKAS COCH/AAPThe April 2 budget will provide about A$600 million to pursue wrongdoers and help restore trust in Australia’s financial...

Silver moss is a rugged survivor in the city landscape

Silver moss can survive almost total dehydration. HermannSchachner/Wikipedia, CC BY-SASign up to Beating Around the Bush, a series that profiles native plants: part gardening column, part dispatches from country, entirely...

Popular articles from Modern Australian

How to encourage healthier eating for your kidsEarly Bird Fall Fashion Trends5 Shaving Mistakes Most Men MakePreparing Your Car for a Road Trip in 5 Steps5 Top Offbeat Things to do in Hong KongExploring Whakatane NZNewly launched EyeHealth1st unites the majority of Australia’s independent optometristsDental Health at an Older AgeExpert Reveals Why You Can Remember Pizza Hut's 481 1111, and not Your Mum's NumberImportance of a Great Smile for Self-ConfidenceHow To Find A Wedding Dress On A Budget5 meditation tips for beginnersGet the Best Out of Garden Reticulation: Perth Expert Advice5 Smart-Home Upgrades You Should Invest InMeet a Car Wrecker as unique as a South Australian accent is