Reclaiming the Australian Dream

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posted | in Feature Article

Home ownership has been embedded in the Australian psyche as one of the defining aspects of our nation for generations, but this aspiration is becoming less and less attainable. Australia currently faces a shortage of more than 200,000 homes – and with an annual shortfall of 60,000 more each year this is set to balloon to over a million homes by 2025 we do not urgently undertake reform.

A lack of policy vision and political will has lead to affordability in the housing market taking a nose-dive, forcing prospective home buyers to the fringes of our major cities, ever further away from work and opportunity.

It’s the Australian dream – owning the family home, the old concept of the quarter acre block and white picket fence. But that dream is in danger of becoming a dystopian nightmare, and it will take bold reform to pull us back from the brink.

For generation after generation, young Australians have been told that this is what they want, what they should aspire towards. While this was quite a reasonable and attainable goal in years gone by, the rising gap between average wages and average house prices has meant that this will be increasingly difficult for those not already entrenched in the property market.

The Australian Dream is in danger of becoming a dystopian nightmare, and it will take bold reform to pull us back from the brink.

To understand Australia’s housing affordability crisis, it is best to examine the instruments and ideas which have lead us from a situation where housing was attainable and affordable to the vast majority of Australians, to one where home ownership is increasingly becoming a hazy pipe-dream, beyond the reach of the average Australian. Between 1960 and 2011, real house prices have risen at an average of 2.7% per annum, ahead of a 1.9% p.a. growth in real household incomes. Coupled with increased interest rates, the qualifying household income to purchase a median first home buyer house has almost tripled over that period in real terms.

It shouldn’t be surprising then that young people are leaving the family home later and later in life, with outlooks of one day owning their home becoming increasingly bleak.

Addressing this problem is no easy task – the flip side of making housing more affordable is generally decreasing the wealth and primary investment of the millions of Australians already established in the property market and enraging the powerful lobby groups who support the status quo, electoral suicide for any political party.

There are three major areas where Governments of all political persuasions have fallen short, allowing inaction and indecision to taint their resolution to the affordability crisis:

  1. There has been a systemic failure to provide a planning and development framework that effectively fosters an affordable housing market and affordable housing developments, while balancing the concerns of residents and those who wish to be residents in a palatable manner.
  2. Federal and State Governments have failed to cooperate to implement a taxation and fee regime that promotes the affordability of housing.
  3. There is a tendency to protect the interests of those already established with generous tax concessions and systemic advantages lavished on those already within the property market and effectively living the Australian dream at the expense of those who aren’t.

These three factors combine to create an exponentially growing housing divide that looks set to create a vast group of people who will never be able to afford their own home and live out the Australian dream.

While the problems facing Australia’s housing market are vast and daunting, there are solutions just waiting for the right political resolve to come into fruition. Many of these solutions have been pushed aside time and time again into the too-hard basket, which has only made the need for bold reform more pressing. As those who will never own their own home gradually move to outnumbering those who will, it becomes incumbent on our democracy to actually address these issues.

The current situation is heavily geared towards increasing the demand for property investment, without adequately addressing the core issue of supply.

As things currently stand, a more affordable housing market would see an increase to productivity and opportunity in work and education through reduced travel times, an increase to commerce through more disposable income, and of course the improvements to standard of living and quality of life that these things would bring, a goal Labor should always be aspiring to.

It is time we closely examine the veritable herd of sacred cows that inhabit the property market, factors such as the outsourcing and separation of planning powers, the ways in which we tax land and assess capital gains in the taxation system, our hesitance to support denser development and subdivision, particularly in areas bordering our CBDs, and of course that old spectre, negative gearing.

The current situation is heavily geared towards increasing the demand for property investment, without adequately addressing the core issue of supply. This can primarily be seen in the generous tax concessions afforded to overinvestment in primary dwellings and the rebates now taken for granted in the owning of rental properties, as well as the overly generous Howard Government concessions for Capital Gains.

Addressing these problems will certainly see the price of property fall, but by simultaneously allowing denser development on existing properties, it is indeed possible to both reduce the price of dwellings and maintain the price of land, ensuring windfall gains for those who would be otherwise disadvantaged by changes to the system while providing substantial improvements to quality of life that come with the attainability of housing.

It is generally considered to be the goal of each generation to leave things better than they found them.

It is past time for us to start a conversation as to how today’s youth are going to be able to afford the same lifestyles as our forebears.

As a nation, we must stop ruling out vigorous taxation and regulatory reform, and take a look back at those discarded documents lying at the bottom of the too hard basket. With a little leadership, we can once more look forward to the Australian Dream.