11 Aug 2017

As a nation, we are now the most unequal we have been since the Great Depression. We are becoming more divided by wealth and class.

As a nation, we are now the most unequal we have been since the Great Depression. We are becoming more divided by wealth and class.

If you’re well off you can access the world’s best health care, excellent education, and housing close to work and services. You can provide your children with opportunities and an inheritance that will ensure their security. If you’re earning a million dollars per year you just received a $16,500 tax cut. If you invest in property, you receive the world’s most generous tax concessions. For many Australian millionaires, this means they don’t pay any tax at all.

For many Australians life becomes more of a struggle each day. Penalty rates for weekend hours are being cut, and work is becoming characterised by casualization and the ‘gig economy’. Taxes are rising for those on low and median incomes at the same time as the government is proposing a $65 billion cut to business tax. Services, such as a bulk billed doctor’s visit, become harder to access due to the government’s cutbacks. If you are on the Age Pension or Newstart, the government threatens you with debt notices and imposes longer application times.

In this unequal and unfair society, the most basic need, a secure place to call home, is denied to thousands.

At the 2011 census 105,000 people were homeless. Soon the 2016 Census results will tell us what that figure has risen to, and it surely has risen. This is a national disgrace and unacceptable.

Coalition governments, at State and Federal level, have shown they are incapable of coming to grips with this housing affordability and homelessness crisis.

We have a failing, distorted housing market, made worse by stubborn government policy. The distortions created by favouring investors cascade through the housing market, hurting all, but hitting the most vulnerable the hardest. Starting from the viewpoint of supporting the commodification of housing via tax breaks is precisely the wrong way to approach housing. Instead we must begin by acknowledging that everyone deserves a safe, secure home.

No policy on housing and homelessness has any credibility if it doesn’t deal with the structural problems caused by over-generous benefits provided to investors, in the form of negative gearing, capital gains tax concessions and special tax treatment for self-managed super funds.

Furthermore, no government can be taken seriously if it doesn’t appoint a dedicated Minister for Housing and Homelessness. The $44 million per year cuts to homelessness funding in the Coalition’s 2014/15 Budget shows what can happen when you do not have a Minister with specific responsibility for housing and homelessness.

If we are to build a good society, a society based on fulfilling the human rights and basic needs of Australians, then we must tackle the issues of housing affordability and ensure everyone has a secure home.

The Coalition have ignored the housing issues for four years, before belatedly cobbling together a few ineffectual fig-leaf policies at the 2017 Budget. Despite promising ‘an enormous package’ that would be ‘well received’, the result was disappointment across the sector. The Grattan Institute’s Professor John Daly said ‘you’d need an electron microscope’ to see any effect on house prices. Shelter Australia’s Adrian Pisarski said it was ‘a centrepiece without a centrepiece’.

In contrast Labor has a plan to improve housing affordability, increase financial stability, reduce homelessness and boost jobs, including:

  • Reforming negative gearing so that deductions can only be claimed on newly built homes, which will increase supply and create construction jobs.
  • Reforming capital gains tax concessions, cutting it by half to 25%, which will reduce incentives for investing in property only in order to realise capital gains.
  • Limiting direct borrowing by self-managed superannuation funds -  limited recourse borrowing in SMSF’s have exploded in recent years – from about $2.5 billion in 2012 to more than $24 billion today. This represents an 860% increase in limited recourse borrowing by SMSF’s in just 4 ½ years.
  •  Facilitating COAG processes to introduce a uniform vacant property tax across all major cities.
  • Increasing fees for overseas investors buying Australian real estate, and increase penalties when they break the law.
  • Establishing a bond aggregator to increase investment in affordable housing.
  • Boosting homelessness support for vulnerable Australians by $88 million over 2 years
  • Achieving better results from the National Affordable Housing Agreement including better rights for renters, planning reform, inclusionary zoning, and accelerated land release.
  •  Re-establishing the National Housing Supply Council and reinstating a Minister for Housing.

These policies will help level the playing field between home buyers and investors. They will remove some of the distortions in the housing market which drive investment for capital gain, rather than investment in securing homes for people. Uniform vacant property taxes are a good step towards better utilisation of the more than 1 million properties that sit empty each night.

Analysis by the Australian Housing and Urban Research Institute has demonstrated that providing affordable and stable accommodation to disadvantaged Australians decreases the amount government has to spend on health and mental health services. In my view there will also be significant reduction in public expenditure in other areas such as prisons and correction services. Spending on housing really should be seen as a productive investment.

Labor is committed to extra investment in homelessness services, and I am particularly concerned about the increasing number of older women experiencing homelessness, and the plight of young people coming out of State care. As Minister for Housing and Homelessness, I will work with the States through the NAHA process to ensure these policy areas are addressed.

Labor will have more to say on housing policy in the lead up to the next election and as part of that process we will continue consulting with industry experts and NGOs.

I now turn to the bigger picture covered in this issue of Parity – how housing and homelessness relates to poverty.

Poverty is a result of economic inequality. Unequal economic and social power leads to poverty, and inequality leads to lower economic growth.

Housing and homelessness is one of the key economic challenges faced by all levels of government. The loss of productivity that comes with homelessness, rental stress and insecurity of tenure is a feature of our failing housing market.

There is growing academic and political analysis of the implications for intergenerational inequality, arising from the changing nature of housing policies.

Thomas Piketty’s Capital in the 21st Century has highlighted rising wealth inequalities in advanced economies.

The evidence presented by Piketty gives even greater significance to housing outcomes as a major reinforcer of wealth and income inequalities.

Piketty argues that as the returns to owners of capital have grown faster than overall income per capita (meaning that investment incomes are rising faster than wages) wealth inequality has risen, and will continue to rise.

One key implication of this is that inheritance rather than the return from one’s own economic activities begin to dominate the distribution of wealth, and therefore the distribution of the absence of wealth - poverty and insecurity.

A paper by Duncan MacLennan, Prof of Strategic Urban Management at the University of St Andrews and Prof of Public Policy at the University of Glasgow and Dr Julie Miao, lecturer in urban studies at the University of Glasgow titled Housing and Capital in the 21st-Century, highlights the significance of housing wealth in increasing inequality.

The paper takes the view that housing market processes and wealth outcomes will drive higher inequality and lower productivity into the future unless housing and related policies change markedly.

The authors state that Piketty’s findings imply that rethinking both the role of housing systems and the efficacy of housing policies are central to shaping more effective economic policy.

If we are to tackle homelessness, poverty and inequality, then housing affordability policy must play a central role. Labor understands this and is committed to policies that will make a substantive difference to the lives of Australians struggling to find and keep a roof over their heads. The Commonwealth government should be acting to reduce inequality and housing costs-induced poverty. Labor stands ready, as the alternative government, to do so.

This article first appeared in the July 2017 Vol 30, Issue 5 edition of Parity – The publication of the Council to Homeless Persons.