ADDRESS TO THE AUSTRALIAN CAPITAL TERRITORY HOUSING AND HOMELESSNESS SUMMIT
HOUSING AFFORDABILITY AND RISING INEQUALITY
I would like to acknowledge and pay my respects to the traditional owners of the land on which we meet.
Thank you to ACT Housing and Suburban Development Minister Yvette Berry and the ACT Government for the invitation to speak to you today.
Housing and Inequality
Housing is a powerful determinant of social and economic participation.
Australia is in a housing crisis – a crisis of supply and a crisis of affordability.
This housing crisis has far reaching consequences.
The issues associated with the housing crisis affect people all along the housing continuum.
People experiencing homelessness; people in rental stress; first home buyers and people relocating or downsizing.
The crisis affects the lives of hundreds of thousands of households, curtailing their life prospects and potential.
It has economic consequences for the whole nation, cutting into productivity and prosperity. Our housing system is contributing to growing inequality, and lower investment in employment and wealth creation.
Eminent economists such as Stiglitz, Piketty, Atkinson and James K Galbraith have identified inequality as a driver of political and social instability.
Prof Duncan MacLennan, Professor of Strategic Urban Management at the University of St Andrews has highlighted the role of housing wealth in increasing inequality.
MacLennan notes that from the 1950s to the 1980s, in Western Europe and the Anglophone countries, the proportion of national income committed to housing policies, programs of public capital expenditure and infrastructure investment, were often triple those prevailing by the 1990s.
One of his key conclusions is that if households invest their savings in driving up the price of existing bricks and mortar rather than investing in human capital and forming new firms, then long-term growth and productivity are likely to be lower.
And the longer this process happens the greater the detrimental effects, as Paul Krugman notes - “when the rate of return on capital greatly exceeds the rate of economic growth, the past tends to devour the future, society inexorably tends towards dominance by inherited wealth”.
As Labor’s Shadow Minister, it is my job to ensure that housing policy doesn't add to inequality, but on the contrary, reduces it.
Just as there are far-reaching negative consequences associated with the housing crisis, conversely there are many advantages in ensuring all our people have secure, affordable housing.
We know, empirically, that bringing a person out of homelessness results in savings to the public purse in terms of decreased demands on our health, justice and social security budgets. We know that secure housing has far reaching benefits for those on low incomes in terms of education and their prospects for employment.
And the entire economy benefits if we rectify the misallocation of resources associated with housing speculation fuelled by over-generous tax concessions.
As such there is a strong community interest in addressing the housing affordability challenge, and we will need the commitment and investment of all levels of government, and a range of stakeholders if we are to rise to that challenge.
The housing policy challenge
I want to briefly outline the policy challenge.
Australian cities and many regional areas are now some of the least affordable in the world.
Comparatively high housing costs by international standards make Australia an expensive place to live and an expensive place to do business.
The cities which are our engines of growth are also the places where housing stress is greatest.
The impact of this on renters and aspiring home purchasers is well documented.
The maximum affordable rent for a couple on the minimum wage with two children is $416 per week, far short of the median Sydney rent of $743 per week for a 3-bedroom house.
For households reliant on income support payments, the situation is extreme.
Less than 1 percent of houses for rent in Greater Sydney are affordable for households on low incomes.
In most of our capital cities, rental vacancy rates are below 2 percent
Our social housing system no longer provides a safety valve for the over-heated private rental market.
Public housing supply has fallen by 16,000 in eight years and 20% of public housing stock has three or more major structural problems or lacks functioning facilities for washing, sewerage, or storing and preparing food.
At 4.4% of total housing stock, we now have one of the lowest proportions of social housing among OECD countries.
The only part of the social housing sector which is growing is community housing, both mainstream and Indigenous.
However under current policy settings growth in this part of the sector is modest and waiting lists for social housing remain intractable.
While housing construction activity in 2016 and 2017 has kept pace with population growth this has not dampened pent-up demand generated by years of under-building.
If we look at the distribution of the price of house approvals in the period from 2006 to 2014, almost 80 per cent of house approvals are to be found in the 6th to 9th deciles of the housing price distribution.
The distribution of units by price segment is also biased in the same direction as houses. On average over the timeframe 2006–14, 80 per cent of unit approvals were in the high 8th to 10th deciles of the unit price distribution.
We are building a lot of houses. In fact, recent housing completions data indicates we are building houses faster than ever.
The problem is; we are building a lot of expensive houses but we aren’t building enough housing that is affordable to low and moderate income households.
The greatest demand is for rental housing which is affordable and available to households on low to moderate incomes.
Estimates of the gap between underlying demand for housing and supply in 2016 range from 369,000 to 527,500.
A conservative estimate is that a total investment of at least $120 billion would be required to remedy an affordable rental housing supply shortage of this magnitude.
The government’s Affordable Housing Working Group has estimated that an additional 6,000 social housing dwellings will be required each year just to keep pace with future population growth, without addressing the backlog of need.
A more comprehensive estimate prepared by Dr Judith Yates for the Council for Economic Development of Australia is that Australia needs 20,000 extra affordable housing dwellings each year for at least a decade to address the backlog of need among those on low to moderate incomes.
Using the most recent estimates for the number of households in rental stress, of which there are 527,500, even if half of all the 220,000 new dwellings built each year were made affordable and available to low-moderate income households, it would take over 5 years of new supply to address rental stress amongst Australia’s poorest households.
Australia’s housing affordability problem has developed over several decades and will need a long-term commitment to resolve. What is required is a comprehensive, long-term commitment to addressing the supply of affordable rentals for low to moderate earners.
Achieving the necessary growth in affordable rental supply is beyond the capacity of government to tackle alone. The core of the strategy must include incentives to encourage institutional investment to make long-term commitments to a new asset class of affordable rental housing.
I firmly believe that while the provision of transitional and supported accommodation for people who are experiencing homelessness or are at risk of homelessness is vitally important, sustainable long-term reductions in the rate of homelessness depends on our capacity to provide stable, long-term, affordable housing.
In April this year, Labor announced a package of measures that included $88 million over two years to improve transitional housing options for women and children escaping family and domestic violence, young people exiting out-of-home care and older women under financial stress who are at risk of homelessness.
Domestic and family violence is the main reason women and children have to leave their homes.
An increasing proportion of homeless people are aged over 45 and represent nearly one in five of all clients of homelessness services.
Older women under financial stress are increasing in numbers among the homeless population and many more are at risk of homelessness. They are on fixed incomes with little or no superannuation. They can't access affordable housing and are at the mercy of the private rental market. They may have to pay multiple rent increases each year. They can't afford it and have nowhere to go.
Over a third of the 3000 young people who exit out-of-home care each year end up experiencing homelessness within a year of exiting care. Among the total population of homeless youth, nearly two thirds have a history of state care.
A Shorten Labor Government will develop and implement a national plan to reduce homelessness through the Council of Australian Governments.
There is a massive gap in housing policy – and we need national leadership to address it.
Labor’s response to the challenge
The response to the housing and homelessness challenge requires a concerted, cooperative effort across all levels of government and civil society.
As Bill Shorten said yesterday to Salvation Army’s Major Brendan Nottle, after his amazing 700km walk to highlight the plight of people experiencing homelessness:
“My party, Labor, we will have a National Homelessness Strategy. It’s what you want and what we will support.”
I welcome the responsibility to develop that strategy.
Labor’s current policies to address housing affordability include reform of negative gearing and capital gains tax, and support for the creation of a bond aggregator to facilitate investment in social and affordable housing are an important step but we are not stopping there.
I am actively engaging with the community housing sector, and with some of Australia’s largest superannuation funds and banks to discuss an increased role for superannuation funds and financial institutions investing in Community Housing.
It is clear that there is recognition we need significantly more investment in social and affordable housing.
Tomorrow, Bill Shorten and I will meet with Australia’s major faith-based organisations to examine how a Shorten Labor government can engage with faith-based groups to reduce homelessness and increase affordable housing.
Labor is providing the national leadership that is necessary to drive a concerted national plan to address the housing crisis.
The ACT is an example of what can be done by a sub-national government.
The ACT Labor government has done the hard work on policy and made significant investments to address the growing need for affordable and social housing through the development of its comprehensive housing strategy.
The ACT has led the field in actively advocating for national leadership in tackling homelessness and support for social housing.
ACT Labor was the first jurisdiction to support the Federal Labor Housing Strategy announced in April this year, and the ACT has been vocal in support for changes to negative gearing and capital gains tax arrangements to ease the pressure in housing markets and direct investment towards new supply.
However, the states and territories need a partner in the Commonwealth government that understands that decent, affordable housing is the basis of the social and economic participation and a key plank in the fight against rising inequality.
The Liberal alternative
Unfortunately, the alternative being proposed by the current government is woeful. They advocate policies that will be socially destabilising and detrimental to economic growth. This is not the professed tradition of the conservative parties in this country.
When Robert Menzies delivered his centrepiece of Liberal Party mythology, his “Forgotten people” speech, to a radio audience seventy five years ago, he positioned home ownership as the basis of a stable society.
“The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole.”
He certainly didn't think the rich and powerful needed a leg up. He said of them in the “Forgotten people” speech:
“... in most material difficulties, the rich can look after themselves.”
It’s not my intention to eulogize Bob Menzies, but under the Liberal Party of 2017, there is little sign of the Liberal Party of Menzies.
Instead of mythologising the ‘Forgotten People’ speech, today’s Liberal Party, the party of WorkChoices and penalty rate cuts, the party of the 2014/15 Budget, the party of vindictive policies targeting social security recipients, would do well to read it carefully.
It ought to make sobering reading for them.
The Turnbull government continues to defend existing negative gearing arrangements and capital gains tax discounts, the vast bulk of which go to the top 10 percent of the income distribution.
They plan to give a $65 billion tax cut to multinationals and the big banks, while imposing a tax hike on people on modest incomes.
While the challenges of providing affordable secure homes to people are so acute, Labor will not countenance a massive handout to the top end of town.
If the Turnbull government’s tax cuts to the top end of town were to proceed, there will be nothing that any government can do to increase the supply of affordable and social housing. There just won’t be the money available to deal with it.
As Labor has said many times, budgets are about choices. The Coalition has chosen to cut taxes for multinational corporations and high income earners.
Labor will choose to support low and moderate income households into affordable and social housing.
We understand that housing policy requires both national leadership and investment.
Labor's vision for housing policy is to make sound, long-lived policy decisions; to give people back the stake in their communities that they so strongly desire; to stem the tide of growing inequality to which housing inequality is a significant driver and to ensure that a healthy housing system is a key foundation of a healthy society.
Only Labor will bring together state and territory governments, non-government organisations, community housing providers, and institutional investors to drive a concerted effort to tackle housing affordability.
 Productivity Commission. Report on Government Services, 2017. Table 18A.36