ADDRESS TO THE HOUSING AFFORDABILITY SUMMIT 2017

30 Jun 2017

SENATOR THE HON DOUG CAMERON

SHADOW MINISTER FOR SKILLS AND APPRENTICESHIPS

SHADOW MINISTER FOR HOUSING AND HOMELESSNESS

SENATOR FOR NEW SOUTH WALES

 

ADDRESS TO THE HOUSING AFFORDABILITY SUMMIT 2017

SYDNEY

FRIDAY 30 JUNE 2017

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I would like to acknowledge the traditional owners of the land on which we meet today and pay my respects to their elders past and present.

I acknowledge the member for Bennelong, John Alexander who has made a constructive and courageous contribution to the housing debate in Australia.

I would also like to thank Glen and the organisers of the summit for their interest in what is an extremely important social and economic challenge for Australia.

The cost of purchasing a home has become so expensive that it is now out of reach for many Australians.

There is undoubtedly a crisis in housing affordability in many regions of Australia.

Even though the focus of this summit is housing affordability, the issue of homelessness is closely linked.

Homelessness is a particular challenge for many Australians who find themselves on the streets, couch surfing or in overcrowded and unsuitable accommodation.

For a rich country like Australia to have over 100,000 of our fellow Australians without proper and secure accommodation is a national disgrace.

Housing and homelessness is not simply a social issue but it is one of the key economic challenges faced by all levels of government.

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

Thomas Piketty’s book 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 in many advanced economies.

Piketty argues that the wealth of the capitalist class will grow faster than incomes of workers, leading to an endless inegalitarian spiral.

This means that the return to owners of capital will be growing faster than overall income per capita (meaning that investment incomes are rising faster than wages) and, in consequence that wealth inequalities will rise.

 further implication is that inheritance rather than the return from one’s own economic activities begin to dominate the actual distribution of wealth.

As Paul Krugman (2014) 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”

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 forms of capitalism.

From the 1950s to the 1980s in Western Europe and the Anglo-Saxon 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.

The paper notes that since the 1980s a “modern” suite of housing policies has emerged including; replacing dwelling subsidies with income -related assistance, shifting public housing to non-profit ownership, moving towards market rents, promoting home ownership, deregulating mortgage markets and preferring tax expenditure supports to transparent subsidies.

In addition to this, labour market changes have favoured higher income households, and there have been significant changes in patterns of economic growth and housing.

In Australia, we are seeing many of these issues emerge; including stagnating wages growth compounded by the removal of penalty rates.  Housing demands and needs are running ahead of inelastic supplies. 

These pressures have resulted in sustained growth in real house prices and increasing unaffordability.

The authors’ 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.

The paper argues that failure to understand housing systems and implement policies to address them is arguably exacerbating income and wealth inequalities, reducing productivity growth and replacing entrepreneurial returns with a growing reliance on property rentier outcomes, that is, people living on income from property or investments.

From this it’s evident that one of the key challenges for a Housing and Homelessness Minister is to convince Finance and Treasury Ministers that addressing the housing crisis will contribute to growth and productivity.

I must say that Bill Shorten, and our economic team of Chris Bowen, Jim Chalmers and Andrew Leigh understand these challenges facing homebuyers and the homeless.

In stark contrast, the Coalition does not seem to understand the costs of not addressing a dysfunctional housing system on the Australian economy and society.

Intergenerational inequality is an inevitable result of the capitulation by the Turnbull government to rent seeking investors.

Analysis by the Australian Housing and Urban Research Institute has demonstrated that by providing affordable and stable accommodation to disadvantaged Australians, the expenditure by governments on health and mental health will decline.

In my view there will also be significant reduction in public expenditure in other areas such as prisons and correction services.

By using available economic levers to address housing affordability, governments have the capacity to reduce unemployment and create a fairer, more egalitarian and productive society.

I believe the implications for investment, entrepreneurship; wealth creation and equality in Australia will be profoundly negative if we continue to favour investment in housing as distinct from other forms of wealth creation.

This is why Labor has taken a strong stand on the inequality and housing injustice being created by the Coalition’s policy of favouring investors over home owners.

Market distortions such as capital gains tax and negative gearing concessions are unfair and increase inequality.

Housing and homelessness is being treated seriously by the Labor opposition. This is demonstrated by Labor’s appointment of a Shadow Minister to the Housing and Homelessness portfolio.

The Coalition government’s failure to appoint a Minister for Housing and Homelessness is a strong indication of their lack of commitment to dealing with either issue.

Before I describe some of the components of Labor’s housing affordability package I think it is worthwhile addressing what the 2016 census tells us about the housing market:

  • Declining numbers of Australians in home ownership with fewer people owning their home outright.
  • More people renting and higher rents.
  • Around one third of people are in housing stress, including renters, and those paying off their mortgage.
  • Homeownership is down to 65.5% from 67% in the 2011 census.
  • Renters make up 30.9% of the housing market while 25 years ago they were at 26.9%.
  • The proportion of those owning their own home outright has declined from 41.1% in 1991 to 31% in 2016.
  • As outright ownership declines, residents with mortgages now account for 34.5% of the total, up from 27.5% in 1991.

It is an increasing worry that 11.2% of dwellings, or about 1.04 million homes were unoccupied, up from 10.7% in 2011. This could be a result of rising speculation or “land banking” by investors.

The Government is well aware of these issues but seem incapable of developing effective policy responses.

Just this week AHURI published a review which found that ‘…there is almost no effort within high-level policy thinking at the federal level that is dedicated to constructing and articulating a systematic conceptual understanding of the links between housing policy objectives, housing policy instruments and mechanisms, and their effect on the economics of housing systems or economic productivity.’

What a damning indictment of the Turnbull government!

Assistant Treasurer Michael Sukkar promised the Government’s 2017 budget housing policy package would be “extraordinarily large” and “it will be an impressive package, it will be a well-received package”

However the 2017 Budget grab bag of unrelated measures did not address key drivers of housing affordability that are in the Commonwealths control, such as reform of negative gearing and capital gains tax concessions.

The Grattan Institute’s John Daley summed it up perfectly when he said “you will need a scanning electron microscope to see an impact on prices.”

The Government’s 2017 Budget measures continue to demonstrate a complete lack of interest in housing as an important social and economic area of concern to Australians.

In contrast, the last Labor government took the following initiatives towards addressing housing affordability and homelessness:

  • We produced “The Road Home” a White Paper on homelessness and developed national strategies and targets to reducing homelessness
  • We committed to the Housing Help for Seniors Pilot
  • Invested $5.6 billion in the Social Housing Initiative which delivered around 20,000 new homes, funded repairs and maintenance to 80,000 more and sustained 9000 jobs through the Global Financial Crisis
  • Provided $6 billion to the states and territories for affordable housing
  • We negotiated the National Partnership on Homelessness which saw the Australian State and Territory Governments provided over $1 billion for reducing homelessness.
  • We established the National Rental Affordability Scheme which has provided 38,000 new affordable rental housing units. Labor’s NRAS was on track to deliver 50,000 new affordable rental dwellings and the level of demand was such that would have extended by a further 35,000.
  • Established the National Housing Supply Council
  • Appointed a dedicated Minister for Housing and Homelessness

In contrast the Abbott/Turnbull governments have:

  • Refused to address unfair distorting tax breaks for investors
  • Abolished the Housing Help for Seniors Pilot
  • Slashed homelessness funding under the National Partnership Agreement on Homelessness
  • Abolished the 1st Home Saver Account scheme
  • Closed the National Rental Affordability Scheme
  • Refused to act on advice about making the superannuation system and financial system more resilient
  • Defunded homelessness and community housing peak bodies
  • Failed to appoint a Housing Minister
  • Abolished the National Housing Supply Council

Labor’s plan to improve housing affordability, increase financial stability, reduce homelessness and boost jobs includes the following:

  • Reform negative gearing and capital gains tax concessions
  • Limit direct borrowing by self-managed superannuation funds.
  • I note that 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.
  • Facilitate COAG processes to introduce a uniform vacant property tax across all major cities
  • Establish a bond aggregator to increase investment in affordable housing
  • Boost homelessness support for vulnerable Australians by $88 million over 2 years
  • Achieve better results from the National Affordable Housing Agreement including planning reform, inclusionary zoning, and accelerated land release
  • Re-establish the National Housing Supply Council and reinstate a Minister for Housing.

Labor will develop further policy prior to the next election.

One very important issue worth noting today is the fact that housing affordability is compounded by stagnating wages and cuts to penalty rates.

Just last week the Reserve Bank Governor, Phillip Lowe, said the economy was suffering a “crisis” in real wage growth and said it “would be a good thing” if workers were “prepared to ask for larger wage rises.”

Other issues such as the productive performance of the home building sector and the need to improve productivity have been addressed in the Farmer Report in the U.K.

The report highlighted the importance of ensuring the availability of skills, developing modern building techniques and using more manufactured homes in the mix.

These are the issues that will improve housing affordability and productivity in the housing industry.

This is a more sophisticated approach than constantly attacking workers bargaining capacity and their unions.

Providing the growing number of renters with increased rights and security is also an important issue that has to be addressed nationally.

The issue of declining home ownership and generational inequality is a result of young people being locked out of the market.

Addressing the complex problem of making housing more affordable and developing effective federal solutions for change requires a commitment to dealing with the issue, effective consultation and having the vision and policies that assist Australians to buy their first  home.

The Coalition has neither the vision, the solutions or commitment to making housing more affordable for Australians.

Only a Labor Government will work with the States and Local Government in a cooperative manner to tackle the horrendous problem of housing affordability and homelessness.

It’s time that the Turnbull government acknowledged that it is a human right to have a roof over your head.

Understanding that housing is about building a home and not just an investment needs to be at the forefront of peoples thinking.

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 these issues to get everyone a roof over their heads.

Thank you for your patience and attention.

MEDIA CONTACT:   

LUKE WHITINGTON 0422 265 775