Minute with Magnus

LINDER MagnusThings have been hotting up in housing advocacy as well as the weather. After a great turnout (150) at our Parramatta ‘Everybody Needs a Home’ Forum, in partnership with the Sydney Alliance, Vinnies, Uniting, and the CRMC, we followed-up with attendance and a question and plea for action at the next council meeting, only to see the councillors actually pass their affordable housing policy after deferring it twice before.

Power to the people! This has been a great victory.

After a series of local assemblies in various LGAs we are now planning a larger rally at the Sydney Town Hall on Thursday 14 March as a partnership between the Sydney Alliance, Everybody’s Home and Vinnies.

The theme will be Housing + Power – recognising that affordable housing is only so if it is also affordable to live in. By and large, renters have been blocked from participating in affordable and renewable energy, meaning most of them are now paying more for their power than people on considerably higher incomes. Please check out our write-up in this newsletter and register now – we would like to have 1,000 registrations before Christmas so we can show our political decision makers that we are serious.

We welcome the announcement by the Minister for Planning, Anthony Roberts, that SEPP 70, an environmental planning law to which some councils have access to demand more affordable housing, will now be available to all councils without the need to demonstrate evidence that affordable housing is required in their LGA.

However, councils still need to apply and we encourage you all to speak to your local government councillors to find out if and when your council may have a plan to participate in SEPP 70.

May we – myself and the Churches Housing team – wish you, our members, stakeholders and collaborators, a very happy, safe and restful Christmas.

Parramatta forum gets results

03 Link to Crabtree Ppnt Pmta ForumIn early November, 150 people crowded into Parramatta Mission’s hall to meet and hear politicians from all three levels of government talk about their policies and actions on affordable housing.

Also present was Dr Louise Crabtree, senior research fellow, Western Sydney University who delivered a very detailed analysis of the issues and possible solutions. See her presentation here

Less than three weeks later, Parramatta City Council – after years of dithering – approved an affordable rental housing policy which includes applying for SEPP 70 for greater powers to demand inclusion.

While Churches Housing is not saying that the forum directly led to this sudden change of heart, the Council’s vote shows that citizen action and persistence do have good results.Parra Forum

Housing Solutions for Dummies

05 Sol

Download this paper as a pdf

Australia’s three levels of government – Commonwealth, State, Council – are all responsible for various parts of the country’s housing affordability crisis, but no one level is responsible for solving it. Each level can pass the buck and the blame, and opt for politically safe choices that result in houses being built on urban fringes where very few residents will object, but where jobs and infrastructure are scarce.

Magnus Linder and Philippa Yelland present some solutions in this paper, Housing Solutions for Dummies, the second in a two-part series.

NIMBYs (Not In My Back Yard) are frequently blamed for successfully opposing infill development in inner- and medium-ring suburbs. Ironically, appealing to a different facet of self-interest could be a way through this impasse. Insufficient medium-density housing (three to five storeys) in inner- and middle-suburbs is now beginning to prevent the very NIMBYs who opposed such buildings from moving to smaller dwellings in their own suburbs, a practice labelled as ‘ageing in place’.

The second part of this changed conversation can be an appeal to NIMBYs’ concerns for their children, grand-children and other relatives or friends. The housing affordability crisis no longer is elsewhere, affecting other, unknown people. It is here now, in middle-class homes, affecting now-adult children.

Affordable housing is a difficult political issue but it is not unsolvable. It is a mess created by two decades of both major political parties’ decisions that favour the existing 65.5% of owners – who are voters – at the expense of the 30.9% who rent privately – and who are also voters.[1]  However, this ratio is changing to more renters, particularly among younger renter-voters.

Another disincentive to change is the Federal Government’s annual deficit ($33 billion a year in 2016-17) – with an election looming. In contrast, most State governments are in surplus –and they also want to be re-elected.

Given that the complex ‘spaghetti bowl’ is split between the three levels, the solutions presented are divided between Federal (broadly responsible to demand-side contributions to the housing crisis), State (broadly on the supply-side) and Councils (planning).

FEDERAL

  1. Wind-back negative gearing gradually and lessen Capital Gains Tax (CGT) discount

At present, negatively geared investors can deduct losses on their property investments from their income from work.

Capital Gains Tax treats net capital gains as taxable income in the tax year in which an asset is sold or disposed of. If an asset is held for at least one year, then any gain is first discounted by 50% for individual taxpayers, or by 33.3% for superannuation funds.[2]

Over 10 years, if negative gearing was phased out and the CGT discount cut from 50% to 25% gradually, then property prices could drop 2%.[3]

That price drop could be more for cheaper properties because tax breaks have funneled investors into low-cost homes that are minimally taxed by state land taxes and tax-free thresholds.

University of Tasmania modelling shows that these changes would have little impact on the mom’n’pop investors. Over 10 years, the initial $20,000 cap on housing-related tax deductions would be lowered by $1,500 a year until the dropped to $5,000.

In the first year (with $20,000 cap), 6.3% only of all property invetors (1.1% of all taxpayers) would be affected. By year 10, 28.5% only of high-income property investors would pay more tax, while most mom’n’pops would pay no more tax.[4]

In addition to lowering house prices, these two reforms would improve the Federal Budget by about $5 billion a year.[5]

Contrary to scaremongers, rent levels would not change much and housing markets would not collapse. The change would be in lower land prices because the supply of suitable urban land is constrained.

  1. Age Pension assets test to include family home

At present, for the Age Pension assets test, the first $203,000 only of home equity is counted and the rest is ignored. If this was inverted gradually to assess all of a home’s value above a threshold of, say, $500,000, then this would be fairer and add from $1 billion to $2 billion a year to the Federal Budget.

For low-income retirees who have high-value houses, the effect could be reduced if they kept receiving the pension and then repaid the over-payment when their house is sold. Thus, the reform would have very little effect on retirees, but would lower inheritances.

These reforms would be introduced gradually so that retirees had time to respond.

Another reform could include more of the family home in the means tests for residential aged care. At present, the means test for support-only in such care includes the first $162,815 of the home and only if no other protected residents (spouse or dependent children) live there.

  1. Restrict bank lending to reduce macro-economic risks

Australia’s financial regulators, APRA and ASIC, can limit banks’ lending to limit macro-economic risks caused by higher household debt. In late March 2017, APRA (Australian Prudential and Regulatory Authority) limited banks so that new interest-only housing loans could not be more than 30% of total housing loans. In late 2014, APRA had stopped banks from increasing their total lending to property investors by more than 10% each year. Ongoing restrictions on credit now appear to have successfully cooled the housing market.

  1. Enforce existing rules on foreign investment

Four existing policies should be enforced more explicitly.

First, the Foreign Investment Review Board (FIRB) prohibits third parties (such as real estate agents, lawyers and accountants) from knowingly helping people to breach foreign investment rules and yet existing properties have been sold to overseas investors. So, non-financial businesses and professions must be compelled to ensure that buyers are residents or have FIRB approval.

Second, foreign investors should be encouraged to rent out their investment properties, despite enforcement being difficult. The Victoria Government’s vacant-property tax will be self-reporting in 2018, the first year of operation. This is putting the fox in charge of the hen-house, a triumph of hope over experience.

Third, the Commonwealth Government can:

  • raise FIRB application fees
  • disallow claiming CGT exemption for main residence
  • tighten CGT withholding

Fourth, anti-money-laundering laws can be tightened to stop Australian properties being bought to launder black money from overseas. Real estate agents, lawyers and accountants must be subject to money-laundering controls.

  1. Reduce immigration until housing infrastructure catches up with existing population

 Immigration adds to demand for housing – Australia’s population would have grown 0.7% a year over the past 10 years without immigration. The actual growth has been 1.7% a year.

This growth also adds to infrastructure costs: schools, hospitals, roads, transport.

  1. Fund and build infrastructure in Sydney and Melbourne, encourage regionalisation

Infrastructure-building has been used in marginal seats to win votes rather than being built in the cities to which immigrants flock.[6] It follows that infrastructure must be built where people are actually living rather than where rhetoric says they should live.

Both State and Federal Governments are now talking about incentives to encourage immigrants to move to regional centres – the success or otherwise of this rhetoric remains to be seen.

 

  1. Develop coherent national housing policy

The National Housing Supply Council was formed in May 2008 by the Rudd Government (Labor) but abolished in by the Abbott Government (Liberal) in late 2013. A new agency must be formed as an independent statutory body with its own staff.

In the area of social housing alone, to move people in the bottom-income quintile out of housing stress in Sydney, more than 7,000 social housing dwellings need to be built each year for the next two decades.

According to Dr Laurence Troy, ‘Around a third of this is just to maintain the (existing) share, which we are not currently doing.’

Dr Troy, who is Research Fellow/Lecturer, City Futures Research Centre at the University of New South Wales, says ‘the bottom quintile households we identify would (almost) all be eligible for social housing under the current system.

‘If we put this next to current housing targets of 30,000 per year, around 20% of all housing growth would need to be social housing.

Speaking about AHURI’s report on social housing as infrastructure[7], Dr Troy’s team have quantified social housing needs across Australia according to ABS’s SA4 (Statistical Area Level).

The figures suggested are based on existing residents, so AHURI’s estimates are not premised on ‘some grand social redistribution across Sydney’, says Dr Troy.

The report costs-out delivery of such a program, based on a not-for-profit model, but with different subsidy arrangements. ‘The cheapest way to fund this, from a government point of view, is to provide capital grant funding,’ Dr Troy says.

STATE

While Australia has a lot of land, it does not have an abundance of well-serviced land near major city-centres. In 1990, land comprised 50% of the cost of residential dwellings – in 2016, this amount was 70%.[8]

  1. Reform infrastructure and charges

State governments and local Councils must work together to:

  • speed new housing
  • align population forecasts with housing
  • tighten timeframes for re-zonings
  • reform infrastructure charges
  • use State land bodies to develop affordable rental housing
  • mix lot sizes and housing types

Transport infrastructure that is close to affordable housing is crucial if lower-income residents are to be able to live close to employment. In Sydney, 2% only of suburbs and 38% of home meet NSW Government’s target for access.[9] Transport for NSW aims for all the city’s residences to be within 400m of a busy stop that is serviced every 30 minutes or within 800m of a train station serviced every 15 minutes.

  1. Improve rental conditions

Australia’s weak tenancy laws favour landlords by allowing no-cause evictions. Tenants say that the insecurity of renting is one of its biggest drawbacks, with this problem worsening as more people rent because they cannot afford to buy. States’ tenancy laws (and land tax rules) must change to offer tenants more security.

Other factors that contribute to tenants’ insecurity are:

  • State land taxes favouring small mom’n’pop investors
  • negative-gearing benefits encouraging landlords to turnover properties frequently
  • tenancy leases allowing landlords very broad rights to end leases
  1. Reform property taxes

Stamp duties on property transfers are inefficient because they discourage people from moving to dwellings that better suit they needs and can also discourage people from moving to better jobs. Such duties also put the tax burden on prospective home buyers rather than existing owners, thus entrenching intergenerational inequity.

So, two reforms should take place, First, general property taxes should replace stamp duties. Second, land tax should apply regardless of the owner’s total property holdings.

States could fund this in either of two ways through property levies paid through Councils’ rates bases. First, an annual flat tax of between 0.5 and 0.7% could be charged on unimproved land values or, second, a levy of between 0.3 to 0.5% could be charged on capital-improved property values.

Land taxes could be assessed on the value of each property owned rather than the combined value.

  1. Flatten rates of land tax

State land taxes have tax-free thresholds and progressively higher taxes based on aggregate landholdings in any one state. So, an institutional holder (with various properties in one State) could pay land tax of 2% in contrast to a mom-n-pop investor with one property only in that State who may pay no land tax.

This must change so that large-scale institutional (industry superannuation funds) can develop build-to-rent dwellings.

  1. Owner-occupied housing to be included in land taxes

In all states, the main place of residence is exempt from land tax – this makes home-ownership more attractive and inflates prices.

As explained in the first article in this two-part series, land tax – in NSW – is paid on the total value of taxable land above the threshold of $629,000. The tax is $100.00 plus 1.6% of land value between $629,000 and the premium rate threshold of $3,846,000. Thereafter, the rate is 2%.[10]

An alternative way to do this would be to impose a $2 levy for every $1,000 of unimproved land value used for owner-occupied housing.

Either approach would lower land values from 3% to 6% and housing prices by about 3%.

  1. Adopt inclusionary zoning policies

In NSW at present, Councils must show the NSW State Government why affordable housing is needed in their LGA (Local Government Area). This is SEPP 70 (State Environmental Planning Policy No. 70 Affordable Housing [Revised Schemes]). This process costs time and money and is a disincentive to Councils.

Instead, State governments should mandate affordable housing for every LGA. This would compel new developments to include at least 15% of social housing or pay an equivalent levy for such housing to be built. Clear rules with little ‘wiggle room’ will give developers certainty and add to the supply of affordable rental housing.

  1. Work with Councils on community consultation

Talking with residents can yield surprising results and lessen opposition to medium-density housing. The experience of the Brisbane City Council is instructive (see Council section that follows). Rather than removing planning controls from Councils, State Governments can allow more ownership and consultation.

  1. Enforce existing rules on foreign investment

State Governments could:

  • increase or introduce stamp duty
  • introduce land tax surcharges
  1. Increase supply

Despite massive increases in supply over the past few years, demand did not dissipate and prices still escalated. What we need is supply of social and affordable rental housing, not a greater supply of expensive housing.

COUNCILS

  1. Community consultation

In 2014, the Brisbane City Council published its City Plan 2014.[11]

This was the result of almost 10 years’ work. In 2005-06, more than 60,000 Brisbane-ites commented on the CityShape plan for the next 20 years. The process then moved into five years of community consultation. While the process and final plan have critics, the overall outcome has been much less resistance to inner- and medium-density infill housing.

 

CONCLUSIONS

To re-phrase Tina Turner in Mad Max Beyond Thunderdome, we don’t need another report.[12] What we need is action from all three levels of government.

Tax and welfare reforms are urgent, as are decisions about immigration levels.

Community consultation can go a long way towards enlightening self-interest – people can oppose more density in their suburb but they will not then be able to age in place, nor will their children be able to buy in the same area.

While the mess, the concatenation, the spaghetti took 20 years to occur, we do not have another 20 years in which to talk endlessly about possibly solutions that some other level of government should do.

We must act now to make housing more affordable, to increase the supply of housing for low-income Australians to rent or buy and to end homelessness.

The blockage to affordable housing is not lack of money, it is lack of political will and bravery.

 


[1] 2016 Census QuickStats http://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/036
[2] https://www.google.com.au/search?q=capital+gains+tax+discount&rlz=1C1LOQA_enAU689AU689&oq=capital+gains+tax+discount&aqs=chrome.0.0l6.5509j0j8&sourceid=chrome&ie=UTF-8
[3] Hot property: negative gearing and capital gains tax reform, J Daley, D Wood, H Parsonage, Grattan Institute 2016-8 https://grattan.edu.au/report/hot-property/
[4] Richard Eccleston, Julia Verdouw, Kathleen Flanagan, Gradual reform to capital gains, negative gearing and stamp duty will make housing more affordable https://www.architectureanddesign.com.au/features/comment/gradual-reform-to-capital-gains-negative-gearing-a
[5] 2016 post-election report Parliamentary Budget Office, https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Budget_Office/General_elections/2016_post-election_report
[6] M Terrill, O Emslie and B Coates, Roads to riches: better transport investment, Report No. 2016-5, Grattan Institute https://grattan.edu.au/report/roads-to-riches
[7] https://www.ahuri.edu.au/research/final-reports/306?utm_source=website&utm_medium=homepage&utm_campaign=slider1
[8] Australian System of National Accounts, 2016-17, Australian Bureau of Statistics, http://www.abs.gov.au/ausstats/abs@.nsf/mf/5204.0 Consumer Price Index, Australia, Dec 2017. Cat. 6401.0 Australian Bureau of Statistics http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0
[9] https://www.rmit.edu.au/news/all-news/2018/jul/sydney-liveability-scorecard
[10] NSW Government, Revenue Land tax https://www.revenue.nsw.gov.au/taxes/land
[11] https://www.brisbane.qld.gov.au/planning-building/planning-guidelines-tools/brisbane-city-plan-2014
[12] We Don’t Need Another Hero, Terry Britten & Graham Lyle, 1985
https://lyrics.az/terry-britten/-/we-dont-need-another-hero.html
http://www.warnerchappell.com/search

Housing (Un)affordability for Dummies

05 UN

Download this paper as a pdf

Housing affordability in Australia has worsened since 2008, particularly in Sydney and Melbourne where prices have increased fivefold – Sydney is now the second-least affordable city in the world, behind Hong Kong, with Melbourne not far behind.[1]
A series of connected forces is causing this crisis in affordability. The housing market is like a huge bowl of spaghetti … a tangled, complicated mess.
Magnus Linder and Philippa Yelland examine the causes in this first paper and possible solutions in a second paper, Housing Solutions for Dummies.

SOME of the forces – or to put it another way, the spaghetti strands – are having a more significant impact than others and some are potentially easier to fix than others.

While house prices have doubled, wages have increased 13.5% only. This has put more than 1 million Australians[2] into ‘housing stress’ (households in the bottom 40% of income in Australia paying more than 30% of net income for housing).

This applies either to renters in an escalating market or as overcommitted mortgage holders who have bought-in hoping to get ahead while interest rates are low.

Home ownership peaked in 1966 at 72% – it is now down to 65.5% with private renters comprising 30.9%. The remaining 3.7% are other tenure types or not stated in August 2016.[3]

Worryingly, home ownership/buying among younger Australians (25 to 34 years) has dropped from 60% to 45% in the 35 years from 1981 to 2016.[4]

A. HISTORICAL

Assumption that people own their own home when retired

Australia’s home ownership rate rose after World War II, peaking in 1966 at almost 72%.[5] Contrary to the popular myth, this was not due to the Menzies Liberal Government 1949-66 – rather it was the failure of rent controls introduced during the war. As rents stagnated, landlords left the market and this gap was only partly filled by public housing. So, younger households unable to rent were effectively forced to build their own homes, fortunately at a time when land was relatively inexpensive and building regulations were less onerous.

Weak tenants’ protection against no-cause evictions

This historically high rate of home ownership has meant that most rental homes are owned by individual investors. Consequently, tenure is short-term and tenants can be evicted without cause.

Inadequate old-age pension

The assumption that older people will own their own property underlies the relatively low amount of the old-age pension: the Australian government spends 4% of GDP on the old-age pension, compared with the OECD average of 9%.[6] Not surprisingly, the old age income poverty rate in Australia is high at 26% compared to 13% across the OECD in 2015.

Superannuation

Our compulsory superannuation system is also predicated on home ownership. Without home ownership, superannuation is manifestly inadequate to maintain post-retirement living, particularly if you live in Sydney or Melbourne.

B. POLITICAL

Failure to see social/affordable housing as infrastructure

In Adam Smith’s The Wealth of Nations, the invisible hand was the unseen market force that helped demand and supply reach equilibrium. But, this hand is increasingly arthritic and constrained in a market which sees housing as a private matter and therefore off-limits for government.

The rise of neo-liberalism in the 1980s in the UK, US and Australia under Margaret Thatcher, Ronald Reagan and Malcolm Fraser respectively began more than three decades of under-investment and decline in public housing. To quote former NSW premier Nick Greiner, both sides of Parliament have been ‘absolutely crap’ at public housing.

Red-tape by the kilometre

Red tape hampers co-operation between local Councils, State and Federal Governments. For example, in 2009, the NSW Government launched what has come to be known as SEPP 70 [State Environmental Planning Policy No. 70 Affordable Housing (Revised Schemes)]. This was to allow specified councils to prepare an affordable housing contribution scheme for certain precincts, areas or developments within their local government area.[7]

Six Councils in Sydney now have SEPP 70 schemes: City of Sydney, Randwick, Inner West, Northern Beaches, Ryde and Canada Bay. However, the onus is on each council to demonstrate to the NSW State Government the need for affordable housing within their LGA (Local Government Area).

This process is a significant cost to councils, with no certainty as to whether the expenditure will be worth the investment. But, the Greater Sydney Commission and other bodies have already demonstrated the need for more affordable housing in all LGAs across Sydney.[8]

C. GLOBALISATION

Australian housing market is now global

During the global financial crisis 2007-09, Australia managed to continue growing but the downside is that we integrated our markets with the global economy and are now exposed to international demand, supply, liquidity and credit availability issues. Housing in Australia has been a haven and a safe bet over the last decade, so is attracting investment from around the world.

Credit Suisse analyst Hasan Tevfik says overseas buyers perceive Australian property as cheap when compared with their own country and also providing better returns. For example, Sydney landlords look for a 3% return, compared with Shanghai where yields average about 1.5%.[9]

High net immigration

In 2017, more than 162,000 permanent immigrants arrived in addition to 447,772 overseas students.[10] In Sydney, immigration increased the population by 84,684 people (83% of the total increase of 101,558). For Melbourne, the growth from immigration was 79,974 people (64% of 125,424).[11]

That in itself is not the problem; the problem is that both cities are already experiencing housing affordability and supply issues, so this compounds the problem, especially in Sydney where the geography is now preventing further greenfields growth and increasing densification is unsettling existing residents.

High net immigration may not be a problem if people are more evenly distributed around the country or other cities. However, with 80% of new jobs in Sydney created in the CBD, there is a reason why people need to stay close to the centre.

Casualisation of workforce

In the past five years since 2013, the number of full-time casual employees has increased from 10.6% (of full-time employees) to 12.1%. This is about 106,000 extra people working casually.

In the past 10 years since 2008, casual employment for under 25s has risen from 47% to nearly 54%.

This lack of wage security and ability to bargain for a wage rise, combined with an inability to afford holidays is having a major social impact. [12] This tends to result in an inability to secure a mortgage as well as rental applicants appearing to be less-appealing tenants, due to insecure income.

D. FINANCIAL

Tax policies (negative gearing, capital gains tax)

in January 1985, the Hawke/Keating (Labor) government legislated for negative gearing and capital gains tax, in theory to ease pressure on government to supply public housing and to stimulate the economy. In September of that year, capital gains tax was introduced –a separate tax but often related to negative gearing.

Negative gearing drives housing prices because it provides incentives for investors and tax relief for landlords. Economist Saul Eslake doubts politicians’ willingness to change negative gearing because they will lose votes. About 100,000 people become home buyers each year, while more than two million people own at least one investment property. Eslake points out that such owners do not want lower housing prices for non-property owners.[13]

Low interest rates

More than anything else, the availability of cheap credit has whetted the appetites of investors who, until recently, reaped massive returns on investment.

The perverse effect has been rising prices due to insatiable demand, so in the end people are paying more for the same thing because they can afford to. Unfortunately, low rates do not assist lower-income home buyers when the median price has already risen to $1 million.

This gold rush in housing has also seen an extraordinary number of people enter the market as landlords, many of whom have no experience and sometimes no interest in being a landlord. Others, because they are already overextended in their financial commitments, may refuse to provide even basic repairs.

First Home Owners’ grants & similar schemes

These schemes are politically popular but of little value as they fuel extra demand in markets that have limited supply, thereby forcing prices up accordingly. It is an easy way for a government to boast about their achievements in tackling affordability while the real result is a price increase straight into the pocket of the owner or developer.

Land tax

Land tax was initially designed to encourage large landowners to subdivide and therefore generate smaller lots for families to buy. With prices now beyond affordable for many families, land tax is now working against them. The current structure of land tax is also working against large institutional investment (think super funds). A progressively rising land tax on larger holdings makes super funds and other larger investors uncompetitive in comparison with small mum’n’pop investors. Similarly, companies considering build-to-rent schemes – where blocks of units are not sold nor strataed – are also facing large land tax bills.

Land tax, in NSW, is paid on the total value of taxable land above the threshold of $629,000. The tax is $100.00 plus 1.6% of land value between $629,000 and the premium rate threshold of $3,846,000. Thereafter, the rate is 2%.[14]

Home Building Compensation Scheme

The Home Building Compensation Fund (HCBF), previously known as Home Warranty Insurance, provides a safety net for home owners in NSW faced with incomplete and defective building work done by a builder or tradesperson.

Licenced contractors who take on residential work valued at $20,000 or more need insurance cover through HCBF. They must obtain this cover before starting any work or taking any money under the contract, including the deposit. It is a good scheme to protect owners in case of disreputable builders.

However, there is an issue when this is also levied on affordable housing. Affordable housing is often developed by a registered community housing provider (CHP) and sometimes by private companies. These are build-to-rent and not for sale, often to higher quality standards to reduce long-term maintenance and to make them energy efficient and affordable to live in for prospective renters.

Ultimately, we have a situation where the builder or CHP can be insuring itself in case they go bankrupt. This is ludicrous apart from added expense, red-tape and a slowing of the whole building process.

Growth of SMSFs with investment house/s as the sole asset/s

Since 2007, Self-Managed Superannuation Funds (SMSFs) have been allowed to borrow up to 70% of a house’s price, thus putting housing as an investment within the reach of most SMSFs. This brought a new class of investors into a market already fuelled by excessive demand. However, by the end of 2018, the four major banks had stopped writing new mortgages for SMSFs.

E. SOCIAL

Short-term letting platforms

Online accommodation platforms, such as Airbnb, are enabling tourists and short-term visitors to displace permanent dwellings in high-demand cities and worsening housing affordability for low-income groups.

Studies by two urban and regional planning professors at the University of Sydney, Nicole Gurran and Peter Phibbs, show that Airbnb rentals concentrate in popular tourists areas such as the City of Sydney and Waverley in the city’s east near Bondi Beach.

Gurran and Phibbs have found that Airbnb rentals in Waverley are more than three times the usual vacancy rate in that Local Government Area – Airbnb rooms/beds as a proportion of total housing stock are 4% in Waverley, compared with the overall Greater Sydney rate of 0.9%.[15]

NIMBYs prevent medium-density housing

High-income, high-education, high-resource neighbourhoods have become associated with the Not In My Back Yard (NIMBY) syndrome.

NIMBYs are frequently found in inner- and middle-ring suburbs that are ideal for medium-density affordable housing such as six townhouses on an 800 sq m block. However, NIMBYs also tend to be very effective and very vocal at opposing such developments in the very suburbs best-equipped and situated for affordable housing.

In launching the Grattan Institute’s report[16] in March 2018, co-author John Daley said these ‘relatively small mum-and-pop developers’ can be ‘vociferous’ in their opposition to medium-density housing.[17]

F. SELF-INTEREST

Rising number of empty units: units/homes as piggy banks

On census night 2016, 11.2% of properties in Australia were recorded as unoccupied, some for good reason but many others because nobody actually lived there. It is estimated that about 10,000 apartments in the Sydney CBD are empty with many more in other parts of greater Sydney. Greater Melbourne’s vacancy of 4.8% of 1.7 million homes means that the city has 82,724 homes vacant[18].

A large part of this phenomena is due to the financialisation of the housing market, where housing becomes an investment class rather than providing shelter. Over the last decade, investors may have been able to realise a 10-15% return on investment without even having a tenant.

Many units will also attract a premium on sale if sold empty and unused. Banking regulations require mandatory reporting for deposits over $10,000, however this is not extended to the property sector.

So there may also be other more sinister motivations in buying property and simply using it as a safe and secure bank vault. All this leads to a lack of supply of actual housing, especially if possibly 10% of our housing is taken up by nobody.

Size does matter

While the average floor size of the country’s dwelling has decreased, Australians are still building the world’s second largest homes overall (189.8 sq ms), behind the US (204.3 sq ms). The fall in size (down 2.7% on the previous year) is due to more apartments being built.[19]

The CommSec report’s authors, economists Craig James and Ryan Felsman, emphasise that overall ‘not only are houses far bigger than those built in the 1980s and before, but the standard of fit-out today is far superior with quality kitchens, bathrooms, floor coverings and inclusions like air-conditioners’.

Gentrification

Urban sociologist Ruth Glass coined the word gentrification in 1964 to describe the transformation of blighted, poor neighbourhoods into suburbs for upwardly mobile, cappuccino-sipping professionals. As the neighbourhood becomes more desirable, rents increase and the poor are forced out. Landowners profit from the unearned income of neighbourhood improvement.

Too many reports, not enough action

Australia’s housing crisis is the subject of an increasingly long congo-line of reports, inquiries, recommendations from Federal and State Governments. Inquiries include:

  • 2004 Productivity Commission – first home ownership
  • 2008 Senate Select Committee – housing affordability
  • 2014 Senate Economics References Committee – affordable housing
  • 2015 Standing Committee on Economics – home ownership

Community housing providers spend time and money on preparing submissions to government inquiries. Think-tanks and academics study and publish extensively on the problem. Agencies such as Anglicare report yearly on rental (in)affordability. The Australian Housing and Urban Research Institute (AHURI) delivers research to government and housing industries. Conferences on homelessness and housing abound and proliferate.

The time has come, indeed it is past, to act on the now very-well-documented need for affordable housing. We do not need another report. We need action and we need it urgently.


[1] Mark McGrindle https://www.huffingtonpost.com.au/mark-mccrindle/in-20-years-the-average-house-price-in-sydney-and-melbourne-coul_a_21874791/
[2] ‘Australia’s broken housing system: homelessness and poverty amid affluence’, Dr Ben Spies-Butcher, Thinking about poverty (ed. Klaus Serr)
[3] 2016 Census QuickStats http://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/036
[4] Gavin Wood and Rachel Ong, Sustaining home ownership in the 21st century: emerging policy concerns, https://www.ahuri.edu.au/__data/assets/pdf_file/0007/2104/AHURI_Final_Report_No187_Sustaining_home_ownership_in_the_21st_century_emerging_policy_concerns.pdf
[5] Australia Home Ownership Rate 1966-2018 https://tradingeconomics.com/australia/home-ownership-rate
[6] http://www.oecd.org/australia/PAG2017-AUS.pdf
[7] https://www.planning.nsw.gov.au/policy-and-legislation/housing/affordable-rental-housing
[8] https://www.greater.sydney/central-city-district-plan/liveability/housing-city/providing-housing-supply-choice-and
[9] http://www.abc.net.au/news/2017-03-24/why-chinese-investors-keep-buying-australian-property/8385174
[10] https://internationaleducation.gov.au/research/International-Student-Data/Documents/INTERNATIONAL%20STUDENT%20DATA/2017/2017Nov_0712.pdf
[11] https://www.businessinsider.com.au/australia-immigration-population-growth-sydney-melbourne-2018-4
[12] https://www.theguardian.com/business/grogonomics/2018/jan/16/we-should-be-concerned-about-the-casualisation-of-full-time-work
[13] https://www.news.com.au/finance/real-estate/simple-reason-negative-gearing-will-never-be-scrapped/news-story/0718b841cd273ce6c8bca1306fd360d2
[14] NSW Government, Revenue Land tax https://www.revenue.nsw.gov.au/taxes/land
[15] ‘When tourists move in: how should urban planners respond to Airbnb?’, Nicole Gurran & Peter Phibbs, Journal of the American Planning Association, Winter 2017, Vol 83 No 1 https://www.tandfonline.com/doi/full/10.1080/01944363.2016.1249011#_i9
[16] Housing Affordability: re-imagining the Australian Dream, John Daley and Brendan Coates, Grattan Institute, March 2018>
https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf
[17] https://www.afr.com/real-estate/housing-supply-nimbys-preventing-needed-mediumdensity-housing-grattan-says-20180302-h0wxnn
[18] Cashmore, Catherine, ‘Speculative Vacancies 8 – The Empty Properties Ignored by Statistics’ Prosper Australia, Dec 2015, https://www.prosper.org.au/wp-content/uploads/2015/12/11Final_Speculative-Vacancies-2015-1.pdf
[19] CommSec Home Size Trends Report November 17 2017 https://www.commsec.com.au/content/dam/EN/ResearchNews/ECOReport.20.11.17_Biggest%20homes_size-fall.pdf

Bidwell Uniting sets table for action

Bidwell Uniting sets tableBidwill Uniting Church cares a lot about its neighbourhood, where housing prices have pushed rents to unreasonably high levels and placed a lot of stress on local families.

In preparation for running their own table talk (see below) on housing affordability, the Churches Housing CEO and Sydney Alliance Housing Team Co-Chair Magnus Linder attended the church and spent some time sharing resources, ideas and running a mini-table talk for the leaders.

Many people in our communities are feeling the pressure that housing stress brings and table talks not only only allow churches to connect in meaningful ways with people, but also allow for some communal action in the form of advocacy to be taken.

Why not think about this for your church whether housing, refugees or affordable power?

  1. Relate

Either in pairs or groups, participants build relationships by sharing a value they hold.

  1. Listen

Participants hear from families as they share their personal stories.

  1. Process

To unpack 1 and 2, participants discuss their reactions in small groups.

  1. Respond

An expert gives facts about the current situation and responds to questions.

  1. Act

Participants are presented with options to take action.

Bedsits and partnerships

The Cecil is an old guesthouse in Katoomba, NSW, with a chequered history.  Built in 1920, it recently lay derelict until Anglicare bought it in 2015 and renovated the sprawling building into a 26-room bedsit for the over-60s at risk of homelessness.

Not only does this wonderful building provide a home for the disadvantaged, but also the partnership with the local Anglican Church, St Hilda’s, means the residents have an immediate affiliation with a believing community.

Resident Bob was one night away from sleeping on the streets when accommodation became available at the Cecil. He now marvels at the provision from the God he is not too sure about. ‘This must have been a God thing.  How else could it have happened?  I love it here.’

Alice had nowhere to live and was unsure of her future. She is delighted with the arrangement. ‘I can go to the lounge area when I want company or go into my unit and shut the door when I don’t.’    Many residents have wandered up to St Hilda’s for services, their monthly market morning and even some Christianity Explored courses.

St Hilda’s minister, Rev Ray Robinson, is excited about the opportunities to share the gospel with this community.  Welcome packs have been made and plans are underway to celebrate Christmas together with some small gifts for each resident as a token of love from the church.

In partnership with Anglicare, St Hilda’s will continue to build connections and share the love of Jesus with this small vulnerable community on their doorstep.

Here are some before and after shots…

Before
Cecil-old2
Cecil-old1
After
Cecil-new2
Cecil-new1

Housing is prominent in City of Sydney’s resident survey

CityFarm-145

Picture: community garden, City of Sydney

Questions about housing, finances and food insecurity form an important part of the City of Sydney’s resident survey.

Run every four years by the City of Sydney, the community wellbeing survey goes to more than 100,000 households in the council’s LGA.

One question, for example, asks respondents if housing costs have forced them to unwillingly sacrifice spending on: food and groceries, heating, medical treatment, other household items, sports and recreation, arts and cultural activities, eating out, or education.

Housing issues also top the list of response options in another question that asks if households are thinking of moving out of the City of Sydney in the next one to five years for reasons of: home rental prices, home buying prices, or family (housing of schooling).

If you live in the City of Sydney LGA, then you are welcome to do the survey online at cityofsydney.nsw.gov.au/wellbeing

The deadline is Thursday 20 December 2018. The online survey is in English, Chinese, Thai, Indonesian and Korea

 

More than 7,000 social housing dwellings needed annually for next 20 years in Sydney

To move people in the bottom-income quintile out of housing stress in Sydney, more than 7,000 social housing dwellings need to be built each year for the next two decades.

According to Dr Laurence Troy, ‘Around a third of this is just to maintain the (existing) share, which we are not currently doing.’

Dr Troy, who is Research Fellow/Lecturer, City Futures Research Centre at the University of New South Wales, says ‘the bottom quintile households we identify would (almost) all be eligible for social housing under the current system.

‘If we put this next to current housing targets of 30,000 per year, around 20% of all housing growth would need to be social housing.

Speaking about AHURI’s just-completed report on social housing as infrastructure, Dr Troy’s team have quantified social housing needs across Australia according to ABS’s SA4 (Statistical Area Level).

The figures suggested are based on existing residents, so AHURI’s estimates are not premised on ‘some grand social redistribution across Sydney’, says Dr Troy.

The report costs-out delivery of such a program, based on a not-for-profit model, but with different subsidy arrangements. ‘The cheapest way to fund this, from a government point of view, is to provide capital grant funding,’ Dr Troy says.

For the short version of AHURI’s report, go to:

AHURI Short Report

For the full version, go to:

AHURI Full Report

Young people need 10 fundamental changes, says YouthAction

Young people in NSW need fundamental changes – including reliable housing – to improve their lives, according to YouthAction’s just- published report.

A NSW for Young People: Beyond 2019 calls for ‘a safe and affordable place to call home’ in its 10-point plan.

The report focusses on young people who are excluded and experience disadvantage.

It is based on consultation and research with thousands of young people, and hundreds of youth support services in recent years.

Read the Report