Philip Lowe wants everyone to get a housemate to fix the housing crisis.
It’s the sort of highly clickable headline that turns Australia’s housing woes into great content, giving angry renters someone to blame for their predicament: an out-of-touch Reserve Bank governor.
In context, what Lowe said wasn’t so silly. He merely noted while giving evidence at Senate estimates that since the pandemic “the average number of people living in each dwelling declined and that increased total demand for dwellings”.
More people wanting to move out of home and live alone “doesn’t work” without more supply, he said, causing higher house prices and rents.
“As rents go up people decide not to move out of home, or you don’t have that home office, you … get a flatmate.”
Far from telling people who are three or four in a three-bedroom sharehouse that they should look to cram a fifth housemate under the stairs or in the living room, Lowe was simply observing that a particular circumstance, such as a single person moving out to a two-bedroom dwelling, isn’t helping the supply crisis.
Higher rents forcing different choices is “the price mechanism at work”. So although his comments about needing to “economise” had a tut-tut normative quality, more realistically it was just an empirical observation that prices will cause more people on average to live in each dwelling.
The resulting two minutes of hate was predictable. However technically correct Lowe’s explanation was, to too many it sounded like a tone deaf lecture.
Lowe is not popular, particularly with people who took to heart his mid-pandemic guidance that interest rate rises were not likely until 2024 – and took out big mortgages.
With 11 interest rate rises in a row and likely a few more coming, it’s very easy for new homeowners to grumble about that misfired forward guidance every time they see their repayments increase.
Looking back, rates were too low for too long and maybe earlier action could have been less severe.
Young people feel they are damned if they continue to rent, stuck paying off someone else’s mortgage, and damned if they buy because they become the foot soldiers in the war on inflation, hit by every rate rise and held hostage by whether others continue to spend and drive rates higher still.
Spending figures bear this out: a recent Commbank iQ report found a sharp divide in spending patterns according to age group, with older Australians increasing their expenditure while younger people are cutting back.
Lowe gave the government ticks for its budget, noting it was “broadly neutral” and “actually reducing inflation” through the electricity price relief.
But for the budget to do more, to actually be contractionary and ease the need for interest rate rises, the government would have to raise taxes or cut spending, which is politically difficult.
The Liberal senators Andrew Bragg and Dean Smith have wished Lowe well and expressed hope he’d be back in October – that is, have his term renewed after seven years. I’m not sure it’s a sentiment many renters or new homeowners would share.
At its core, Lowe’s diagnosis of skyrocketing rents was simple: “It’s a supply problem.”
That’s why it’s so disappointing to see that Labor and the Greens are still stuck in their standoff over the $10bn housing Australia future fund bill.
Max Chandler-Mather, the housing spokesperson for the Greens, enjoyed a good few months campaigning against the future fund model, with edgy rhetoric likening it to “gambling on the stock market”.
It’s long past time for the government to take this argument away from him by making basic concessions. In Senate estimates last week the future fund managers said it was reasonable to expect annual payouts of $500m. Great. If the government is confident, it can guarantee that amount as a floor, not a ceiling.
For his troubles, Chandler-Mather has copped a lot of personal flak from Labor and scrutiny for opposing what he considers some inappropriate housing developments in Brisbane.
In pursuit of a righteous goal to get more for renters and to take a bigger bite out of the housing shortfall, the Greens have held up a bill promising 30,000 social and affordable homes over five years.
Labor tried to call the Greens’ bluff in budget week, and found they were willing to prevent the bill coming to a vote. After a late start to proper negotiations, they now just need to craft the solution to help both sides save face.
The independent senator David Pocock had some good ideas in the Senate inquiry: creating a bigger future fund, or indexing the $500m disbursement sooner (it is currently slated to increase only from 2029).
Why not just increase the $10bn fund to $15bn, and payouts from $500m to $750m? That way the Greens can say they got more for housing and Labor can say the investment model is unchanged.
People think putting roommates in the home office is silly. The only durable solution is a bigger supply of homes. It’s time to build an off-ramp and get this housing bill debate done, or renters won’t only be angry at governor Lowe.
