I’ve lost track of the number of parliamentary inquiries into housing over the years, and hate to think of the countless hours many well-meaning people (along with self-serving barrow pushers) put into submissions, hearings and reports.
As demonstrated by the present crisis, decades in the making, it has all been for nought.
Our lemming-like march to a critical shortage of affordable shelter and ever-higher household debt has proceeded uninterrupted under governments of all stripes.
If any of the inquiries had achieved something, we wouldn’t be in our present mess.
And now there’s another housing-related Senate committee inquiry under way, albeit one with narrow focus, that similarly is unlikely to make any impact on the crisis when it reports in three weeks.
This one is the Economics Legislation Committee’s inquiry into the government’s Housing Australia Future Fund.
Regular readers will know how little I think of Labor’s Claytons affordable housing policy, designed only to be a little bit better than the Coalition’s and not make any difference to the overall problem.
Too hard for the major parties
Neither federal Labor nor the Coalition has any interest in dealing with the fundamentals underlying the crisis.
It is politically too hard for them to dream of announcing policies aimed at providing large-scale public and affordable housing and dampening residential housing price rises – and that’s without considering how conflicted many politicians are given their own property portfolios.
It’s why the various inquiries tend to fall back into the arms of the property developer lobby, claiming the problem is all the fault of state and local governments for not being laissez-faire with their zoning and development approvals.
And if you believe that, you’ll believe all the other standard neoliberal follies.
It is simplistic nonsense that appeals to people who like simple answers, including many of the oft-quoted self-professed housing “experts”, because it ignores the core truth of Australian housing – it is a game controlled by existing property owners devoted to maximising the return on their assets over time.
This is not a purely political reality, but an economic one as well.
Non-owners don’t get a look in
Since governments effectively vacated the field, non-owners don’t get a look in.
This has been nicely spelt out by Dr Cameron Murray – economist and author of Game of Mates – in a Substack post to clarify the common confusion of builders, developers and owners.
It is property owners, not builders, who decide to build.
“New dwelling supply is therefore driven by the financial incentives of property owners, who want to maximise the total return on their property assets over time, not builders, who want to maximise housing construction turnover but can only do so subject to the decisions of property owners,” Dr Murray writes.
“The incentives of builders and property owners are different. Sometimes the same company does both activities, but this doesn’t change the underlying incentives.
“How much new housing is built is not a choice made by builders but by property owners. This is why the idea of property as a monopoly makes so much sense.
“Non-property owners can’t compete using non-property inputs. They must always buy property from a current owner to get into the housing game, and these current owners have no incentive to minimise the price they receive by rapidly increasing their sales or rapidly building new homes.”
For years, Dr Murray has been trying to tell those who would listen that the property market has a built-in speed limit on how fast it produces new housing.
He has been making submissions to the aforementioned inquiries but, obviously, to little effect.
His whole post is worth reading for those who want to know, as it also goes into the shortcomings of our present housing industry statistics upon which some of the common housing furphies are based.
He calls the housing market “build-to-order”.
Property owners’ monopoly
The property owners’ monopoly protects asset values by not building when it might reduce total returns.
“It is possible to apply for many planning approvals and hold a stock of approved projects that allow the flexibility to quickly respond to the market. Many of the largest housing developers do this.”
Which is where my particular call comes in for governments to meaningfully re-enter the housing market.
They have the ability to get the builders working without worrying about existing asset values.
The private rental market’s pursuit of high total returns has priced its product out of the sustainable reach of the working poor, let alone those worse off, leaving the federal government to blow $10 billion on subsidising private rent over the past two years with no end in sight as the population grows and home building turns down.
Major direct government investment in housing now has the potential to pick up the forecast slack in building and change the dynamic by standing in the corner of non-property owners against the monopoly.
But neither major political party wants to do that.
