Some Notes on housing in Australia

Vanguard December 2010 p. 6
Alex M.

According to an October 2010 report by the Australian Housing and Urban Research Institute (AHURI), which looks into the benefits and risks of home ownership for low-moderate income households, “Australia has long been a society of home owners.”

This report and others like it on the AHURI website (www.ahuri.edu.au) provide a wealth of information about the political, social and economic factors that shape and have shaped this “society of homeowners”.

Overview of housing policy
In the 1950s, in line with post-war reconstruction in general, home ownership was promoted. A combination of housing and non-housing policies encouraged this ideal. These policies included: ‘exemption from capital gains tax, discounted/controlled interest rates for home mortgages, cash grants to first home buyers, provision of low interest home loans directly by governments and via intermediary organisations such as state banks, sales of public housing to sitting tenants, mortgage deductibility (for a short period only), development of “affordable” home ownership lots by state land developers, and planning policies which promoted detached housing, the house type desired by purchasers”.

It was clear that governments at Federal and State levels saw it as their duty to help people achieve the ‘Australian dream’. With modifications, the broad policy settings of Australian governments continued along the lines mapped out in the 1950s.

Economic stagnation
With the stagnation that accompanied the ending of the long boom of capitalism in the late 1970s - early 1980s, government policies regarding housing were re-assessed.

The 1990s ushered in “a fundamental change in policy settings on home ownership with the elimination of some of the more explicit measures to promote home ownership. In particular, governments no longer saw it as their role to assist the ‘marginal would-be home owner’ in purchasing a home”. Emphasis in government housing policies shifted from the promotion of home ownership for ‘marginal’ people to the provision of rental housing assistance for those with urgent housing needs. Such a shift in emphasis was driven by neo-liberal ideology which promoted the market as the most efficient resource allocator, with governments having the reduced role of safety net providers “for some ‘at risk’ households”.

The rise of the investor
Financial deregulation, which began under the aegis of Paul Keating the Hawke Government’s Treasurer, contributed significantly to the rise of the investor in the housing market. One of the consequences of financial deregulation was the easing of credit. In turn, the easing of credit has been one of the factors causing a steady increase in borrowing by rental investors.

The authors of the October 2010 AHURI report state that “in January 1990 investors accounted for 14% of the value of all housing loans but 20 years later accounted for 32%.” (Reserve Bank of Australia 2010: Table D5, Bank Lending Classified by Sector, June). Furthermore, in Melbourne where the report’s authors conducted their case study, “lending to rental investors accounted for 50% of residential loans in June 2010, the first time that investor lending has exceeded loans for owner occupancy”.

Another factor impelling rental investment has been and continues to be capital gain through the use of negative gearing. Negative gearing, the claiming of losses on rental property “against all income for tax purposes” has become more popular, with “the percentage of individual rental investors claiming a net loss for taxation purposes increas[ing] from 58% in 2000–01 to 70% in 2006–07”.

The rise of the rental investor or landlord in the 1990s is directly connected with the influence of neo-liberal ideological brain-washing about market efficiency and de-regulation. What gets overlooked or downplayed in reports by many research bodies is the class aspect of their social analysis.

The class aspect of housing
Clear from what has been outlined above about declining government involvement in and concern with housing policy and the rise of rental investors/landlords, is the power of particular class interests.

Financial capital in the form of banks, home loan brokers and others have big stakes in the housing market and some rental investors do too, though the latter do not necessarily have the same clout as the finance capitalists.

As has been pointed out before in these pages, the provision of housing and related government policies necessarily reflect the values of the dominant class. That is, the provision of affordable housing to low and middle income families, or working class families, is not a priority for governments, landlords or financial capitalists. For the latter two, their priorities are profit maximisation. For governments, beholden as they are here in Australia to capitalist class interests, the social reforms of the 1950s and the long boom years are things of the past.

The neo-liberal mantra says governments are no longer are in the process of social engineering because governments ‘always’ stuff things up. Markets are said to be the most efficient mechanisms for distributing commodities such as houses.

In his article The Housing Question, Frederick Engels wrote about the attitude of capitalist states to the issue of working class access to affordable housing. He said: “It is perfectly clear that the existing state is neither able nor willing to do anything to remedy the housing difficulty. The state is nothing but the organised collective power of the possessing classes, the landowners and the individual capitalists (and it is here only a question of these because in this matter the landowner who is also concerned acts primarily as a capitalist)… If therefore the individual capitalists deplore the housing shortage, but can hardly be persuaded even superficially to palliate its most terrifying consequences, then the collective capitalist, the state, will not do much more”.

Housing in Australia will continue to be fraught with problems of affordability for working class families, and finance capitalists and landlords will continue to rake in the profits. This is the stuff of capitalist social relations.

Social housing
Long experience has shown that there are times when even the capitalist state is able to provide a measure of social housing. It does not do so willingly, but sees this as the lesser of evils.

Good examples were major housing redevelopment in England responding to the emergence of an organised working class during the 1830-40 periods. Another was in Australia, with the growing strength of the working class after World War Two. The common thread is that the ruling class will make concessions in the face of pressure as a safety valve to dampen the militancy of the workers.

The demand for a large scale increase in the provision of social housing by the capitalist government is legitimate and should be put forward. The housing question can only be ultimately resolved through putting an end to capitalism and removing the provision of housing from the hands of the capitalist class. In Australia’s conditions that means an independent, socialist Australia.