It has long been suggested that Australia faces a significant housing shortage. This is not true. The fallacy of a housing shortage was exposed in the good work of economists like Kris Sayce and Steve Keen.
The problem is that Australia faces a shortage of affordable housing. The distinction is extremely important, for it points towards a different sort of solution.
Tackling the problem by merely building lots of new dwellings might make real estate and building companies happy. It does not address the reasons why the cost of housing has hit the stratosphere. This is what needs to be understood and addressed.
In the first place, high prices are the result of an ongoing speculative bubble. This is the result of firstly, an economic crisis that has diverted an increasing portion of investment capital away from production and into speculation. It is no accident that historically, an early sign of deepening economic crisis is a boom in property prices. The current period has followed the classical pattern.
This shift in investment is so marked that for quite a few years the majority of dwellings sold (over 60%) have been bought up by companies and individuals, not as prospective householders, but to benefit from rising prices and rents. A housing shortage exists only in the sense that these speculators crowded out a portion of would-be householders.
Expansion of credit
A second important factor has been the massive expansion of credit, much of the private component of this has been used to purchase property.
Large scale cutback on state provision of affordable housing over the last 20 years or so, has had a heavy impact on the most vulnerable, particularly since the closure of many institutions that once looked after people with mental health problems, and the elderly. Many of these people have been thrown into sub-standard estates and abandoned without the special services that they need in order to cope well.
Housing is the single biggest cost for most. As economic crisis deepens, as unemployment and underemployment rise, as the growth in real wages declines and national income moves upward, the burden of the cost of housing becomes an even bigger problem. It affects all aspects of life. As the mortgage or rent rises, cuts have to be made to other expenses. The standard of living falls.
Housing affordability is therefore one of the most important issues facing the majority of Australians. There is an urgent need for proper solutions.
Many are calling for a major boost in government investment in affordable housing. The record shows that the private market will not provide this. It is a good demand that must be supported. Large scale housing projects on their own would do a good deal to lower housing costs.
Much more can be done as well. In the long run this cannot be avoided. At the head of this is to apply measures that effectively put an end to speculation.
One example of this practice is the negative gearing provision, which allows investors to gain a windfall through taxation benefits. This should at least be outlawed for properties over a ceiling that marks them as beyond the average household. Larger scale investment into the housing market for speculative purposes should be outlawed, and properties over a given value should be nationalised and turned over to affordable housing.
Expansion of public housing should be a priority. Public housing estates should not be dumping grounds for the most vulnerable. They should encourage the development of communities working together for a better life for all.
In this vein, more residential stock should be turned over into cooperative housing. Cooperative housing is another means by which to build communities. Conscious cooperation to look after the collective interest provides a good means to lift the position of individuals in many ways. It can also serve as an important school, training people how to not only work together, but to become more conscious of their common interests, the need for and possibility of building a very different type of society. This is a positive perspective, tied up with the struggle to end capitalist social relations once and for all. Not everyone shares this vision at this point in time. But all can agree that steps can at least be taken to ensure that the burden of housing cost is made lighter for the majority.