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Housing Policy in Australia: A Case for System Reform
Dr Cameron Murray is Australia’s leading expert commentator on housing. He is an economist and co-author of Rigged, and he runs his own think-tank, Fresh Economic Thinking. He has been a tenant, a homeowner and a landlord, and he has worked in property development.
‘If you’re not sure you believe the official story of why house prices and rents are so high, read this.’
ROSS GITTINS, TheSydneyMorningHerald
‘The vast majority of what is written and said about Australian housing is either nonsense, property porn, clickbait or lies, all more-or-less to the benefit of interests vested in maintaining the status quo of ever-more expensive shelter with all the social damage that causes. Cameron Murray’s TheGreatHousingHijackis the exception that proves the rule—the only book you need to understand the giant con we have fallen for. Nobody escapes unscathed. Read it.’
MICHAEL PASCOE, TheNewDaily
‘Cameron Murray unpicks Australia's housing market stitch by stitch and reveals the myths, falsehoods and vested interests that underpin the housing debate. His work uses
extensive research to shine a light on an issue many in politics, academia and the media prefer to keep opaque. He challenges long-held opinions and brings a context that too often is missing from how we talk about housing.’
GREG JERICHO, TheGuardian
The information in this book is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate seek professional advice from a financial adviser.
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian CopyrightAct1968(the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to the Copyright Agency (Australia) under the Act.
7. Absorption rate equilibrium: What determines the rate of new housing development
Housing hijackers
8. Politics and politicians
9. Academics and policy wonks
10. Muddled media
11. YIMBY yammer
Distractions and distortions
12. Mismeasuring manors
13. Skipping the cycle
14. Proper planning
15. Immigration inspection
16. Vacant villages
17. Rental rules
Hoax housing policies
18. Supply superstitions
19. Zoning zealots
20. Financial fixes
21. Favoured first home buyers
Course
corrections
22. Managing monopolies
23. Perfecting property
24. HouseMate
25. Future foresight
Glossary Acknowledgements
Notes
List of figures
1 How moving sustains a spatial equilibrium in between two locations
2 Density equilibrium is where there is no net gain from going taller
3 Why monopoly property owners build housing in response to rising demand
4 Housing asset prices do not reflect ‘affordability’, whatever that means
5 The Speculative Index, 1983–2023
6 How planning limits interact with the density equilibrium
7 Direct policy programs can massively boost homeownership
Property problems
1 ◆ Dwelling dreams
‘Third, and final, call . . . ’
The gavel dropped. The auction was over.
A busy day at the auction hall had seen more than thirty landlords bid for the right to rent their property to the young Jones family.
The opening bid was $3000 per month. At that price, the prospective landlord bold enough to open the bidding stood no chance. At this auction, all the landlords who gathered feared missing out on the tenant.
Almost immediately, the landlord of a nearby property offered their similar home for $2200 per month. A neighbouring landlord quickly responded by offering their home at $1980 per month. Then a third landlord jumped in to bid $1730 to attract the Jones family to their home. After more than a dozen bids, the winning landlord offered their best price of $1270 per month for a three-bedroom cottage and won the auction to buy the Jones family as tenants with their lowest possible price.
Like all auctions, the winner was stretched to their financial limit. The winning landlord offered a price that barely covered their costs. But it was a risk they thought was worth taking.
All the properties at the auction had been inspected by the Joneses and were all high quality and at a location they desired. All the bidding landlords had agreed to the Jones family’s offer of a three-year lease term with annual rental reviews set to market through a competitive bidding process. If the winning landlord bidder pulled out of the contract within that three-year period, they would be
required to compensate the Joneses for the costs of relocation and any additional rent they would have to pay to live elsewhere.
The family knew that when the auction was over, they would have secured the home they wanted at the best price possible. The housing market worked. They were jubilant. But then the Jones family awoke. Cheap housing—whether renting or purchasing—is, unfortunately, just a dream for many young families. Whether it is the Great Australian Dream, the American Dream, the Canadian Dream or the British Dream, these deeply ingrained cultural aspirations are increasingly not matching reality. For some, it is a nightmare.
The average age of first home buyers has risen in Australia and in many other countries, including the United Kingdom and the United States. Publicly funded belowmarket rental homes have dried up, and homeownership rates are trending down in many nations. If you want stable and affordable housing, alongside broad and early homeownership, then these are not promising statistics.
How is it that at the richest point in human history we no longer achieve improvements in desirable housing outcomes, and are instead going backwards on many metrics? This is a question TheGreatHousingHijack answers.
But, to begin to answer it, we need much more context, something all too rare when it comes to analysis of housing markets. In this case, we need to look further back in time. Unequal access to housing and declining homeownership might seem like a uniquely modern problem. Sometimes people today will attribute this outcome to too much greed or to housing being treated as an asset class instead of a
necessity. Whatever it is, the problem is seen as new and therefore recent actions are to blame.
But the problem is age-old.
A problem for the ages
In his visit to Sydney in 1836 on HMS Beagle, biologist and father of evolutionary theory Charles Darwin immediately adopted the national pastime of commenting on the housing market. In his diary entry on his first day in Sydney, he wrote:
the number of large houses just finished & others building is truly surprising; nevertheless every one complains of the high rents & difficulty in procuring a house Sydney has a population of twenty-three thousand, & is as I have said rapidly increasing; it must contain much wealth; it appears a man of business can hardly fail to make a large fortune; I saw on all sides fine houses, one built by the profits from steamvessels, another from building, & so on. An auctioneer who was a convict, it is said intends to return home & will take with him 100,000 pounds. Another who is always driving about in his carriage, has an income so large that scarcely anybody ventures to guess at it, the least being assigned being fifteen thousand a year. But the two crowning facts are, first that the public revenue has increased 60,000 £ during this last year, & secondly that less than an acre of land within the town of Sydney sold for 8000 pounds sterling.1
Later in the nineteenth century, Friedrich Engels, who became a historical figure for his writing on class struggles and his work with Karl Marx on capitalism, wrote a series of articles in 1872 seeking an answer to ‘The Housing Question’ that puzzled those in the industrial cities of central Europe. He asserted:
The so-called housing shortage, which plays such a great role in the press nowadays, does not consist in the fact that the working class generally lives in bad, overcrowded and unhealthy dwellings. This shortage is not something peculiar to the present; it is not even one of the sufferings peculiar to the modern proletariat in contradistinction to all earlier oppressed classes On the contrary, all oppressed classes in all periods suffered more or less uniformly from it In order to make an end of this housing shortage there is only one means: to abolish altogether the
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