Whether renting or trying to buy a first home, the housing market is an increasingly horrible place for most Australians. House prices have roughly tripled since the ’80s and rental increases aren’t trailing far behind.
The impact is being borne disproportionately by younger generations. In the last four decades, homeownership among people aged twenty-five to thirty-four on the lowest incomes crashed by 40 percent. And even if you discount income and class background, for everyone under the age of forty, homeownership has been dropping significantly. Unable to afford mortgage deposits and crippling repayment schedules, poorer millennials are watching the possibility of homeownership slowly recede over the horizon.
At the same time, housing policies from both major parties have largely failed to make housing any more affordable. Anthony Albanese’s government recently launched its “one million homes” policy, but Parliamentary Library analysis suggests that it may only build 187 affordable homes.
The value of rent-assistance payments and first-home buyers grants have trailed behind the cost of housing. Indeed, instead of improving homeownership rates among younger Australians, first-home buyers grants have often offset their ostensible benefits by raising prices.
The fecklessness of both major parties on housing policy may have something to do with the fact that federal politicians are the most prolific real estate investors out of any profession. Interestingly, federal Labor MPs are actually more likely than Coalition MPs to own an investment property and about equally likely to own three or more. No doubt some part is also played by the tens of millions both parties have accepted in donations from the property and financial sectors over the last decade.
However, while personal interest and the influence of developers in Parliament may partly explain the problem, the Left will have to face a broader political challenge to win the fight for more affordable housing. Grasping the dimensions of this challenge first requires some understanding of the history of Australian housing policy.
The Asset-Economy Bind
In the two decades after World War II, the rate of homeownership grew from 53 percent to 71 percent, thanks to the construction and sale of public housing, rising incomes, and policies that encouraged banks to prioritize mortgage lending. Since then, however, governments have largely left housing to the private sector.
At the same time, successive governments have deregulated mortgage lending while introducing discounts and concessions so as to levy lower taxes on profits made in the housing market than on income from work. As wages have stagnated, asset inflation has become a relatively more promising path to personal wealth.
In essence, during the neoliberal era, governments retracted the ladders that had once helped people climb into the housing market. Crucially, though, they only retracted this ladder after a large majority of people had already become homeowners.
Today, while home-owning baby boomers can still extend a smaller, family-size ladder to help their children climb into the property market, this only serves to exacerbate class inequality across generations. This raises the question of why we can’t lower the social homeownership ladder once again. After all, most Australians aren’t property tycoons. Less than a quarter of homeowners have more than one property. And of those who do, only about a quarter own more than two.
The problem with lowering housing prices — at least according to quite a few housing economists — is that most homeowners want the value of their house to keep rising. When property-market speculation was unleashed, it increased the value of the home-owning majority’s most valuable asset. And even for regular, single-property-owning people, a house is still an asset. It can be used as collateral to obtain bank loans or to access cash from mortgage equity withdrawals. If it’s a primary residence, it can be sold tax-free. Housing is the intergenerational nest egg par excellence.
It’s become a commonsense proposition that if a government tries to lower house prices — or does anything that can be painted as doing so — it will incur the wrath of the home-owning majority. Policymakers and commentators often point to the 2019 federal election to illustrate this. Labor went to that election proposing to cut some of the tax benefits enjoyed by property investors. Although the changes would have had no direct effect on single-home owners, the Coalition ran an effective scare campaign about the effect the changes would have on all house prices.
According to housing researcher Martin Duck, the scare campaign worked “because investment properties and owner-occupied housing are part of the same asset class.” He explained that “any threat to the value of investment properties was perceived as a threat to the value of the working classes’ greatest asset and greatest liability — their homes.”
Interestingly, however, after the dust had settled, the truth turned out to be more complicated than the commonsense explanation. Many wealthier seats that would have been most affected by the policy swung toward Labor, while many poorer seats who would have been less affected swung toward the Coalition.
This doesn’t suggest that the scare campaign was unsuccessful — after all, it targeted all homeowners, not just property investors. But it does caution against seeing the house-price scare campaign as the main determinant of voters’ choices.
At the same time, the 2019 results do suggest that an electorally significant chunk of the populace is invested in seeing housing prices continue to rise, or can at least be convinced that they should be.
In the lead-up to the 2022 election, Labor ditched its 2019 tax-reform agenda to minimize the threat of another Coalition scare campaign. Albanese’s subsequent win has likely convinced some party strategists that this was the right decision. Meanwhile, their “one million homes” plan has not faced any serious countercampaign from developers or investors, suggesting that no one expects it to make a dent in housing prices.
Does the House Always Win?
This raises the question: Are we trapped in an asset-economy bind where the government will always rig the game in favor of homeowners?
According to housing economist Cameron Murray, the answer is probably. In a recent presentation, he expressed doubt that anything meaningful will happen until “non-homeowners are the majority and politically organized.”
However, this is an obviously unsatisfying answer for those trapped outside of the housing market. While various groups are already organizing renters, it may be a long wait before non-homeowners become the majority, changing the electoral calculus.
Currently, homeownership sits at around 65 percent of the population. Although the overall trend is downward since its peak in the mid-1960s, government programs (insufficient as they are) and lending from the “Bank of Mum and Dad” are slowing the decline in homeownership. Indeed, recent years have seen a very slight increase in the rate, although this is likely a momentary blip.
However, not everyone is convinced that homeowners must become a minority for a leftist housing policy to become politically viable. Greens housing spokesperson Max Chandler-Mather told Jacobin that some homeowners will vote for policies that might lower house prices. As he explained,
just because someone has a mortgage, it’s not as if their entire interest is based on the housing market inflating forever. There’s a portion of homeowners who either have kids or are spending an enormous proportion of their income on servicing a mortgage who recognize that they would be better off if they were able to sell that home and buy a more affordable home somewhere else. When it comes down to it, people’s material interests are to spend a small proportion of their income on a suitable home in an area where they want to live.
This analysis is backed up by Greens polling, which often finds majority support for building more public and social housing, improving renters’ rights, and rent controls.
Chandler-Mather’s perspective is typical of the new left flank of the Greens, which aims to redirect the ire of both renters and homeowners toward property investors and the banks. These groups, they argue, are the ultimately beneficiaries of the way the market works.
Intuitively, this shouldn’t be too difficult. Owner-occupiers struggling with massive mortgages aren’t exactly sending Christmas cards to their local bank branch. There are also many homeowners who won’t be too positively disposed toward the property investors against whom they had to compete to secure their first home.
There’s also some electoral evidence that the Greens argument can cut through with homeowners. It’s true that the Greens generally do well in electorates where renters make up a large proportion of voters. Adam Bandt’s seat of Melbourne is 63 percent renters, Stephen Bates’s Brisbane seat is 53 percent, and Chandler-Mather’s Griffith is 48 percent.
However, the seat of Ryan — won by the Greens’ Elizabeth Watson-Brown in 2022 — is 66 percent homeowners and 33 percent renters, a ratio broadly in line with the national average. This suggests that homeownership could be less of a barrier to progressive housing policy than some policy wonks and Labor strategists might believe.
For those, like Murray, who see little chance of real political change until the electoral logic changes, the solution is to search for policies that make housing cheaper without antagonizing the home-owning majority.
For first-time home buyers, Murray is drumming up a program he calls “HouseMate.” Under the plan, a publicly owned housing developer would build a massive amount of new housing and sell it at the cost of construction. Murray estimates that, on average, a house built under this scheme would cost around $300,000, roughly half of what most pay in the private market. HouseMate properties would only be available to people who don’t already own a home. Buyers would also be barred from selling them for a set period, in order to lock investors out.
Murray’s plan is modeled on Singapore’s Housing and Development Board, which raised homeownership from 20 percent in the 1960s to nearly 90 percent today. However, there’s also a key difference in HouseMate designed to appease the private market. Whereas in Singapore, roughly 90 percent of new homes are built by the government, under Murray’s plan, the private sector will still build the majority of households.
As a result, Murray argues that HouseMate will not cause “major disruption to existing private rental and housing asset markets.” At the same time, he acknowledges that the existence of a cheaper alternative would somewhat deflate the private market.
The Australian Greens have seemingly taken a few cues from Murray’s HouseMate. Under their housing policy, a similar scheme would offer 125,000 homes to first-time home buyers. However, they also want to build almost triple this amount as dedicated public housing for people on lower incomes. Perhaps their most controversial call — at least in the mainstream media — is for a two-year rent freeze.
While there are some differences, both the Greens’ plan and that put forward by Cameron Murray recognize the importance of large-scale government intervention. Crucially, neither plan proposes to use public money to supply or underwrite the private housing market. Instead, they propose creating an alternative to the private market. As such, both plans have the potential to decrease property values — especially if built at scale. This is in line with Singapore’s program, which pretty much took over the private market because it offered citizens a far better deal.
This means, obviously enough, that both plans will likely lead to housing devaluation in the private market.
Barriers to Reform
Some on the Left warn that the Greens should not underestimate the challenge of winning cheaper housing in the neoliberal economy. For example, Marty Duck suggests that while rising property prices may not constitute the entirety of homeowners’ interests, it’s still a considerable factor. As he explains,
highly indebted households with children may have more of an interest in a rising property market because a falling market poses the risk of them owing their bank more than their house is worth. Falling house prices do not necessarily make it easier for households to sell and buy a more affordable home somewhere else because their position vis-à-vis the market may be unchanged or have even deteriorated.
According to Duck, it’s crucial that left-wing political strategy takes into account these realities, which are a legacy of conservative social engineering. From at least the Robert Menzies years until today, the Right has doggedly fostered a society built around homeownership and property investment. In Duck’s analysis, the point was to avoid the socialization of private wealth via the tax system by encouraging families to grow wealth that would remain within the family. Inflating and sustaining property prices was — and is — key to this.
Consequently, in addition to the large-scale government investment in housing proposed by the Greens and Cameron Murray, it may also be necessary to roll back the policy settings that inflated housing prices in the first place. This will require the kind of tax reforms that Labor has abandoned. Equally, it may be necessary to redirect finance away from asset speculation and toward productive activity and the wages of those who perform it. This will amount to a more fundamental transformation of the Australian economy.
The challenge for the Left will be building a popular mandate to lock in these reforms in the long term. Doing so won’t require the support of all homeowners — but it will require a significant chunk of them. The key to this may well lie in appealing to homeowners as more than homeowners. After all, many homeowners are also workers with an interest in higher wages and public services, residents who want to see sustainable, well-planned cities, and parents who want their kids to grow up in a fairer world.