Housing policy needs a game-changer
by Brendan Coates, Joey Moloney
Australia’s housing crisis has been building for a long time. Home ownership rates have been falling among younger, poorer Australians for decades. Half of retirees who rent are living in poverty. And homelessness is on the rise.
The pandemic has made the crisis worse. And it’s low-income renters who are suffering the most.
Rental vacancy rates are at record lows. Rents are rising by as much as 15% a year. Shocking stories abound of Australians sleeping in tents, caravans or even their cars because they can’t find a home they can afford to rent.
The Covid lockdowns and the work-from-home revolution have spurred a new “race for space”.
People want more space to themselves, either by taking an extra bedroom as a home office or by moving out of the family home or a share house. Much of this change appears to be permanent – many Australians now expect to work from home much of the time.
The outcome is that fewer people are living in each home – and we’ll need more homes just to house the same number of people.
And now that the borders have reopened, migration has come roaring back. Treasury estimates there will be an influx of 650,000 migrants over the course of this financial year and next. More people means we need more houses – and we are adding people a lot faster than we are adding houses.
So, what should be done?
The first thing federal government should do is substantially increase rent assistance to ease the burden on low-income renters.
Rent assistance works. In 2021 it reduced housing stress levels for recipients nationwide from 72% to 46%. But the maximum rate of rent assistance hasn’t kept pace with the rising rents paid by low-income renters. The government should increase it by 40%. This would cost the budget about $2bn but the money would go straight towards easing the cost of living for those struggling the most in the private rental market.
The Productivity Commission’s review of housing assistance argued that increasing rent assistance should be the government’s No 1 priority to help low-income renters. The recently release report of the economic inclusion advisory committee called for a substantial increase.
But with so many families struggling to find a home, at any price, state governments must also step up.
First, they should expand the use of “head-leasing” – leasing private rentals and subletting them to vulnerable people.
Second, they should buy homes and turn them into social housing.
And third, they should explore ways to encourage owners of short-stay rentals advertised on platforms such as Airbnb to return those properties to the long-term rental market, for example by lifting the rate of land tax that applies to short-stay accommodation.
The last of these would come with a cost, because fewer Airbnbs would mean fewer tourism dollars and therefore fewer jobs, especially in regional areas. But it would be better than seeing families living in caravan parks, tents and cars.
But in the long term the only way to keep rents in check is to build more housing. Governments at all levels should make sure more housing is built.
The Senate should pass the Albanese government’s housing Australia future fund bill so the country has a stream of funding to help increase our social housing stock in line with population growth.
But the federal government should double the size of the fund – from $10bn to $20bn – and guarantee that the funding will flow irrespective of returns.
The federal government’s plan to sign a housing accord with the states to boost supply could be the game-changer the nation needs.
Australia has not built enough housing to meet the needs of its growing population. Construction is constrained by land-use planning rules that limit development in many inner and middle-ring suburbs.
Things will not get better unless the Albanese government puts enough money on the table to push state and territory governments to ease land-use planning rules, to enable more housing, including more high-density housing close to jobs and transport.
After decades of neglect of housing policy, Australia urgently needs governments – federal, state and local – to stop pretending there are easy answers to the housing crisis.
Unless governments start making hard policy decisions, the crisis will only get worse.
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