Speech to National Press Club
Check Against Delivery
I respectfully acknowledge the Traditional Owners of the land on which we meet today, the Ngunnawal people.
Last Sunday morning at the 2020 Summit, I was part of a panel of participants discussing how Australia is seen by the rest of the world. David Speers, who was moderating the panel, asked us what made us feel Australian.
Elleni Bereded-Samuel, originally Ethiopian, who migrated to Ballarat via Brussels, said that she first felt truly Australian when she:
“bought a block of land and built a house and invited all my colleagues and friends around for a barbecue”
Elleni’s story is shared by so many Australians.
A place of our own represents security.
We use our homes as a base to seize life’s opportunities: to raise a family; be part of a community and build a career. For generations, buying a home has given us the certainty of a roof over our heads when we retire, making it a little easier to live on the pension.
Housing is the greatest investment most families have.
Australia has traditionally been a country with higher rates of home ownership. But the numbers are falling – at exactly the same time other countries are lifting their performance.
Today 69% of Australians own or are buying their own home. That is now just below the United Kingdom – a country we traditionally led – and nowhere nations like Ireland where 77% of people are home owners.
Unless we shift course, fewer Australians will own their own homes.
National Housing Policy
It is a strange repudiation of the Menzies legacy that saw falling home ownership under the Howard Government. Our policies, in contrast, seeks to make home ownership more achievable and rental properties more available.
To achieve our objectives, our national housing policy needs four pillars:
- Firstly, housing needs to be stable. People want to know that they can make long term plans, relying on the fact they are able to put down roots. Short term churn in the rental market and increasing loan default rates and negative equity in some areas have increased insecurity in our housing markets.
- Secondly, housing needs to meet adequate standards. We want houses that keep us healthy, not make us sick. Kids need to be able to get a good night’s sleep and have a place to study; pensioners shouldn’t be moving buckets around under leaky rooves when it rains, frightened to complain to the land lord in case the rent goes up.
- Thirdly, housing needs to be connected. We want our homes to be part of a community and a neighbourhood. Our housing needs to be connected to transport that gives access to jobs, schools, shops and childcare – not to mention the park or the beach. Today our housing should also be connected to communications – including access to the internet.
- Finally, housing needs to be affordable. It doesn’t matter if mansions in Mosman cost $4 million, as long as there is enough affordable rental property at the other end of the market, and first home buyers can afford a modest entry-level home. Home ownership usually involves some financial sacrifices, but ideally food and school excursions shouldn’t be among them.
Affordability is clearly the most pressing housing issue for the majority of Australians.
Consider the statistics.
- To buy an average priced home you now need a six figure salary to service the loan.
- In 1996 the average house cost about five times the annual wage, today it is seven and a half times.
- A typical first home buyer now spends a third of their income on mortgage repayments – this compares to less than two out of every ten dollars earned in 1996.
- Rental vacancy rates are now below 2 per cent in all capital cities with some cities below 1 per cent.
This tells us Australians and their families are having trouble finding affordable and secure accommodation and then using more and more of their income to keep it.
The National Centre for Social and Economic Modelling recently undertook new research for the Government that found that 1.1 million low and moderate income families are in housing stress.
These families – who are in the bottom 40 per cent of all earners in Australia – are all spending more than 30 per cent of their limited disposable incomes on housing costs.
There were 220,000 more families in this boat last year than in 2004 – an increase of a quarter in just three years.
Families with children have been particularly hard hit, along with young singles entering the housing market for the first time.
The number of older households in housing stress is also on the rise – with the number of families headed by a person aged over 70 doubling since 2004.
685,000 of households in housing stress are renters. These are people who are either moving house or cutting back on essentials to keep a roof over their head in a private rental market where competition has plunged along with vacancy rates.
I met recently with a group of people in Victoria representing older tenants. They showed me pictures of the conditions in which some of their clients were living: leaking rooves; doors hanging off hinges; showers that older people couldn’t get safely into or out of; dodgy wiring. These pensioners were too afraid to complain the condition of the properties in case their landlords put up the rent and they couldn’t find a new place.
We have all heard the stories of housing affordability resulting in individual families doing it tough. I am getting letters every day from people telling me of their difficulties in finding a rental property within their budget or a house they can afford to buy, or their fears about hanging on to their home if interest rates increase. These individual stories of hardship are hard to listen to with equanimity, but they represent more than hard luck stories.
Unless we begin to turn around the negative trends in housing affordability, we’ll see negative affects on the economy and broader society.
Last year I visited the boom town of Emerald.
I heard from local business owners who say they can’t find staff because no one wants to move to towns with high rents unless they’re going to work in the mines and make the big bucks. Its impossible to find teachers, nurses, pub staff or mechanics unless you provide accommodation or pay over the odds so people can afford high rents. On the other hand, unemployed people pack up their belongings, spend their last $100 on petrol and arrive in town with nowhere to stay, hoping they’ll find a job. Its not always easy to convince an employer to take you on if you’re sleeping in your car.
Researchers tell me that historically housing has not been an issue in labour mobility across the country.
I fear that towns like Emerald might be the canary in the coalmine and that as housing becomes less affordable we will see people unable to follow employment opportunities because of the cost of housing. With labour shortages being what they are in many parts of the country, that would be a disaster.
Similarly we cannot underestimate the social outcomes. The Government has already had a lot to say about the importance of social inclusion – including through tackling homelessness. One of the greatest problems homelessness services face is that once someone is ready to leave crisis accommodation, there is often nowhere for them to go.
The private rental market is impossible, and public housing has been squeezed for a decade.
I received a letter last month from a women – lets call her Marjory – who wrote to tell me of her experience in the rental market. She told me she had been forced to move her family every twelve to eighteen months to stay in a house they could afford. She was extremely worried about the impact on her children and told me that she had realised that she never really allows herself to get settled in a community – just in case she needs to move again.
National housing policy settings need to make it easier for Marjory to find the security her family needs. The stress Marjory is feeling inevitably impacts on her children too.
This housing affordability problem has been barrelling down the highway at us like a run away road train for several years.
There are some problems that don’t fix themselves.
Need for National Leadership
The Prime Minister noted in his address to the Sydney Institute last week that ‘there has been a recognition in the capitalist west that Adam Smith’s ‘invisible hand’ does not represent the solution to every economic problem’. For the last decade we have been told that housing policy should be left to the market alone and there was no role for the Commonwealth.
The history of Australian housing policy tell us a different story.
At various times, when housing has represented a challenge for the economic life of Australia, or for our welfare, Governments (both Labor and Liberal) have shown leadership.
In the 1940’s Australia was faced with the need for housing for ex-servicemen and the legacy of the high rates of evictions and homelessness from the 1930s.
John Curtin and Ben Chifley launched the first Commonwealth State Housing Agreement in 1945 to build rental housing, including for returned service personnel.
Minister Dedman, Minister for Post War Reconstruction said of the Commonwealth State Housing Agreement Bill:
‘It will provide means whereby a full scale attack can be made on one of the worst of our social evils, namely the bad housing of the Australian people. This Bill provides a plan for housing and rehousing families of lower income group – adequately, effectively and hygienically on a scale in advance of all our past performances’
From the mid 50s the housing policy of the Menzies Government was to focus on home ownership.
Fast forward to the 1970s. By now the private sector was well established as the main provider of housing for Australians and many families were successfully buying their own homes.
Urban sprawl created new problems associated with the lack of social infrastructure and urban development. Again Commonwealth leadership was required to improve urban design and the connection between housing and transport.
Whitlam said, “No other western nation has cities in which the incidence of urban sanitation is so primitive or or so ludicrous as in the cities of Australia. Liberals reject sewerage services because they are a socialist undertaking.
We are the most effluent nation in what the Liberals call the free world”
By the 1980’s, the Australian economy was opened to the world and the housing market matured, with support for low income renters and homeless people.
By contrast in 1996 the Howard government became the first post-war government to not to have a Housing Minister.
Nor a housing policy.
The housing market works perfectly adequately for most Australians. Plenty of people have done very well. But we have several problems emerging that won’t be fixed without some leadership:
- declining rates of home ownership with fewer first home buyers;
- declining availability of rental properties – especially affordable rental properties;
- declining availability of social housing.
Underlying all of these trends is the simple, uncontravertible fact that we haven’t been building enough houses, and that Australian Government policy has played a role in that.
By the end of the year, the Commonwealth will negotiate with the States and Territories a new National Affordable Housing Agreement.
It will be one of the five major Commonwealth State Agreements and will pull together the current range of housing programs including Commonwealth Rent Assistance, funding for public housing, responses to homelessness and the First Home Owners Grant.
And where the motto of the housing market has been “location, location, location,” the motto of the National Affordable Housing Agreement will be “supply, supply, supply”.
If today’s big problem is housing affordability, the big solution is to increase housing supply.
It is often said that it is impossible to get economists to agree on anything.
Well right now, it seems that’s not quite the case.
Housing economists agree that Australia simply doesn’t have enough homes.
They can’t, of course, agree on exactly how many more we need.
Household formation outstripped housing supply around 2004. The gap has continued to grow since that time.
Conservative estimates suggest that Australia is now 30,000 homes short with some estimates being considerably higher.
The truth is that no-one has been asking the question of how many houses we need, of what kind, and in which locations, for over a decade. The assumption that the market would – in the long run – right itself has meant that Government policy didn’t try and encourage better balance between supply and demand. In fact, policies like the superannuation tax changes seem to have exacerbated the problem. Certainly the relaxed attitude of the previous Government to serious skills shortages in the building industry didn’t help.
The Government has already announced its intention to establish a National Housing Supply Council. The National Housing Supply Council will provide forecasting and analysis of Australian housing need, because we never want to be in the sort of mess we’re in now, again.
Currently the Commonwealth has information on demand side factors such as demographic data and information on overseas and internal migration.
The States have a body of information on supply side factors – land release, planning frameworks and the impact of infrastructure projects like new transport corridors.
Industry has information and direct experience in key areas such as skills availability and access to materials.
Currently no-one pulls all of this together to provide clear advice and forecasts so that we can get housing supply right.
That is where the National Housing Supply Council comes in. The Council will be an expert body, providing advice and forecasts to government on housing supply.
This Council will publish an annual State of Supply report to analyse the adequacy of construction and land supply for the next 20 years.
Today, I am able to announce that Dr Owen Donald has accepted the position of Chair of the National Housing Supply Council.
Dr Donald is a former Executive Director of Housing in Victoria and the first Executive Director of the Australian Housing and Urban Research Institute – AHURI. He has served as a Board member of the Australian Institute of Health and Welfare, the Melbourne Ports Corporation as well as a number of homelessness and social housing organisations.
I am very pleased that he has agreed to take on the very important role of getting us back to a position where we understand housing supply and can get on top of the problem.
I’ll be announcing other members of the Council in coming weeks and I look forward to the first State of Supply Report early in the new year.
This need to improve housing supply drove the range of commitments we took to the last election, and a number we have announced since.
Housing Affordability Fund
The Government will invest $500 million in a Housing Affordability Fund, firmly focused on helping developers and local government to unblock the supply of housing and pass the savings on to new home buyers.
This commitment is targeted at supply side barriers that hold up new construction, inflating holding costs that are passed on to purchasers.
The Government intends to provide funds for projects that reform the handling of development applications and defray the costs of local infrastructure currently funded through charges and levies.
I am confident that there are real gains to be made by fast tracking planning reforms. I met recently some people from local government who informed an investment of $4 million dollars to their state would produce $140 million in benefit – simply from rolling out the electronic Development Application standard.
We want fund practical projects that produce real measurable gains in the form of more houses, more quickly. My colleague the Hon Richard Wynne, Minister for Housing in the Victorian Government, tells me that he was able to bring hundreds of new lots on line by helping a cash strapped local council with the costs of rezoning.
National Rental Affordability Scheme
The National Rental Affordability Scheme is perhaps the most ambitious of the Government’s new housing policy commitments.
This Scheme aims to create a new asset class for institutional investors in affordable residential housing.
The Scheme will provide an annual incentive to institutional investors to build new homes and rent them to low and moderate income earners at 20 per cent below market rates.
The Australian Government will provide institutional investors with an annual $6,000 refundable tax credit for new buildings – with capacity to provide the credit as a grant instead for non-taxable entities such as community housing agencies.
State and Territory Governments have agreed to contribute at least $2,000 per annum in cash or in kind for each home.
Each property will attract this subsidy for 10 years, at which time the property may be rented at market rates or sold.
In the first five years the Government aims to bring 50,000 properties on line.
If there continues to be demand, the Government will expand the Scheme to 100,000 properties over the following five years – a major new investment in Australia’s affordable housing stock.
Tenants will be subject to a clear income test that will target low and moderate income earners.
This isn’t a replacement for public housing – its making the rental market affordable for lower income singles and families in the workforce as well as those on income support payments.
We expect that workers earning moderate incomes – such as apprentices or workers in retail and hospitality – will benefit from the Scheme.
Our aim with the National Rental Affordability Scheme is to create an incentive for the market to invest and build large portfolios of affordable rental housing.
I expect new partnerships to emerge between institutional investors, property developers and community housing agencies.
First Home Saver Accounts
It was fair to assume, once, that if you worked hard and saved hard you might one day own a home of your own. That’s still the desire of most young Australians but the reality is increasingly out of reach, partly because the cost of homes to purchase has outstripped increases in earnings, but also because rents are high and limit the ability to save a deposit.
One of the biggest barriers to becoming a first home owner is saving a decent deposit.
First home buyers now account for 18 per cent – or barely one in six – of all home purchasers – compared to 22 per cent in June 1996. The proportion of 18-34 year olds buying their first home fell from 48 per cent to 44 per cent between 1994 and 2004.
To begin to reverse these trends, the Government is providing for the introduction of First Home Saver Accounts.
The Accounts will provide a simple, tax effective way for Australians to save a meaningful deposit for the purchase of their first home.
Since the announcement of these new Accounts, the Government has increased the benefits to low income earners through the provision of a minimum 15 per cent Government contribution on after tax contributions of up to $5,000 each year.
A couple earning average incomes and putting aside 10 per cent of their incomes for their first home, could be able to save a deposit of up to $80,000, depending on returns. This is considerably more than if they held the money in a normal bank account.
The Accounts also support national savings. We estimate that the Accounts will contribute around $4 billion to national savings within four years.
There is an array of issues I have had not had time to cover today.
Suffice to say that our future housing priorities must include tackling homelessness, the need for greater environmental sustainability in our housing and of course the important work that is being led by my colleague Jenny Macklin to address the appalling state of housing in many remote Indigenous communities.
Ten years of cuts to public housing, and consequent tighter targeting, has led to dysfunctional systems that may take many years to fix.
Across the board we have some pretty significant catch up work to do.
I’m not sure if anyone is keeping track, but it is possible that I am now saying for the millionth time: there are no silver bullets – no overnight solutions when it comes to housing affordability.
Any policy changes we make today will take years to have a substantial effect on the widespread availability and affordability of housing.
But with national leadership, cooperation with the States, local government and industry, and the right housing policies, we can make a difference in the medium to long term.
We can breathe life back into the great Australian dream.