Rob

Since the middle of the 20th century, almost all Australians could expect to one day own a home, as long as they secured a stable income. But the idea that working- and middle-class Australians can expect to own their own homes in their lifetimes is fast becoming a distant memory, much like dial telephones and black-and-white TV. Sydney is home to hundreds of high schools, with tens of thousands of pupils. A recent analysis shows that any pupil graduating today will have to save for 46 years to afford a deposit for a median house, and mortgage repayments will require 127 per cent of a median salary. Forget about buying a home in order to start a family. Unless they have wealthy parents to fall back on, school leavers in Sydney will only be able to afford a house in their home town after they’ve retired. But it’s not just Sydney. Across the nation, high-income households in Australia are renting. In 2021, nearly 25 per cent of renting households in Australia had an income of $140,000 or more per year. In 1996, however, equivalent top income segment households comprised only 8 per cent of renters. There are many different analyses of how and why we got to where we are today. Many on the left blame tax offsets that have created a speculative bubble in property, while some on the right (and the left) blame immigration. But there is one thing most observers of the housing crisis agree on, and that is that the supply of housing has not kept up with demand. And the reason supply has not kept up with demand has been a change in government priorities over time. To understand how government policy has changed, it’s worth looking at the conditions that created the baby boom between 1946 and 1964. After WWII, the Australian government went on a house-building spree, which made the cost of housing substantially cheaper. Social norms dictated that young couples needed to get married in order to live together – so they married at younger ages. This led to a boom in babies being born. But before the babies came there was a correlation between houses being built and increasing marriage rates. This correlation between houses being built and marriage rates increasing was not only found in Australia, but in many nations around the world. In the policy wonk journal Works in Progress, Anvar Sarygulov and Phoebe Arslanagic-Wakefield write that “between 1930 and 1960, marriage rates in the US increased by 21 per cent. Those more likely to marry were in turn more likely to become parents. In this way, the increase in supply of housing fed the baby boom”. It’s worth noting that in Australia, we have not had a housing boom or a baby boom since. Today, government policies do not work to expand the supply of housing, as they did in the lead-up to the baby boom. They work to restrict supply instead. Research by Peter Tulip, of the Centre for Independent Studies, has shown that planning restrictions in Australia’s capital cities have inflated property prices by as much as 40 per cent. Local councils act like a cartel, artificially restricting supply in the face of increasing demand. This wouldn’t have such a large effect if there were affordable supply outside of the capitals – but there isn’t. Moreover, in contrast with the 1950s, housing is no longer seen as a form of shelter and security for young families, but is viewed as an investment vehicle. Restricted supply has created the conditions for a speculative bubble where investors do not need to worry about inflated prices, because they know they can still sell and make a profit. Those wishing to actually live in the houses they buy, however, are not driven by profit, and do have to worry about inflated prices. As urban planner and historian Joel Kotkin warns, this trend underpins an emerging “neo-feudal system” where people are relegated to being lifelong renters, unable to achieve the security that comes with homeownership. If left unchecked, this system will destroy Australia’s egalitarian culture, creating a stratified society where economic opportunity is once again determined by accident of birth rather than work ethic. Some would argue that the age of neo-feudalism is already here. The latest data on spending released by the Commonwealth Bank shows those aged between 25 and 29 have reduced their overall spending by 3.5 per cent since 2023, and are foregoing essentials such as utilities, groceries and insurance. In contrast, those over the age of 60 (those most likely to own property) are outspending inflation. Australians aged 75 and older are now spending 6.8 per cent more than they were just a year ago. Compared to this time last year, spending on luxury cruises has increased by 22 per cent. If we do not want to live in a neo-feudal future, where young people are relegated to being lifelong renters, opting for poodles instead of children and video games instead of marriage, we need to increase the supply of housing on a massive scale – and not just in the capitals. Read my full column here 👇 theaustralian.com.au/comment…