Friday, December 24, 2021

Why won’t governments fix housing affordability?

Becausre they CAN'T. No government has ever found a way. And the reason is simple. Housing is a commodity like everything else that is bought and sold. And anything that is bought and sold is governed by the law of supply and demand. If the demand outstrips supply, the price will rise. So it follows that there is only one way to get the price of housing down. You have to increase the supply of it

But governments put up lots of obstacles to block an increase in supply, -- principally land use restrictions. And local governments are big on both lande use restricions and building restrictions. So local governments have to be stamped on to increase the supply of housing. And that is politically dynamite any time it is attempted. Existing homeowners like the restrictions. They keep "riff raff" out of their neighbourhoods

Rapidly rising property prices have led to increasing concerns around affordability, but support for government intervention may actually decline as affordability worsens, a new paper suggests.

Authors of the study argue that homeowners seek to protect their property price gain from being taxed away or undermined by growing housing supply, resulting in less support for government intervention in housing market inequality.

While based on European data, local experts and economists say it points to the challenge of rolling out reforms to improve housing affordability when more people, and voters, are homeowners than not.

Grattan Institute household finances program director Brendan Coates said the politics of improving housing affordability was fraught because most voters already owned a house or investment and mistrust any change that might dent property prices.

“The interest of homeowners tends to outweigh the interest of renters. There’s that classic adage from John Howard who [as prime minister] said that no one is complaining in the streets about their house value going up,” Mr Coates said.

The political consequences of housing (un)affordability, published in The Journal of European Social Policy earlier this month, used data drawn from European and British social surveys and an analysis of British elections to explore the relationship between housing affordability – house prices relative to incomes – and the demand for redistributive and housing policy.

Authors Ben Ansell, a professor at Nuffield College and the University of Oxford, and Asli Cansunar, an assistant professor at the University of Washington, found consistent evidence that declining affordability, driven by increasing house prices, decreases support for interventionist housing policy, especially among homeowners across Europe, and increased votes for the conservative party in the UK.

The beneficiaries of unaffordability, who they noted were those who own property, will prefer to keep policies and parties in place that keep prices high and rising, they concluded. However, while citizens on aggregate become less supportive of intervention, this masked a growing polarisation in preferences between renters and owners in less affordable regions.

Mr Coates said the research design was plausible in the European context, and that poor affordability would likely impact the preferences of political constituents. However, it was not clear if the politics would play out the same way in Australia, noting that at the last election, when Labor was promising changes to negative gearing and the capital gains tax discount, the electorates that swung to Labor tended to be those of higher income earners, while lower income electorates swung toward the Coalition.

However, Mr Coates also noted it was inner city working-class suburbs that had won big in the “housing lottery” as prices climbed over the years, as they were the group with the largest share of their wealth in housing, while the wealth of higher income earners was typically more diversified.

Mr Coates added there was a clear trend in Australia, though, of wealthier areas being more resistant to increased housing supply, but this was driven by multiple factors and not just potential concern of downward pressure on property prices.

“The real question in the Australian context, where there are clearly more house owners than renters making housing policy transformation really hard, is whether there is enough interest from baby boomers … sufficiently worried about whether their kids can ever buy, that leans them more to reform.

“Or whether the solution [they reach] is to double down … by giving [their children] more access to the bank of mum and dad [to get into the market].”

Mr Coates said both tax reform and increased supply would be key to improving housing affordability in Australia, and worried about staunch proponents of either approach downplaying the other at the current inquiry into housing affordability and supply in Australia, when both were clearly needed.

Independent economist Saul Eslake said supply side reforms were only part of the solution and the federal government needed to back away from policies that inflate housing demand, and had been pursued by both sides of government, such as first-home buyer grants, negative gearing and the capital gains tax discount.

It was a tragedy that Labor had walked away from proposed changes to negative gearing and the capital gains tax, he noted, with the opportunity for such reform now possibly gone for a generation.

A greater focus on building more social housing was also needed, with both parties allowing the proportion of such housing to decline egregiously over the decades.

Appearing before the affordability inquiry last month, he asked members of the committee whose interests they were most concerned about: the 11 million Australians who already own at least one property, and the more than two million who own more than one, or the minority, albeit a growing minority, who have been unable to buy. He noted their answer would determine what they recommended to Parliament, with their report expected early in 2022.

Mr Eslake said while politicians shed “crocodile tears” for young Australians struggling to get onto the property ladder, there was a huge gulf between what they say and do. However, Mr Eslake, who also referenced Howard’s comments, acknowledged most homeowners did not want to see government action that would stop the value of their property going up.

“There is a very large constituency that is resolutely opposed to anything that would dampen the rate of house price inflation, yet that is surely at the heart of what you have to do if you’re going to solve the affordability issue.”

Mr Eslake said it was unclear if Australians had become any more opposed to redistribution policy as affordability declined, but noted that while Australia had quite a progressive income tax transfer system, wealth was taxed very lightly compared to other countries.

Any polarisation in preferences between renters and owners was less obvious locally, Mr Eslake added, saying he was often surprised that there was not more anger from young Australians about the way in which the market has been rigged against them by their parents’ generation. But even if they were to adapt their voting behaviour, he said, who would they vote for, with no big reforms on the table from either party.

The last federal election showed the concern homeowners had for housing reform.

Economist Jim Stanford, director of The Australia Institute’s Centre for Future Work, said that in the context of declining housing affordability it made sense for homeowners to be more cautious about their future and reforms, as they could feel more insecure in their situation, but was sceptical of the paper’s suggestion that they had benefited from unaffordability, noting few could sell off property without needing to buy elsewhere.

Many would also worry about their children and see that their kids did not “have a hope in hell” of buying a decent property, if poor affordability continued.

“I don’t think they are better off, even middle-class homeowners would be better off with a policy that thought of a housing as a more basic service. I don’t accept that they have made money off this boom [and just want] to continue to,” he said.

However, the last federal election had shown the concern homeowners had for housing reform, Dr Stanford said, noting that rightly or wrongly, those who saw themselves as housing investors could be influenced by scare campaigns against policies that made a lot of sense, like Labor’s proposed change to negative gearing.

“The government tried to portray it as a tax on homeowners, which is nonsense, but given how the election unfolded everyone is going to be curious about what they propose in this election, that experience sort of ratified the point … with this article.”

Dr Stanford said a big part of the solution would be building up Australia’s supply of non-market housing, which governments had basically walked away from over the last generation, with the time right for an ambitious plan to build more social and affordable housing.

Housing Minister Michael Sukkar and shadow minister for housing and homelessness, Jason Clare, were contacted for comment.


Australia to get the first of its nuclear submarines FIVE YEARS ahead of schedule as America fast-tracks $90billion project in face of rising tensions with China

Rising tensions with China have fast-tracked the delivery of the first Australian nuclear submarine under the $90billion deal with the USA and the UK.

Australia now looks set to launch its first nuclear-powered submarine five years ahead of schedule as the West braces for confrontation with China.

Defence Minister Peter Dutton has revealed the UK and US are 'pulling out all the stops' to speed up the massive project.

The controversial deal - which saw Australia abandon its contract with France for a fleet of diesel submarines - could now see the new subs coming into operation in the first half of the 2030s.

They were originally not expected to join the Australian naval fleet until 2040 at the earliest, but the US Defense Department is pushing to bring the timeline forward.

It comes as fears grow of a stand-off between the West and China over Taiwan, with Australian pledging to support any US response if the situation escalates.

'I think we are advancing at a quicker pace than what we could have imagined even at the time of the announcement,' Mr Dutton told The Australian.

'There has been no game-playing, no roadblocks, they are pulling out all stops to make this work. It’s a capability that we want to acquire quickly and we are in those discussions right now.'

He added: ' I think it’s the Americans’ desire to see us with capability much sooner than 2040 and obviously options are being explored at the moment.

'I believe very much we can realise the capability in the first half of the 2030s and we are absolutely working towards that and I am only encouraged, not discouraged, out of the conversations we have had.'

Mr Dutton also hinted the submarines could even be built in Australia, despite the current lack of suitable shipyard facilities or nuclear power knowledge.

Australia has yet to decide if they will be using the US Virginia Class nuclear submarine design or the UK's similar Astute Class.

But any move to manufacture them in Australia will require training shipyard workers, new equipment and specialist nuclear experts.

Some experts have predicted that may not be possible within the new shortened timeframe to rush the submarines into service.

However moving production to Australia may be inevitable as Mr Dutton said the UK and US had limited spare production capacity to build the Australian submarines.

And he said work was already underway with the international partners on designing local shipyards.

The new timeframe now matches the original plan for the introduction of the axed French submarines which were due to come into service in 2035.

Australia's current Collins Class submarines would need major overhauls to extend their service life beyond 2038, making it vital to get the nuclear subs in the water as soon as possible.

The deal with the US and UK is for eight nuclear submarines, and they are likely to be built in Adelaide if the plan to manufacture them locally goes ahead.

China branded the AUKUS deal as 'extremely irresponsible" and has now pushed its backing for a nuclear-free treaty for south-east Asia.

A Chinese government official Lijian Zhao said the deal will 'intensify regional tensions, provoke a military arms race and threaten regional peace and stability.'

Mr Dutton said the rhetoric against Australia should be seen as just part of China's attacks on all the other nations which oppose it and speak up against them.

He added: 'We want a productive and fruitful friendship with China. 'But we have values that we adhere to and we will not deviate from those values and adherence to international law.'


Climate, the far-Left and the devilish problem facing the Greens

Rachel Griffiths, the Golden Globe-winning Australian actress, is no stranger to prompting public debate through outrageous stunts.

In 1997 the Muriel’s Wedding star famously paraded semi-naked outside Melbourne’s Crown Casino in protest of a state government she claimed was “raping” the city of its dignity, compassion and sense of community. When asked by a journalist why she felt the need to be topless, Griffiths replied: “If I didn’t flash my tits, you wouldn’t have put me in the paper.”

It’s what makes Griffiths’ most recent political commentary all the more interesting.

When the Australian Greens party announced a proposal to ban horse racing and impose a 1 per cent levy on all bets to fund a transition, Griffiths was outraged.

“When the planet is melting this will not help you save it. Focus on carbon emissions/boosting infrastructure and you might make a difference,” she wrote on Instagram this week.

She said a ban on the nags would only alienate any Greens voter who was over 40 living outside all but six inner-city postcodes and “help re-elect a government you won’t have a voice in”. Griffiths, who coincidentally now plays a crossbench MP in ABC political drama Total Control, neatly highlights the challenge the Greens have in the coming months.

It is an increasingly contested space for minor parties to find relevance, cut-through and, importantly, air-time. It will be even harder as the election looms with several climate-focused, progressive, independent candidates stealing their limelight as they fight for seats that not so long ago the Greens had hoped they might one day win.

In Melbourne the Greens vote in both Higgins and Kooyong leapfrogged Labor in recent years and put them both firmly in the targets of Adam Bandt’s party. But the independent push is now costing them members, donors and likely volunteers at voting booths on election day.

And so once again chances of winning any of the 10 or so lower house seats identified on the party’s regular triennial hit list are already looking bleak.

The Greens vote has for more than 15 years now been highly influenced by the wider context of the public debate and the issues which voters perceive the election to be about. Loyalty levels of its voters are well below those of the major parties, but if issues which are strongly associated with the Greens are front-and-centre then they can be assured of some success. If not, things go backwards.

While the Greens have often targeted “soft” Labor voters, they’ve found there are equally a lot of “soft” Greens voters that they can - and often do - lose at each election.

Which begs the question, what is the relevance of the Greens at the next federal election? Can they ever again match the almost 12 per cent of the vote achieved under Bob Brown in 2010 or has their influence peaked?

On Sunday this masthead reported that businessman Graeme Wood, who has poured more than $2 million into their campaigns over the past decade, had grown frustrated with the party. The founder of online travel company Wotif said they needed a “shot in the arm” because the party’s support had not increased in the past decade.

Wood isn’t the only big donor over the Greens. David Rothfield, an environmental campaigner and philanthropist who donated half a million dollars to the Greens, Labor, and activist group Get Up, has quit the party. He’s joined the “Voices of” movement to oust incumbent Liberal MP Tim Wilson in the seat of Goldstein.

Former Wallaby [Rugby footballer] David Pocock, who is tight with a number of Greens figures, is standing as an independent for the Senate in the ACT. Those close with him say he stands a better chance of being elected without the baggage of the party and is assured of their preferences in a jurisdiction where the Greens vote is north of 17 per cent.

Pocock, outspoken on social justice issues and was once arrested after chaining himself to a digger at a NSW coal mine protest in Leard State Forest, says he is open to receiving money from businessman Simon Holmes a Court’s Climate 200 fund, a war chest of as much as $20 million to bankroll candidates who are cutting the Greens lunch.

The party can take credit for consolidating its 10 per cent of the vote over a decade but has all but dealt itself out of negotiations by regularly ruling out deals with the Coalition. The handful of times it was prepared to reach deals with a conservative government it was torn apart with bitter internal feuding.

So, why would Anthony Albanese agree to a power-sharing deal if he can’t win a majority at the next election? He knows Bandt would always back a Labor government on supply.

Bandt hopes to make the Greens the biggest third party in the Senate’s history by adding two seats at the next election. But when he promises he’ll win extra lower house seats and influence government policy, that’s what he will be judged on.

The Greens’ long-term issue is that they’ve become the natural home of anyone who is concerned about climate, but also of the far left. And when their broader policies alienate those who care about the climate but aren’t of the far left, that’s when a Climate 200-backed independent might be a more appealing choice.


Paradise Dam will be rebuilt to full capacity

The State Government has determined Paradise Dam will be completely rebuilt following detailed investigations and extensive safety works.

It comes after work to lower the dam’s spillway and install the temporary crest were completed earlier this year amid ongoing concerns about the dams structural capacity.

Minister for Regional Development, Manufacturing and Water, Glenn Butcher said the dam would be rebuilt to full capacity.

“From the start of this process we’ve said the solution must deliver water security and safety for the people of Bundaberg – this option delivers both,” Mr Butcher said.

“We’ve heard from the Deputy Prime Minister and other Federal Government representatives that they’re open to providing funding for this project.

“We’ve been working with them collaboratively and will continue those discussions. “Further details about the project will be released in the new year.”

Member for Bundaberg Tom Smith thanked the Bundaberg community for its patience. “I know this has been a tough time for our community and the agricultural sector,” he said. “I’m really proud of how our community has come together to work with the Government to find a solution on this project.

“I can also confirm today that irrigators will not be asked to pay the cost of returning the dam wall to full height.

“These works, once underway, will be a significant undertaking that will also create hundreds of jobs in our region.




No comments: