March 2022

The Nation Reviewed

House of the rising sum

By Russell Marks
Illustration by Jeff Fisher
COVID has not slowed Australia’s property crisis, with more people locked out of the housing market and more left homeless

It’s just before Christmas, 2021. Omicron has been on the loose since South Australia opened its borders a few weeks ago, but it hasn’t deterred 150 people from crowding outside a modest 1990s suburban brick-veneer bungalow with a “For Sale” sign out the front. Auctions are now the only events that bring the suburbs to life. We’re in Mansfield Park, a north-western Adelaide suburb, the name of which causes my 95-year-old grandmother, who lived two suburbs closer to the coast for 30 years, to screw up her nose and say, “That’s where all the migrants went to live after the war.” Her racism expresses a salient point: it has never been a “desirable” suburb.

Today, though, there’s a lot of desire. Or desperation. Commercial banks’ interest rates are already on the rise despite Reserve Bank of Australia governor Philip Lowe’s extraordinary declaration that the RBA won’t touch the cash rate before 2024, and first-home buyers are clamouring to get into the market. This property is too small to subdivide, and you’d struggle to get even a single bed into two of its three “bedrooms”. The bidding opens at $400,000. Similar properties are listed at $470,000, but within three minutes it sells for $740,000. Its vendors have realised an average capital return of 28 per cent each year they’ve owned it. A woman who lives down the street had been walking her dog and stopped to watch the auction. She’s close to convulsing by the time of the third call. “But this is Mansfield Park,” she gasps.

“Unprecedented” is a word in common usage to describe Australian housing markets, and Adelaide’s is no longer an exception. Like other capitals, Adelaide’s real estate is now drawing overseas investors attracted by the relatively low prices and high rental yields, and looking for ways to spend their annual overseas holiday funds. Our own plans to move back to my home city, half-baked in a share house a year and a half ago, were made when we could have easily bought a house in the western suburbs, where I grew up. That dream slipped away during the last months of 2021, as we scrambled to get pre-approval for a bank loan. In the end we bought a house in Adelaide’s elongating south after someone else’s offer, $50,000 more than ours, fell through.

With our Australian citizenships, professional incomes and no kids, we’re among the lucky ones. As house prices climb to mesospheric levels, the number of first-home buyers who will be locked out of the market will continue to grow. In the past month, the queues people have joined to merely view some Adelaide properties have snaked so far around the block that inspections closed before everyone got inside. Reddit is full of stories of people making dozens of unsuccessful offers. Some real estate agents are refusing to sell unless buyers waive their rights to a cooling-off period or to have properties inspected for structural and termite damage.

In capital cities last year, the median house price rose 21.9 per cent to more than $994,000. In contrast, with the cash rate at a tenth of 1 per cent, banks are paying practically no interest on cash deposits. As a result, the house deposits people have taken years to save are losing value (in real terms) with each passing week. There are noises of a slowdown in Sydney and Melbourne, but practically every prediction of a correction, a burst bubble, a downturn or even stagnation over the past three decades has amounted to zilch. The plague of skyrocketing property prices has spread from the two biggest cities to the other capitals and up and down coastlines: regional house prices grew at an even faster rate than capital cities. Like a cockroach in a nuclear winter, Australia’s housing market has survived both the global financial crisis and COVID-19, which halted immigration, increased uncertainty and was supposed to collapse demand. Instead, 2021 was the greatest boom year of them all and there’s no sign of abatement.

When the first baby boomers were in their mid twenties, 55 per cent of them owned their homes. Home ownership rates have declined across all age groups since then. Meanwhile, the proportion of us who rent from private landlords has increased from 18.4 per cent to just under 30 per cent in 2016. Gradually, inexorably, house ownership is concentrating.

We’ve known these trends for a long time. They’re the outcome of policy settings that elevate the preferences of investors well above people’s needs to have somewhere to live. First-home buyers are pitted against negatively geared boomers and tradies and doctors buying their fifth or tenth properties. That wouldn’t be such a problem if retirement and unemployment pensions could cover private rent (they can’t), and if tenants had long-term leases (they don’t) and were protected against summary eviction (in most states they aren’t).

COVID was also supposed to have kicked the stuffing out of the rental market. Initially, we kept to the script: rents briefly fell in 2020. Since then, the absence of international students has somehow coincided with a rising demand for rental properties in most cities. Go figure. While Melbourne rents did drop slightly during the locked-down year to June 2021, prices in Adelaide, Brisbane, Canberra, Hobart, Perth, and especially Darwin (21.8 per cent) and regional areas (11.3), took off like never before.

Briefly in 2020, landlords were prevented from hiking up rents for existing tenants. Those who wanted to simply evicted their tenants anyway, which they’re allowed to do in some states if they give three months’ notice. My partner, a social worker in Adelaide, comes home with stories of single parents being evicted without fault and then relying on the help of housing workers who can’t find rental properties for themselves.

Notoriously, Anglicare’s annual rental snapshot finds that, at any given time, a single person on JobSeeker can afford only two or three rental properties in the entire country. Meanwhile, state governments have been busy selling off their public housing stock, often to non-government organisations that run “transitional” housing programs (as if there’s a private tenancy at the end of their rainbows) or “community” housing programs (in recognition that many people who remain in social housing have complex needs). In its postwar heyday, Australia’s public housing system mostly housed people who had jobs. Means testing has become increasingly stringent over the neoliberal era, as the supply of appropriate properties has contracted. The proportion of people renting from government housing departments has halved since the mid 1990s, while “waiting lists” really need inverted commas to denote their redundance.

In Adelaide, homeless Aboriginal families are provided – if they’re “lucky” – with 12 weeks’ accommodation (in exchange for a proportion of their Centrelink incomes) at the back of an NGO office. If they’re even luckier, they’ll get another six to 12 months’ accommodation before they’re expected to transition either to other social housing, with their dizzying waiting lists, or to private rental, where they’ll compete for properties with dozens of other applicants in the context of a vacancy rate that’s lower than 1 per cent. Callers to Adelaide’s much-vaunted homelessness hotline, which commenced in October 2020, have been told to find a 24-hour McDonald’s to spend the night.

Overcrowding is so chronic in many Aboriginal households that one woman who recently tested positive to COVID-19 in Yuendumu, on Warlpiri land in the Northern Territory, was forced to isolate under a tree. Meanwhile, the NT housing department has spent the past six years – and significant public funds – in a legal battle with residents of the Ltyentye Apurte community, on Arrernte land. The department’s argument has been that it can continue to collect rent from people – since the 2007 Intervention, the department has controlled most houses in most communities – without being obliged, as landlord, to do repairs or ensure houses are habitable. People often go without working stoves or air conditioners for months before the department sends someone to fix them. The department lost in the Court of Appeal in February.

One of the more redundant compilations of government data is the Productivity Commission’s annual report on housing and homelessness services, which reproduces what governments tell themselves – “the main aim … is to ensure that all Australians have access to affordable, safe and sustainable housing”, complete with a fantasy flowchart in which all arrows lead to that outcome – while keeping silent about the fact that people are waiting more than a decade for social housing. That flowchart should really be a stagnant pond chart, or even a circular chart that shows more and more routes to homelessness.

Because they defined it as an emergency, governments managed to find accommodation for 40,000 homeless people during the first wave of the COVID pandemic. They even commandeered entire hotel floors to get it done. In England, two-thirds of the rough sleepers who had been temporarily housed were ultimately moved into stabler accommodation. Not so here: after we showed people what it was like to have a place to live and just enough money to live on, we evicted them and cancelled their Coronavirus supplements. It may have been less cruel to simply have left people on the streets. Mere homelessness, it seems, is no emergency at all.

Many politicians own healthy property portfolios. Peter Dutton has three investment properties (in addition to his place of residence). Karen Andrews and Ian Goodenough both have five. Our political class has looked after its own, pursuing policy settings – unlimited negative gearing, ever lower tax rates on personal and business income and on capital gains – which allow investors like them to amass subsidised portfolios at the expense of the growing minority who will never have a first house. It would be difficult to imagine a set of housing policies better designed to entrench two classes – the propertied and unpropertied – which “egalitarian” Australia so proudly eschewed for much of its history, at least for settlers. The typical homeowner became $130,000 wealthier last year alone. Friends of ours who bought a house 18 months ago are now 50 per cent wealthier – not, as our Lockean anthem claims, for toil, but simply for owning a house. Is there a less productive means of wealth creation?

When it was led by Bill Shorten, who owns no investment properties, Labor went to the 2016 and 2019 elections promising to claw back half of the capital gains tax discount that John Howard introduced last century, and to limit negative gearing to new properties. Those policies have been ditched under Anthony Albanese, who has two investment properties. No matter who wins the next election, the rich will continue to get richer at the expense of the unpropertied.

If they keep their houses, that is. Housing costs make up nearly a quarter of the basket of goods and services that is used to measure Australia’s inflation rate, so property prices and rents must be putting significant upward pressure on inflation. Lowe’s “not before 2024” pledge on interest rates looks shakier each day. Meanwhile, the Council of Financial Regulators – the banking watchdog – is worried that banks, notwithstanding the royal commission in 2018, have been lending too freely and too riskily: Australian households are among the most indebted in the world as a proportion of GDP, and more indebted than Americans were before the GFC. First-home buyers who have just taken on gargantuan mortgages will feel tiny interest rate rises like pincers. While investors will no doubt pass the pain on to renters, there will be some owner-occupiers who just won’t be able to keep up.

Russell Marks

Russell Marks is a lawyer and an adjunct research fellow at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

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