JobSeeker needs to be permanently raised. We need to build 500,000 affordable homes.

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What Australia needs going forward is a decent and fair welfare safety net. Not a punitive one.  We need to take care of each other and not allow people to live in relative poverty in Australia.  The JobSeeker rate should be permanently raised to its current coronavirus #covid19 level.  We don’t know that all those jobs that were lost will be recreated.  We don’t know the economy will reset.  What I do know is that people cannot live above the poverty line in Australia on ~$300 a week if they have to pay rent. That is just a reality.  If we return JobSeeker to the previous Newstart rate, we will I think, risk much higher homelessness, inequality, and relative poverty of young people, and increasingly families and children in Australia.

If you are living in poverty — how are you to find your way out of it without a helping hand?  I hope that if coronavirus has taught us anything is that these social safety nets were created after the war for a reason.  We should work as a society and care about each others welfare.  Every person is important.  Every job is critical. Government and super funds should be investing now in the 350,000 to 500,000 affordable housing needed in cities across Australia.  People need a safe place to live and they need work.

We are currently building only 3000 affordable dwellings a year (1).  A flaccid and weak attempt to deliver what the nation and it’s people need.  A failing on our people. Impotence in the investment into affordable housing over the last 25 years across the the nation has a created a shortfall of 433,000 homes (1).  Just mull on the number for a while, 433,000. That is almost half a million homes that should have been built already.  Homes we needed yesterday.  Homes that would help millions from falling into poverty.  Homes that would raise hundreds of thousands, maybe over a million, in this country out of poverty (2).  Just before the pandemic hit, there were 3, 000, 000 — that’s 3 million people — in Australia living in poverty, that is  1 in 8 adults and 1 in 6 children.  Living.  In.  Poverty (2). With another 1 million unemployed now, that number could rise substantially, maybe by a quarter or even double if something isn’t done soon.

The nation needs stimulus — right now — at this moment. What better thing could we as a nation do than secure the future safety of shelter to our young and at risk populations?  I can’t think of a better way to stimulate the economy.  Much better return in the long run than tax cuts to big companies that we, at this time, can’t afford.

The picture I chose for this article is a wonderfully beautiful Art Deco — Depression era building in Sydney. An example of one of the many fine structures built back then.  We can build to stimulate our economy.  We have done it before.  We just need to prioritise what we need.

(1) Julie Lawson, Hal Pawson, Laurence Troy and Ryan van den Nouwelant https://theconversation.com/australia-needs-to-triple-its-social-housing-by-2036-this-is-the-best-way-to-do-it-105960 date accessed 10 May 2020

(2) Acoss. Poverty in Australia. Is there poverty in Australia? URL: http://povertyandinequality.acoss.org.au/poverty/ date accessed 10 May 2020

Housing affordability in metropolitan Australia

Why are houses today too expensive to buy for the average person and especially young people in our major cities? Are elements such as negative gearing and overseas investors that are often blamed for the rising prices in the media and by politicians the cause of the inflated prices? Or is there something else that has caused the inflation? The short answer is yes. Yes there is. And quite simply it’s supply.

Demand and supply are two elements of the market that are directly linked. If demand is high and supply is low, prices will be higher. If supply is high and demand is low, prices will be lower. The problem in cities like Sydney is that there is a short supply of housing in areas where people actually want to live. Homes that are of a good size (2-3 bedrooms a good size if you are planning a family), in nice neighborhoods, close to schools, medical centres and hospitals, close to public amenities like parks and swimming pools, close to public transport and within a short commute from places of work, which for a city like Sydney is the CBD.

Over past decades new homes have been predominantly built on the outer fringes of the city, which has stretched our cities of Sydney and Melbourne to massive sprawling suburbia. As you head out into this sprawling suburbia land sizes of individual blocks of land get larger, houses get on average larger and are more spread out. The suburbs get larger, amenities are more spread out, hospitals are further away, work is much much further away, everyone requires a car just to do things like go to the shops or take the kids to school, because everything needed for life is so spread out.

This in turn means that the next set of new houses built is pushed even further again from the city centre. The toll of this on people buying their first home, is that they are forced to have a much lower standard of living than those closer to the CBD because they have to spend a lot more time commuting to the city to work in the morning and home again each evening.

People living on the city outskirts will spend several hours a day either in their car or on the train or bus in long commutes.  People living on the fringes often rely on cars to drive everywhere and therefore spend a lot more on petrol for their cars, as well as the other costs involved in car ownership, compared with people in the inner city who often don’t need a car and thus save money on not running a car. Former Liberal Party Australian Treasurer Joe Hockey infamously said in a radio interview in 2014 “The poorest people either don’t have cars or actually don’t drive very far in many cases” (1). In fact it’s the opposite, most “poor people” do drive cars and the costs of running a car helps to keep them poor. “Poor people” who live on the city outskirts tend to drive much further than those who live in the centre, who tend to be wealthier (2).

Houses are generally larger and temperatures in the west of the city are hotter than by the coast because they don’t receive the cool sea breezes, so electricity costs are higher as homes require air conditioning to remain pleasant to live in.

Long commutes are a waste of peoples time, and seriously cuts into peoples recreation time. Time that could be spent with family or friends. High electricity bills and costs of running a car that is used everyday cuts into peoples ability to save money or spend on items to make their life more pleasant.

The short supply of housing in the inner city has pushed house prices up so high they have become unobtainable for people that did not already own a home in Sydney. In the suburb I live in, Marrickville in Sydney’s Inner West about 6 km from the CBD, the median price for a 2 bedroom house is now $1.23 Million (3). The median price means the price in the middle, it’s a bit like the average but a better indication of the middle price people are paying for homes.

In comparison the median price for a 2 bedroom house in Campbelltown, a suburb on the outskirts of Sydney’s western suburbs, is $476 thousand (4). People who live in Campbelltown and work in the city centre will commute for at least 2 hours a day.

So why is a 2 bedroom house where I live so much higher than that of a 2 bedroom house in Campbelltown? The simple answer is demand. There is high demand for houses in suburbs like Marrickville because they are convenient place to live, we have schools, public transport (trains, buses and close connection to light rail), medical care (like GPs, specialists rooms, dentists, radiography services), grocery shops and a shopping centre all within walking distance from homes. There are top hospitals and universities like RPA and The University of Sydney and University of Technology Sydney only 4-5 km away. For people with disabilities there is more access and choice when it comes to disability services. Suburbs closer to the city tend to have more people around and so there is often a greater sense of being in a community than out in the outer suburbs where you can often feel isolated in your street or home. There are cultural and community events in the inner city like weekend markets and theatre, all of which make life more enjoyable in the inner city. Another reason for higher demand in the inner compared to the outer suburbs is that crime rates tend to be lower in the suburbs closer to the city, obviously with a few exceptions.

In my opinion, more focus needs to be on increasing the supply of homes in the CBD and inner suburbs of cities (within 10 km of the CBD), because this is where people want to live based on price data. Yes, people who are already lucky enough to live in the inner suburbs will argue “But there aren’t enough schools! There aren’t enough hospitals! Over-development! I don’t want high rise apartments over looking my house!” . Government has tried to to increase supply and there has been massive backlash in these communities about any new development. This viewpoint to me seems very selfish and short sighted.

My question to those people resisting development and resenting newcomers is, why do you think that you deserve to live in a convenient area, but other people do not? Is it fair that just because you were there first, future generations are forced to live at a poorer standard of living and have to live in an area which is not good for a productive economy because of the high costs on it’s residents, because you were here first? I don’t think that is either fair or good for the economy or society. It ultimately increases inequality in society.

Census data helps governments to determine the number of hospitals and schools built in an area. If more people move to an area, government will see in the Census that the area requires more infrastructure. If zoning laws are changed to allow more housing to be built in the inner suburbs, government can also plan to deliver more hospitals, schools and public transport, for example the new Sydney Metro line going up along the Bankstown line (one of the two main train lines through the Inner West of Sydney) coincides with the opening up of zoning for high rise residential apartments along the Bankstown line corridor.

In the past, and even in the present the most creative and productive areas of cities are not the outer fringes but the more highly developed inner city. If we want to make productive cities we need to make them more livable, which includes increasing the sustainability of our cities by reducing the number of petrol cars on the road, and increasing the happiness of residents by decreasing commuting times and the cost of living.

Reference

1. URL: http://jbh.ministers.treasury.gov.au/transcript/075-2014/ date accessed 12 June 2018.

2. URL: http://www.abc.net.au/news/2014-08-15/joe-hockey-poor-people-cars-claim-misleading/5671168 date accessed 12 June 2018.

3. URL: https://www.domain.com.au/suburb-profile/marrickville-nsw-2204 date accessed 12 June 2018.

4. URL: https://www.domain.com.au/suburb-profile/campbelltown-nsw-2560 date accessed 12 June 2018.

The Looming Sydney Housing Crisis

What is it that people say? It’s a recession until you loose your job, then it’s a depression. I feel it’s a bit like that with the Sydney housing market. It’s not a crisis, it’s a bubble, until your bubble pops and you are pushed out of the property and rental market because you’ve been out priced.

One of the problems with the Sydney housing market is that it’s been treated by many as an easy no brainer investment class. I’m talking about people who buy houses as an investment to sell at a profit rather than to live in them. It doesn’t really matter whether they are local baby boomer investors or overseas investors, the end result is that because there has been so much speculation in the market for so long, we in Sydney (and Melbourne) have seen an artificial elevation in house prices that is not linked to wage growth. This has ultimately out priced many younger people from the market, and basically anyone who wasn’t on the property ladder to begin with.

Now there is a phrase I have a real problem with “the property ladder”, which implies a buying and selling of properties to upgrade ones housing, presumably for comfort, but more recently (say the last decade at least) for sheer profit.

The thing about houses is they don’t generate any income until they are rented out or sold, and if you have a very big loan you won’t really see the revenue until you sell. People have seen housing as an easy get rich quick scheme, they don’t tend to loose value because people always need somewhere to live, and the more people started investing, the more new investors were drawn in. Until recently property investors (that sounds a bit ominous “investors”, but here I mean anyone who was not buying a property for themselves to live in long term) could buy in parts of Sydney and sell a year later making a 20% profit. It’s a bit reminiscent of other bubbles in the past, most recently the Bitcoin bubble which worked on the same easy money principle.

The problem with the housing bubble, is that it’s not just currency like in the case of Bitcoin, it’s houses, that is homes that people live in. If prices get too high many people are spending too much of their income on loan repayments or rising rent prices. This becomes a delicate balance and if something happens, like you loose your job or prices go up again or let’s say interest rates rise, some people are ultimately going to be pushed off the edge, when their bubble pops (e.g. they can’t make their mortgage repayments and default on their loan). This  can even be the first step towards homelessness. If you are a young person paying high rent with low wage growth and probably low wages due to the casualisation of the workforce that is happening in Australia, you can’t even save enough money to become an investor or home buyer to get yourself out of paying high rents.

The problem is, houses only really generate income when they are sold, and because people have seen the housing market as an easy way to make money there has been a massive wave of speculation. The housing market isn’t as complicated as the stock market, prices have tended to go up without the investor having to do much research or anything much once they have invested. Sure this has made some people rich, but the purpose of housing, something I think people in Australia and some other parts of the world have forgotten, is that houses should be viewed primarily as places for people to live in, not an income generating stream or investment class.

Investing in housing only pushes house prices up and doesn’t have any real benefit. Because really, if you own a place that is overvalued, there will eventually be a price adjustment (read price fall). You don’t really have a million dollars if you own a house valued at million dollars. You own a house and if you sell you will only receive what the market says it’s worth. You only have a million dollars if you sell that house for a million dollars and put that money in the bank.

People should be investing in local businesses and companies as those forms of investment do generate income and they can cause growth in the economy in areas that actually have some benefit to Australia like growth in jobs and wages. Australia has had so many great new technology companies leave because they couldn’t find investors here. The ones that spring first to my mind are the new energy solar power companies that went to China or the US when they couldn’t find investors here. There are your jobs of the future and they’ve all gone overseas and will never benefit Australia.

Australia having a trillion dollars in private home loan debt is not benefiting anyone except the banks that are selling the majority of the loans (1), who will see even more profits roll in when interest rates eventually rise, and they will eventually rise . It wasn’t that long ago real interest rates were around 6% and in the 1980’s they came close to 8% (2). I’m talking about real interest rates too here, not what the banks charged as the interest rate on their home loans which reached staggering levels close to 17% in the 1980’s. Anyone with a large home loan should be very concerned about what interest rate they are paying. If interest rates were raised a few percent higher without wage growth in Australia, many borrowers would default on their loans.

Being tied to high home loan repayments and rents also limits what households can spend as consumers, because all their income is going into housing. This also does nothing to stimulate wage growth and other parts of the economy.

To exacerbate the problem there has been very poor housing affordability policy by all levels government which has played a part in rising house prices and household debt.

The Housing Bubble and Homelessness

We are already seeing the effect of this bubble in the increase in homelessness in Sydney. Don’t think there is a connection between homelessness and rising house and rental prices? Think again. When the Government doesn’t provide enough crisis housing or long term housing for people on low incomes, and the unemployment policy is that if you leave an area with more jobs (like Sydney) for an area with less jobs (like a country town with a cheaper cost of living) you could be cut off unemployment benefits.

So picture the scenario,  you loose your job or you get sick and can’t work for a long period, then because of the drop in income you can’t pay your rent or mortgage and you loose that place. You can’t afford rent on a new place in your area because you haven’t found work again and there is not enough crisis accommodation for all who require it, so you have to find somewhere to go. You probably can’t leave Sydney and move somewhere cheaper because you will be cut off any unemployment benefits by the Government. If you can’t find a place you can afford in the city and unless you have someone who can support you you might eventually end up homeless. you might couch surf for a while, but one day you might run out of people to stay with or you might have some kids, and your friends don’t have room for all of you, so you are living in your car, until you can’t afford your car anymore.

This is a reality, and it is partially caused by housing speculation. There are however many other contributing factors to homelessness. Low wage growth, poor housing policy by Government, poor (or should I say stagnant and un-evolving) unemployment benefit policy and poor mental health and domestic violence policies by Government have all contributed to homelessness in Australia.