The national conversation about our housing crisis is too antagonistic.
Too often, it’s pitting younger Australians against Boomers, and that’s putting Boomers on the defensive which, in turn, is making genuine conversation, where people are willing to listen to each other, extremely difficult.
Is it contributing to policy paralysis?
I suspect it may be, because governments are more likely to want to fix a problem if they’re relentlessly pressured by a large amount of voters of all ages to do so.
So, we need to realise it’s in most peoples’ interest to fix our housing problems, as recent research makes clear.
The housing crisis is increasingly impacting home-owners
Experts have published numerous reports on this topic in recent years for the Australian Housing and Urban Research Institute (AHURI).
They say something extremely serious has occurred in Australia.
They say the old post-war compact for housing policy, where governments created the ‘Australian Dream’ of widespread home-ownership in the 1940s, 50s, and 60s, by making housing affordable for most Australians, supported by a labour market where full-time employment and regular wages growth was the norm, was abandoned decades ago.
They say that old set of policies was replaced by a system that now privileges current homeowners (and the children of homeowners) while leaving aspiring homeowners in the dust.
They’ve explained how that change in policy has led to a situation in which it’s become increasingly unrealistic for younger Australians to be able to buy a home by simply working hard.
They say younger Australians know this already.
Home ownership rates for people aged 30 have been declining for two decades – from a high of 65 per cent among those born in the late 1950s, to roughly 45 per cent for those born in the 1980s.
Some researchers say the budgeting strategies younger Australians use to try to save for a deposit are “increasingly insignificant” these days, in the face of rapidly rising house prices, precarious modern work contracts, stagnant wage rates, and the rising cost of living.
They say a huge number of problems younger people face can be traced back to the 1980s and 1990s, when major reforms to Australia’s labour market regulations and wage-setting institutions, initiated by the Hawke-Keating Labor governments, contributed to the disappearance of the “norm” of full-time secure work.
“Whereas older generations experienced relatively secure employment, facilitating the accumulation of savings over time and thus enabling mortgage finance to be secured, this is now becoming the exception rather than the norm,” researchers said recently.
“Many young people, even those with tertiary education, good jobs and incomes, find themselves locked out of home ownership,” others said.
And this is where current homeowners come in.
Lives disrupted, along with financial plans
According to these experts, after government policies morphed in Australia from helping people into home ownership into support for property ownership for already asset-rich Australians, the likelihood of becoming a homeowner has become much more dependent on one’s parents.
That means home-owning parents are increasingly having their own lives and financial plans disrupted.
“With the systemic and at times rapid increase in house prices that has characterised the Australian housing market over the past three decades, the increasingly challenging requirement to accumulate savings for a deposit has placed a growing premium on parental support,” researchers say.
Parents are aware of this, and those who can afford it are handing over larger amounts of money to their children, in an arms-race with other parents, to help their children get into the property market.
“We know that in 2010 around about 12 per cent of people [who were] first home buyers were getting assistance from the bank of mum and dad,” University of Newcastle youth sociologist Julia Cook told ABC RN’s The Money podcast last month.
“It got up to about 60 per cent from 2017 onwards, so it’s grown enormously,” she said.
Researchers say home-owning parents are increasingly having to provide support in other ways too.
They say young people are staying in the family home for longer than past generations, and returning more often, living either rent-free or paying board, and that includes high-earning young people.
That strategy makes obvious financial sense for young people, as the numbers show, but it’s also disrupting parents’ life plans.
“Relative to renting, longer periods spent co-residing in the parental home are associated with an increased probability of transitioning into home ownership. Each additional year spent co-residing is associated with an increase in the probability of transitioning into home ownership of around 40 per cent,” researchers say.
And what about peoples’ retirement plans?
Other researchers have noted that, for people who have managed to get into home ownership, larger mortgage debts are causing an increasing number of older workers to delay their retirement.
That comes with its own financial risks.
“As growing numbers of mature age Australians are carrying mortgage debt later in life and delaying their retirements, increasing numbers will be working when the risks of adverse life shocks are higher,” those researchers found.
“Serious ill health, for example, is a career threatening hazard with an elevated risk in later life. Marital breakdown and redundancy are shocks that also involve higher risks because it is more difficult to recover from such shocks in later life.”
Is this what we want from life?
It all begs the question: is this making us happy?
Some researchers have noted that these multi-decade trends have transformed Australian politics, turning residential property owners and investors into a powerful political constituency.
“This constituency votes with its feet by supporting political parties that pledge to continue with policy settings (especially tax incentives such as negative gearing and capital gains tax exemption for the family home) that supercharge wealth accumulation through property ownership,” they explain.
“Indeed, the rise of the asset economy has taken place in parallel with a shift in voting patterns. The 2019 Australian Election Study observed a move ‘away from occupation-based voting and towards asset-based voting’,” they say.
Do policymakers think that’s good for the country, in the long-term?
That’s probably the wrong question, given the disproportionately large number of landlords sitting in federal parliament.
But look outside politics.
Last week, a major study from Australian National University (ANU) and the Scanlon Foundation Research Institute found that social cohesion fell in Australia this year to its lowest level since the survey began in 2007 (16 years ago).
The study of over 7,500 people found nearly half of participants (48 per cent) think economic issues are the most important set of problems facing Australia today, followed by housing affordability and shortages (14 per cent).
“This is comfortably the largest share of the population citing these problems since the question was first asked in 2011,” lead researcher Dr James O’Donnell, from ANU, said.
Is this what we want for Australia?