The housing problem in Australia: caused by capitalism and capitalist social relations
by Alex M.
A previous article on housing in Australia published in the ‘Marxism Today’ section of Vanguard in November 2010 referred to a report by the Australian Housing and Urban Research Institute (AHURI).
The report examined the benefits and risks of home ownership for low to moderate income households.
Fast forward to earlier this year and AHURI have made a submission to the Senate Economics Reference Committee, which has been given the task of investigating affordable housing in Australia.
The Senate Committee took submissions from a number of interested parties, from individuals to organisations, amongst them AHURI. The Committee is due to report its findings to the Senate in late June.
What has triggered the inquiry into housing affordability is the inexorable rise in house prices and rents and the consequent rise in housing related poverty, people being priced out of homeownership and increasing numbers of the homeless.
What often gets overlooked in these sorts of Parliamentary inquiries are the main beneficiaries of house price inflation; landlords, real estate agents, property developers and financial corporations.
Inevitably, what is overlooked are the class aspects of the provision of housing in Australia. Nonetheless, it is possible to get important insights and information from such inquiries.
Factors that have influenced housing affordability in Australia – AHURI’s analysis
The AHURI submission identifies a number of conditions that are currently influencing housing affordability in Australia and are worth noting here. These are:
• Insufficient supply of new housing to meet underlying demand.
• Real house prices rising faster than incomes – estimates of the ratio of average/median house prices to average/median incomes vary between 5 and 7 depending upon which measures are used.
• A preference for larger, higher quality dwellings, despite relatively small household sizes – from 1994 to 2009, the average size of a new house in Australia increased by 30% from 189 to 245 square metres, average household size fell throughout 20th century from 4.5 to 2.5 persons in 2006, yet the median price of housing in Australia rose 1994–2009 by 240% cent from $125 000 to $425 000.
• Falling rates of home ownership amongst 25-44 year olds. In 1981 61% of 25-34 year olds and 75% of 35-44 year olds were home owners. By 2011 these figures had fallen to 47% and 64% respectively.
• A change in the secure ‘tenure for life’ status of home ownership with 22% of Australian home ownership careers characterised by either dropping out permanently (9%) or churning in and out (13%) of home ownership.
• Market failure at the bottom end of the private rental market with supply unresponsive to demand, despite a context of growth in the relative size of the private rental market – in 2006 it was estimated there was an undersupply of 298,000 private rental properties affordable and available to households in the lowest 40% of the income distribution. By 2010, this is estimated to be over 500,000 dwellings.
• Continuing high numbers of households in the private rental market in housing affordability stress – in 2007-08 60% of low-income private renters were in housing affordability stress.
• A change in the nature of the private rental market from a predominantly short-term transitional tenure, to one that has 33% of its occupants (in 2007-08) as long-term private renters who have rented for 10 years or more continuously, an increase from 25% in 1994. Long term private renters (597,000) now outnumber households in public housing (365,000).
• The supply of dwellings in affordable housing programs (National Rental Affordability Scheme, community housing, public housing) is not keeping pace with population growth or the changing nature of Australia’s population (e.g. more older households and more households with people with disabilities). The share of affordable housing program dwellings in Australia has fallen from 5.5% in 1998 to 4.7% in 2012.
• Growth in the numbers of people living in boarding and rooming houses and living in severely overcrowded dwellings from 46,991 in 2006 to 59,111 in 2011.
The AHURI submission to the enquiry is detailed (as are many other submissions) and does take a critical look at aspects of the taxation system such as negative gearing; the latter having contributed to the spike in house prices and rental increases.
However, as the submission is to a Senate Committee, then it is reasonable to assume that the final recommendations will be for reform to address the inequalities inherent in the housing market here. Fundamental change and views that support that change will most likely be marginalised.
The problem of inequality
Still, voices that highlight the inequalities inherent in the provision of housing under capitalist conditions in Australia persist, despite being marginalised. Frank Stillwell, Professor of Political Economy at the University of Sydney, made a short submission. His submission gets to the heart of the matter:
“First we need to challenge the view, commonly conveyed in the media, that rapid housing price inflation is beneficial. The question should be: good for whom? There are losers as well as winners in a game such as this. Existing home owners and those owning rental properties may benefit in terms of capital appreciation. On the other hand, those who are seeking to become first homeowners must pay ever higher entry prices, making homeownership an increasingly unattainable goal for many households. Tenants meanwhile face escalating rents…”
Furthermore inequality is an inherent part of the problem of housing affordability as well as being an intrinsic part of capitalism itself:
“The contrast between wealthy suburbs and areas with poor housing is the physical expression of a deeply divided society. Of course, people’s capacity to service a mortgage or to pay market rent varies markedly according to their income. So it is very difficult to achieve the social goal of decent and affordable housing for all without addressing the economic forces that generate those inequalities. It is not just that some people derive income from capital while others only derive income from labour. Nor that some people benefit from inherited assets while others do not. These processes are compounded by the way in which housing inequalities interact with labour and capital market inequalities to create cumulative patterns of social advantage and disadvantage.”
Stilwell’s submission is critical of the role of what he calls the ‘economic forces’ which generate inequalities, in wealth and homeownership for example.
He avoids using terms such as class and capitalism, due most probably to the audience he is addressing. We don’t need to be quite so circumspect. The housing problem in Australia is a product of the profit maximising drive of capitalism. Particular class interests benefit from the way things are in the housing sector now.
What is also apparent is the decline of direct government involvement in the provision of housing at the Federal and State levels.
The November 2010 ‘Marxism Today’ article on housing gave an overview of housing policy in Australia since the 1950s and the class aspects of housing and these sections from that article are worth repeating here.
Overview of housing policy in Australia
In the 1950s, in line with post-war reconstruction in general, home ownership was promoted.
A combination of housing and non-housing policies encouraged this ideal. These policies included: ‘exemption from capital gains tax, discounted/controlled interest rates for home mortgages, cash grants to first home buyers, provision of low interest home loans directly by governments and via intermediary organisations such as state banks, sales of public housing to sitting tenants, mortgage deductibility (for a short period only), development of “affordable” home ownership lots by state land developers, and planning policies which promoted detached housing, the house type desired by purchasers’. It was clear that governments at Federal and State levels saw it as their duty to help people achieve the ‘Australian dream’.
With modifications, the broad policy settings of Australian governments continued along the lines mapped out in the 1950s. With the stagnation that accompanied the ending of the long boom of capitalism in the late 1970s-early 1980s, government policies regarding housing were re-assessed.
The 1990s ushered in ‘a fundamental change in policy settings on home ownership with the elimination of some of the more explicit measures to promote home ownership. In particular, governments no longer saw it as their role to assist the “marginal would-be home owner” in purchasing a home’. Emphasis in government housing policies shifted from the promotion of home ownership for ‘marginal’ people to the provision of rental housing assistance for those with urgent housing needs.
Such a shift in emphasis was driven by neo-liberal ideology which saw the market as the most efficient resource allocator, with governments having the reduced role of safety net providers ‘for some “at risk” households’.
The class aspect of housing
Clear from what has been outlined above about declining government involvement in and concern with housing policy is the power of particular class interests.
Finance capital in the form of banks, home loan brokers and others have big stakes in the housing market and some rental investors do too, though the latter do not necessarily have the same clout as the finance capitalists.
As has been pointed out before in the pages of Vanguard, the provision of housing and related government policies necessarily reflect the values of the dominant class. That is, the provision of affordable housing to low and middle income families, or working class families, is not a priority for governments, landlords or finance capitalists.
For the latter two, their priorities are profit maximisation. For governments, beholden as they are here in Australia to capitalist class interests, the social reforms of the 1950s and the long boom years are things of the past. Markets are alleged to be the most efficient mechanisms for distributing commodities such as houses.
In his work The Housing Question, Frederick Engels wrote rather presciently about the attitude of capitalist states to the issue of working class access to affordable housing.
“It is perfectly clear that the existing state is neither able nor willing to do anything to remedy the housing difficulty. The state is nothing but the organised collective power of the possessing classes, the landowners and the individual capitalists (and it is here only a question of these because in this matter the landowner who is also concerned acts primarily as a capitalist)… If therefore the individual capitalists deplore the housing shortage, but can hardly be persuaded even superficially to palliate its most terrifying consequences, then the collective capitalist, the state, will not do much more.”
Housing in Australia will continue to be fraught with problems of affordability for working class families, and finance capitalists and landlords will continue to rake in the profits.
This is the stuff of capitalist social relations. The only solution to such inequity and inequality is the creation of a more just and equitable society, that is, an independent, socialist Australia.