Housing crisis

Australia. False election promises will do nothing to solve the housing crisis

In today’s Australian federal election, none of the parliamentary parties are proposing policies to address the deepening social crisis facing millions of working people. Instead, the official campaign has been dominated by a competition between Labor and Liberal-National, thrown at the business elite, over which party is best placed to implement cuts in social spending and a new attack against the standard of living.

Suburban homes in Hobart, Tasmania. (Wikimedia Commons)

The divide between the political establishment and the masses of ordinary people is clearly demonstrated on the issue of housing. The measures proposed by Labor and the Liberal-Nationals are aimed solely at maintaining record house prices and securing bank profits, under conditions where large swaths of the population are increasingly unable to pay their mortgages and their rents.

Midway through the campaign, the Reserve Bank of Australia (RBA) raised the official interest rate to 0.35%, its first hike in 11 years. It hinted at multiple further increases over the next few months.

Rising interest rates threaten catastrophic consequences for many working-class households. Domain.com earlier this month modeled the impact on a borrower with a $500,000 home loan pegged at 2%. At the end of the fixed rate, a sudden increase in their interest rate between 2 and 3% would increase their monthly mortgage payment from $539 to $836.

Leith van Onselen, chief economist at MacroBusiness Fund (MB) and MB Super, told news.com.au that if the interest rate were to rise to 3.4% by August 2023, average mortgage payments would rise skyrocketing 46%, adding a massive mortgage repayments of $1,250 a month for a median-priced Australian home.

Already, an estimated 10% of homeowners are in mortgage stress, defined as spending 30% or more of household income to service a mortgage. Due to rising interest rates, experts have warned that mortgage stress could quickly reach 20% of all mortgage holders. The Australian Broadcasting Corporation reported earlier this month that some 300,000 households were now at “significant risk” of loan default.

The crisis extends to tenants, who have been hit by average rent increases of 10% nationwide over the past year. Rents are becoming unaffordable and homelessness is increasing. An ever larger proportion of society lives a precarious existence.

A national report from Anglicare Australia provided an overview of 45,992 rental listings nationwide. Only eight were affordable for a single person on sub-poverty JobSeeker unemployment benefit, all rooms in shared houses.

The crisis is particularly striking among young people, where there was only one registration (in a shared house) affordable for a person receiving youth allowance anywhere in the country. Unemployed couples, single parents receiving Centrelink payments and people on the Disability Support Pension could only afford 0.1% of all rental properties in the snapshot.

For a couple living on superannuation, only 1.4% of rentals were affordable, most of which are rooms in shared homes. Finding an affordable rental is even more difficult for older single retirees, with 0.1% of affordable listings.

A single person working full-time at minimum wage (just over $20 an hour) would find that 1.6% of rentals surveyed were deemed affordable. For families with two parents, each earning minimum wage, only 15.3% of the rentals surveyed were affordable.

These numbers tend to drop. In 2012, the Anglicare Snapshot showed around 30% of properties were affordable for families with both parents earning minimum wage.

The housing crisis is the result of deliberate policies, pursued by successive Labor and Liberal-National governments, which have fueled a speculative property bubble, to the point that the median house price in Australia is now over $1 million.

Along with historically low interest rates for more than 10 years, Labor and the Coalition have implemented negative debt and other policies, including substantial tax breaks, encouraging massive investment in the housing market and a ongoing real estate development.

Labor and the coalition have announced housing policies during the election, which even on the face of it would do nothing to solve the hardship facing millions of people.

Prime Minister Scott Morrison has promised his government will allow first-time home buyers to withdraw up to $50,000, or 40%, of their retirement funds to fund a purchase.

The program blocks the vast majority of young workers because you need to have over $120,000 in your super account to qualify. Additionally, many young workers have had to withdraw money from their accounts during the pandemic.

The Labor Party has unveiled an equally useless ‘condominium scheme’, under which the government would provide up to 40% of the purchase price of a new home and up to 30% for an existing one.

To be eligible, buyers would need to have a 25% down payment and qualify for a standard home loan with a participating lender to finance the remainder of their purchase. The program is limited to 10,000 people per year across the country, a drop in the bucket.

Nerida Conisbee, chief economist at property firm Ray White, told media that the Labor Party policy was similar to another implementation in the UK, which led to price hikes “due to the availability of cheap financing.

To the extent that their policies have any impact, that is the aim of both the Coalition and the Labor Party: to ensure that house prices remain high and thus protect the profits of banks and property developers. .

Crucially, nothing will be done to expand Australia’s dwindling public housing stock, which has been dismantled over decades. It started under the Labor governments of Bob Hawke and Paul Keating.

Hawke introduced a market-driven program in 1983, offering welfare recipients cash grants if they were unable to find public housing, forcing them to take housing with private landlords.

Private developers were allowed to buy public housing land through “partnerships” and then demolish the public housing and replace it with lucrative properties. Public housing has accounted for almost 20% of all houses built since World War II in 1980; in 2018, social housing represented only 4.6% of all properties.

Jago Dodson, professor of urban politics, told the Saturday newspaper last month that 730,000 more units would be needed to meet the demand for social housing on waiting lists alone, which would require $5 billion each year for the next 20 years. This is entirely off the official agenda.

Interest rate hikes that are fueling rising mortgage and rent payments are part of a broader jump in inflation that is undermining workers’ real wages. Over the past year, underestimated official inflation has outpaced wage growth by 2.7%, equivalent to an effective reduction in wages for the majority of workers.

The election underlined that the social rights of the working class can only be secured through a political struggle against Labour, the Coalition, all parliamentary parties and the capitalist system they stand for.

The Socialist Equality Party is the only party to propose a solution to the housing crisis by including a massive expansion of affordable, high-quality social housing, substantial wage increases, well in excess of increases in the cost of living, and decent, well-paid work for all who want to work. These measures are incompatible with the domination of society by a small financial oligarchy.

Banks and big business, including in the housing sector, must be placed under public ownership and democratically controlled by workers. Wealth that has been hoarded by billionaires, property developers and financial speculators must be redirected to meet social needs, not private profit. It means the struggle for a workers’ government and for socialism.

Contact the PES:
Telephone: (02) 8218 3222
Email: sep@sep.org.au
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Authorized by Cheryl Crisp for the Socialist Equality Party, Suite 906, 185 Elizabeth Street, Sydney, NSW, 2000.