ADDRESS: National Union of Students Annual Conference 2018
Thanks to Jordon for the introduction – it’s great to be here to talk about housing affordability and the Everybody’s Home campaign.
I want to acknowledge the Kaurna people as the traditional custodians of thisland—and pay my respect to their Elders, both past and present, and emerging.
A colleague said to me the other day, I can’t believe that young people aren’t throwing rocks at auctions.
- We have home ownership rates among people under 35 that are the lowest in 50 years and still falling.
- A private rental market where your incomes aren’t enough to find a rental near your study or work; and
- A growing problem of homelessness, in which 1 in every 4 people who are homeless are under 25.
And this housing mess has been created by failed government policy over decades.
I want to talk to you about the Everybody’s Home campaign that is working to turn government policy around and to fix our broken housing system.
We aim to turn housing around so:
- Finding a place you can afford doesn’t mean commuting over an hour to Uni or work
- Or agreeing to rent a shed in someone’s backyard because it’s all you can afford; or a house that is so dilapidated it should be condemned.
- Or to paying so much for housing, you can’t ever go on holiday; or afford a round of beer.
Life shouldn’t be so precarious that having a month’s gap between contracts, or losing some shifts, or getting sick, should mean tipping into homelessness.
We aim to show Governments that people care about these issues and care about solutions.
I’m talking to you because firstly most of you are part of the young generation most affected; who face a housing system as you look to move out of home that is worse than generations have faced before you.
But I’m also talking to you about it because you’re uniquely placed to effect change – as student representatives and activists, you’ve already gained the skills, knowledge of how power and government works, and networks to make a difference.
So my talk to you will include 3 issues:
- Firstly, I’ll outline the problem we face in housing, both for young people and others
- Second, I’ll show how government policy has got us to this point, and
- Lastly, I’ll talk about the campaign, and how you can be involved.
If you’re on Twitter you can reference the campaign using #everybodyshome; and my Twitter handle is @ColvinKate.
So first, the facts.
Home ownership among people 25-34 has been declining every year.
The conservative press say the problem is you – and avocados. A dangerous combination! This narrative says you can’t afford to buy homes because you spend your money on smashed avocado.
The reality is a little different. Not only are you entering a labor market in which you are far more likely to be in casualised work or on short-term contracts, but houses cost way, way more relative to incomes than they cost your parents.
So, while in 1982 you might only earn $15,000, you could buy a regular house for $48,000 – 3 times incomes. Now, average wages have gone up to $84,000, which seems like good news, except that the same regular house is $680,000, which is more than 8 times income.
You add in the fact that you can’t get a mortgage if your income is insecure; and you also have a HECS debt to pay; and home ownership looks like a pipedream.
So, then the option is rental; which can be okay if rentals are affordable, but they aren’t. Prices are also increasing fast in rentals; twice as fast as CPI over the last 5 years, and competition for the limited number of lower cost rentals is particularly fierce.
Renting gets easier once you start earning a large income; but for people on low and modest incomes, like most students and graduate workers, the reality is paying more than you can afford to secure a place.
More than half of all low and modest income households pay more than 30% of their income in rent; the amount considered affordable.
If you were trying to rent here in Adelaide you’d find it far more affordable than in Sydney or Melbourne, but if you have a low annual income like $20,000, which is around the most common income for 20-24 year olds; you will still find renting a 2 bedroom place unaffordable.
This housing mess is the consequence of decades of failed government policy.
This is the part you should be angry about, and particularly so when the blame is directed towards you.
Let me take you back to 1966. In housing terms these were halcyon times. In other respects it was less fabulous – in 1966 there was no social security for single parents; and we were still a year off the referendum that acknowledged Indigenous Australians as citizens.
But in 1966, home ownership peaked at 72.5% of the population; a rate that had been steadily increasing even as Australia’s population was also growing rapidly.
This increase occurred because state and federal governments were working hard to expand the supply of housing to keep up with – even to exceed population growth.
- Government was directly building dwellings, both for rent and sale, that were targeted at people on lower incomes; and
- Home owners had access to cheap state backed home loans.
So, what is different now. Similarly to the 50s and 60s we have a growing population. But we also have 2 major differences.
- We have a tax regime that subsidises speculative investment; and
- We have Governments that have walked away from supply of housing.
So what are these taxes that prioritise investors over home buyers?
I’m talking about negative gearing and the capital gains tax discount. They’re like evil twins that work together.
Negative gearing lets you deduct your losses on property investment against other income. So if the rent you get on an investment property is less than the interest payments and other costs like rates; you subtract that loss from your salary or business income and pay less tax.
This of itself, wouldn’t make a big difference, because you’re still making a loss, and who wants to do that? But in 1999, the Howard Government halved the tax paid on capital gains. Capital gains just means the profit on sale of an asset.
This means that when you sell a property for a profit, you only pay tax on 50% of the profit. And in property investment that is where the profit is made; not on renting a place out; but on reselling it in a housing market in which prices keep rising.
This is a great deal for high-income earners; letting them turn rental losses into much bigger capital gains, with less tax paid along the way.
What this means for home owners is that they are competing at auctions against investors who are effectively getting a government subsidy by way of reduced taxes. The investors are also speculating on future prices; as they know they will sell; so if they think prices are rising they will bid more and more; bidding up house prices and squeezing out home owners.
You can see the impact this had on investors with more and more loss making investment.
You can also see the impact it’s had on house prices. And the predictable outcome has been a substantial decline in home ownership.
The negative gearing and capital gains tax problem also has an impact on the rental market – as investment properties are mostly used for rental housing. That could be good if it was delivering the right rental housing.
But the reality is that it doesn’t;
It doesn’t create newhousing because more than 90% of lending to property investors is for established housing.
And even in established housing it stimulates investment into properties most likely to gain in price. And that is mostly higher value housing; or housing that is renovated for sale – in other words, taking cheaper rental properties and turning them into expensive rental properties.
The failure of negative gearing and capital gains tax to deliver the rental housing we actually need is most stark when we look at how many investment properties are left vacant. At the last Census 1 in ten properties was unoccupied. Some of these will be holiday houses; but mostly they are new build apartments left vacant to get the most capital gain. They sell for more brand new; and the losses of leaving them vacant are offset by negative gearing tax deductions.
So while you are lining up at a rental inspection with 20 other people; or sleeping on a friends couch; investors are getting tax breaks that encourage them to leave places vacant.
That, right there, is a massive policy failure.
And it’s not a cheap one.
Each year the Government forgoes between 11 and 12 billion in taxes for negative gearing and capital gains tax.
That’s more than double what they spend on Commonwealth Rent Assistance; and almost 3 times what they spend on social housing.
So in summary, we have housing taxes that have worked over decades to inflate prices, rather than to boost the supply of housing. This is why house prices are 8 times and not 3 times incomes.
I think you should be mad about this; but I think you should be even madder about the fact that we can’t turn back the clock so you have the same opportunities as your parents. The Global Finance Crisis in 2008 was triggered in part by falling house prices in the US; and people defaulting on loans. There isn’t a way of making home purchase radically cheaper that won’t create economic chaos.
The best we can do is to stop it getting worse, and worse and worse.
Everybody’s Home policy is to reduce these housing tax benefits to rebalance home ownership in favour of home buyers. This has already been committed to by the ALP; and over the long term it will make a big difference.
But the core of the housing policy fix needs to be in supply – the same way that it was in the 1950’s.
You all know if you’ve tried to get an affordable rental near a University that there isn’t enough to go around.
- Who has applied for a rental where there were many more applicants all vying for the same place?
- And who has ended up paying more than they can really afford to secure a place?
Remember I said that in the 1950s and 1960s Governments were busy building housing that was targeted to lower income earners.
From the 1950s to 70s, government built more than 15,000 new social housing dwellings per annum. Then more than 12,000 to the early 1990s. But since then, they have completed an average of less than 6,000 per annum.
The consequence is that social housing as a proportion of all stock has fallen. And it’s become more targeted to the very poorest; so housing options for low income workers and students have to be found in the private market.
The Everybody’s Home campaign aims to radically change the rental market by delivering on the supply that is needed.
We are calling for 500,000 social and affordable rentals to be built over the next 20 years. That fills the gaps that housing economists have identified; and it would turn the situation completely around.
Not only for people who are housed in the new rental housing; but also for people renting in the rental housing that is there now, because there would be more choice.
A landlord that was looking to rent out the kind of dump with dangerous wiring and mould in the bathrooms, that has 20 people queued up for it now, wouldn’t stand a chance – prospective renters would have better options.
Alongside creating new supply we are also calling for better legislative protection for renters.
- Abolishing no reason notices to vacate
- Establishing minimum standards for rental properties
- Limiting the frequency of rent increases; and
- Letting people have pets and to do basic things to make a place a home, like hanging pictures on the wall.
We are also calling for increases in Commonwealth Rent Assistance, particularly to payment types like Youth Allowance that currently get very small levels of support. And for a national plan to end homelessness. While the main part of a plan to end homelessness is delivering on housing there are other issues that also need to be addressed.
Domestic and family violence is one of the biggest drivers of homelessness for women, children and young people; and the federal government and many state governments are basically asleep at the wheel doing anything about it.
Income security is also a major driver of homelessness; with social security payments like youth allowance and Newstart inadequate to enable people to get or keep housing; and an ever growing list of ways and reasons people can be cut off payments – so more and more people are coming to homelessness services who have no income at all.
So, in summary, we have a housing tax system that is pushing prices out of reach of home buyers and not delivering the rental housing we need.
And, we have Governments that have walked away from delivering rental housing.
Together these problems have created a housing debacle, where more than half of all low-income households are paying more than they can afford in housing costs.
And we know we can create an Australia where everyone has a place to call home by getting Government back into the supply of housing; and by rebalancing our housing taxes.
The question is how do we get Government to do it?
Like all other social policy change, we can’t win unless we can demonstrate that this is an issue that people in the community really care about and want to see real solutions to.
For too long the sector I work for has been too nice about it. We’ve said there are 116,000 households homeless on any night and then said thanks for 1000 extra social housing properties.
Now we are saying the problem has to be fixed and we are not walking away from the scale of the problem. It needs to be fixed not just for the poorest of the poor; but for the low income and modest income workers who need housing security, even as their incomes fluctuate.
And that means that to demonstrate that this is an issue people care about the constituency needs to include everyone who is affected.
So we have created this campaign that is about building this support and giving peoplethe tools to demand our leaders take the housing crisis and homelessness seriously.
It’s a campaign you can take and shape in your own way on campus.
The theory of change is very focussed on the upcoming Federal election. We aim to have political parties bring policies to the election that include our campaign asks.
We aim to build big supporter lists and then get people active in communicating directly to political parties.
There will be easy ways to communicate like petitions and direct emails; but we’ll also be encouraging supporters to connect to their local MP.
On the 11 July we’re launching an action in partnership with the Make Renting Fair campaign to shine the light on the realities of renting.
We’re asking renters to post a picture of themselves sharing something they wish their landlord knew using the hashtag #IWishMyLandlordKne
It might be a positive thing, like #IWishMyLandlordKnew living near to Uni makes studying so much easier.
Or a difficulty – like #IWishMyLandlordKnew that the mould in the bathroom makes my asthma much worse.
Through the campaign we encourage you to use the many political avenues you have open to you – like raising it within your local branch if you’re a member of a political party. Or writing your own letter to an MP.
Or get creative, and dress as a house and set up on Parliament lawns.
We have created a set of campaign materials, like the base petitions; the artwork; the website, the policy platform and a messaging guide that are there to be built on; and used to build a set of local supporters. They are not branded to any one organisation; they are there to be used as a shared asset.
As we get closer to the election we will ramp up the pressure on the parties. We’ll do more media to raise the profile of the problem, we’ll direct supporters to raise their concerns with parties, and we’ll also be lobbying directly ourselves.
We’ve already had 2 lobbying days in federal parliament; and I have to tell you that while there are some pockets of support; neither major party will make these changes unless they hear from voters that the change is being demanded.
In many electorates young people are a critical voting constituency. And so I am saying to you that you can make a difference. But you need to be active and fight for the fairness you deserve.
The first step is to join the campaign yourself. If you go to everybodyshome.com.au, you can sign up to the campaign. If you’d like to start a campus group and get active you need to sign up as an organisation. Just email me at [email protected]
Together we can fight for a more connected, more equal, more fair Australia, where Everybodyhas a place to call Home.
Thank you – and I’m happy to take any questions on policy, or tactics, or anything else!