By Denis Hay

Description

Discover why the Australian government backs developers for building public housing, affecting affordability. Learn how Australia’s monetary sovereignty could change this.

Introduction

Australia’s housing affordability crisis is at a tipping point. While the demand for affordable housing surges, the government continues to rely on developers rather than investing in public housing directly. Why is this the case? This article delves into the political, economic, and ideological reasons behind this decision. Australia’s monetary sovereignty provides opportunities to shift policy, but the question is still: will the government act?

Housing Affordability in Australia

As of 2024, Australia’s housing affordability crisis continues to worsen. Recent data from the Australian Bureau of Statistics (ABS) shows that house prices have increased by 7.5% in 2023, contributing to a 32% rise in housing prices since 2020. Meanwhile, wages have grown by just 2.3% per year over the same period, making homeownership an unattainable dream for many Australians. In 2024, the median house price in Sydney surpassed $1.4 million, while Melbourne’s median price reached nearly $1 million.

The rental market is equally strained. In major cities, rental vacancy rates have fallen below 1%, driving up rental prices. The latest CoreLogic data reveals that in 2023, rental prices rose by 8.3% nationally, with some areas experiencing increases as high as 15%. As a result, more Australians are experiencing housing stress, defined as spending more than 30% of their income on housing costs. The Australian Council of Social Service (ACOSS) estimates that in 2024, around 45% of low-income earners are experiencing housing stress, up from 35% in 2020.

Why Is Housing Becoming Unaffordable?

1. Supply and Demand: The supply of affordable housing is not keeping pace with demand. The government’s reliance on private developers has resulted in a focus on high-end developments, which are priced out of reach for many Australians.
2. Wage Stagnation: Wage growth has been outstripped by rising property prices, making homeownership and even renting difficult for average Australians.
3. Inadequate Public Housing: Australia’s public housing stock since the 1970s and the shift toward private market solutions:

Inadequate Public Housing: A Historical Decline

Public housing in Australia has seen a marked decline since the 1970s, with successive governments gradually reducing their commitment to providing affordable homes directly. In the 1970s, public housing accounted for around 6.5% of Australia’s total housing stock, reflecting a strong government focus on providing affordable homes. At that time, public housing was seen as a crucial element of Australia’s social welfare system.

Decline of Public Housing Over the Decades:

1. 1970s: Public housing represented approximately 6.5% of Australia’s housing stock, with strong federal and state government investment in social housing. The Whitlam government, for instance, made substantial investments in public housing as part of its social welfare agenda.

2. 1980s: By the early 1980s, the public housing stock had started to decline as neoliberal economic policies gained influence. The Hawke and Keating governments shifted focus towards market-based solutions, reducing the construction of new public housing. Public housing as a proportion of total housing stock began to shrink, dropping to around 5.5% by the mid-1980s.

3. 1990s: The 1990s saw a further reduction in public housing investment, as governments increasingly looked to private developers to provide housing. The stock of public housing continued to decrease, with public housing making up only around 5%of the total housing stock by the end of the decade. Policies shifted towards encouraging homeownership and providing rental help for private market housing, rather than building more public housing.

4. 2000s: By the early 2000s, public housing accounted for just 4.7% of the housing stock. The focus on privatization and market-driven solutions continued under both Liberal and Labor governments. Public housing construction was deprioritized, and private-public partnerships were increasingly used for social housing projects.

5. 2010s: The decline continued into the 2010s, as public housing stock fell to 4.4% by 2011. The emphasis was placed on providing rental subsidies and housing help programs like the National Rental Affordability Scheme (NRAS), which incentivized private developers to provide low-cost rental housing. However, these efforts did not replace the loss of direct public housing.

6. 2020s: By 2023, public housing represented just around 4.2% of Australia’s total housing stock, a significant drop from the 6.5% in the 1970s. Despite rising housing stress and homelessness, government policies continued to favour private sector involvement over direct public housing investment. Programs focused on helping private sector development through tax incentives, subsidies, and zoning changes, rather than building new public housing.

Shifting Toward Private Market Solutions

This gradual decline in public housing stock is tied to broader neoliberal economic policies that prioritize market-based solutions over government-led projects. Rather than directly building affordable homes, governments have increasingly relied on the private sector to meet housing demand, offering incentives to developers in exchange for a part of their developments being given to affordable housing.

However, this approach has led to a shortage of affordable housing, as developers primarily focus on high-profit luxury housing, leaving lower-income Australians struggling to find affordable options. The decline in public housing stock has also resulted in longer waiting lists for public housing, with many applicants waiting for years to access affordable homes.

This data highlights the significant reduction in public housing in Australia over the decades, showing how government policies have increasingly favoured private market solutions at the expense of direct investment in public housing.

The Emotional and Social Impact of Developer-Driven Housing Policies

The government’s reliance on private developers is not just an economic issue; it also has far-reaching social consequences.

Rising Homelessness and Housing Insecurity

Australia’s homelessness crisis is growing. Data from Homelessness Australia shows that the number of people experiencing homelessness increased by 8% between 2021 and 2023, bringing the total to over 122,000 people in 2024. Families, elderly individuals, and young people are particularly vulnerable. Housing support services are overwhelmed, with charities like Mission Australia and The Salvation Army reporting a surge in demand for emergency accommodation and financial help.

A Divided Society

By supporting private developers who prioritize luxury housing, the government is worsening inequality. Wealthier Australians are accumulating property and increasing their wealth, while low-income and middle-class Australians struggle to find affordable housing options.

Stressed Renters

Renters are bearing the brunt of the housing crisis. In 2024, the proportion of Australians renting their homes reached 32%, up from 28% in 2016. With rental prices rising at unprecedented rates, many renters are living pay check to pay check. A 2024 survey from Domain revealed that 50% of renters are experiencing rental stress, up from 38% in 2020.

Why the Government Should Fund Public Housing Directly

Given Australia’s monetary sovereignty, the government can fund and build public housing without financial constraints. Below are the main reasons why direct government involvement in housing is crucial.

1. Neoliberal Ideology and Its Influence on Housing Policy

Since the 1980s, neoliberalism has shaped Australia’s housing policy. Neoliberalism promotes free markets and minimal government intervention, leading to the privatization of many public services. In the context of housing, this means relying on private developers to meet housing needs. However, the private sector is driven by profit, not by public need, resulting in a lack of affordable housing.

2. Political Ties with Developers and Real Estate Sector

The relationship between the Australian government and property developers is well-documented. Developers and the real estate industry are significant political donors, shaping housing policy to benefit their interests. According to the Australian Electoral Commission, property developers have donated over $40 million to political parties between 2010 and 2024. This financial influence ensures that developers receive favourable tax treatments, zoning laws, and incentives, while direct public housing initiatives are sidelined.

Example: Property magnate Harry Triguboff, Australia’s richest developer, has been a major donor to both political parties, highlighting the entrenched relationship between the real estate industry and Australian politics.

3. The Myth of Cost: Public Housing vs. Private Development

One common argument against direct public housing investment is cost. Governments often claim it is cheaper to incentivize private developers to build housing than to fund public housing projects directly. However, this view ignores the long-term social and economic costs of not providing affordable housing.

Short-term vs. Long-term Costs: While private development may seem cost-effective in the short term, the lack of affordable housing leads to increased homelessness, reliance on welfare services, and reduced economic productivity. Direct public housing investment would reduce these social costs over time.

Australia’s Monetary Sovereignty: As a sovereign currency issuer, the Australian government can create and allocate public money for vital infrastructure projects, including public housing. This makes the argument of cost moot, as the government has the financial capacity to fund large-scale public housing initiatives without borrowing or increasing taxes.

4. Public Housing Stigma and Voter Perceptions

There is a persistent stigma attached to public housing in Australia, which has been a significant factor in the government’s reluctance to fund it. This stigma dates to the 1970s and is rooted in the association of public housing with poverty, crime, and social problems.

Public Housing Decline Since the 1970s: In the 1970s, public housing accounted for around 6.5% of Australia’s housing stock. However, this figure has steadily declined, reaching just 4.2% in 2023. Government investment in public housing has fallen dramatically over the decades, with successive governments favouring private market solutions. In 1975, the federal government gave 10% of its total budget to housing and urban development; by 2024, this figure had dropped to less than 2%.

Changing Perceptions: Despite the stigma, well-designed and maintained public housing can be a practical solution to the housing crisis. Countries like Austria and Singapore have shown that public housing can provide high-quality, affordable homes without negative social connotations.

5. The Corporate Profit Motive: Affordable Housing vs. Luxury Developments

Private developers are driven by profit, not public interest. As such, they focus on luxury developments that generate higher returns, rather than building affordable housing. Even when the government offers incentives for affordable housing, these projects are often overshadowed by high-end developments.

Case Study: In 2023, a study by the Grattan Institute found that despite government incentives, only 10% of new housing developments in Sydney and Melbourne were classified as affordable, compared to 30% in the 1990s.

6. International Models: How Other Countries Approach Public Housing

Countries like Singapore and Austria offer valuable lessons for Australia in how to effectively manage public housing.

Singapore: Singapore’s public housing system provides homes for 80% of its population, with the government taking an active role in the planning, funding, and construction of public housing. This approach has created a stable and affordable housing market.

Austria: Vienna’s public housing model is another example of success. In Vienna, over 60% of residents live in publicly funded housing. The city’s long-term investment in public housing has helped keep rents affordable and provided high-quality housing for residents across all income levels.

Conclusion

Australia’s current approach to housing – relying on private developers to meet demand – has failed to provide affordable housing for those who need it most. The government’s reluctance to invest directly in public housing is rooted in neoliberal ideology, political ties with developers, and a misguided focus on short-term costs. However, by embracing its monetary sovereignty and committing to large-scale public housing investment, Australia could address the housing crisis and ensure that every citizen has access to a safe, affordable home.

Question for Readers

Do you think public housing is the solution to Australia’s housing crisis, or should developers continue to play the leading role?

Call to Action

If you believe Australia needs more public housing and less reliance on developers, share this article and let your voice be heard. Join the conversation by leaving a comment or exploring more articles on how Australia can take control of its housing future.

This article was originally published on Social Justice Australia