A crisis of unaffordable housing and rental levels afflicts Australian metropolitan and regional cities. Negative gearing taxation rewards are decreasing housing affordability, particularly at the lower-income levels of the housing market. Do strategies exist to fix this affordability mess? Denis Bright reports.
The desperate problem of housing affordability is well publicized in the mainstream media. The electorate would welcome more focus on the solutions to this impasse which might require a reappraisal of the ideal of a house in leafy suburbs at great commuting distance from work and educational institutions.
As portrayed by the director Bobby Cohen, Sam Mendes and Scott Rudin in Revolutionary Road (2008), Frank and April Wheeler could not cope with the demands of life in suburbanized Connecticut in the 1950s when life was still very affordable in this hypothetical movie set away from the real politics of the McCarthy Era.
Are our leaders aware of the toxic mix of unaffordable housing prices and rental levels at a time when real wages of lower income workers are now in decline in the new social realities of urban Australia?
The Demographia Index of median housing prices as a multiple of median income levels housing prices in some locations with overseas examples is all too familiar.
With median home prices in Sydney now running at over 12 years of median salaries, the financial challenges are almost impossible as shown by the latest saga of the Demographia Index (ABC News Online 7 November 2016).
As much of this subsidized negative gearing investment goes to the middle and upper ends of the housing market, generous taxation concession do little to to extend the housing and rental supply curves for lower income families.
Without a progressive paradigm change at the lower end of the property market, property investors are keen to buy up every available workers’ cottage and habitable packing shed.
Former whistle stops on the way north to the Sunshine Coast north of Brisbane will be recycled into new outer suburbs in the 2020s.
This interactive and innovative real estate web site talks up the benefits of investing in Elimbah in the twilight zone between the urban sprawl from the Brisbane Metropolitan Region and the Sunshine Coast.
Federal taxation concessions to the tune of $11 billion to support negative gearing could be better spent to support lower income families.
As investments in strategically located communities like Elimbah became a haven for property investors, the prospects for affordable houses and rental levels for lower income families are somewhat diminished. Median housing prices of $545,000 and rental levels of $450/week are hardly affordable at close to 60 kilometres north of Brisbane’s CBD.
Replacing Australia’s current housing model with Singapore’s regulated housing market would not be an acceptable policy change here because of the widespread attachment to market fueled diversity in the property market. Ninety (90) per cent of residents live in public housing (Singapore Housing and Development Board Online 2017).
Pragmatic policy options do exist to ease Australians out of their reliance on the market for the delivery of housing and related community development options such as public transport, sporting and cultural networks. This does not mean a return to the public housing suburbs which were available for the first post-1945 generation and the changes might attract bipartisan support.
In South Australia, Elizabeth certainly delivered affordable housing and rental options through the integrated state planning models of the SA Housing Trust (ifech Media Online 2016).
Rentals were available for a few dollars a week near permanent jobs which could be the envy of a new generation of Australians.
The South Australian Government retains an Affordable Homes Programme.
Properties available are largely newly built houses, house-and-land packages, and former public housing properties which are all available for less than $370,000. Applications are means-tested and available only to first home buyers (https://affordablehomes.sa.gov.au/).
Former public sector houses still have a respectable commercial value in Elizabeth and adjacent Salisbury as shown in a recent Ray White advertisement.
On Brisbane’s Southside, in Coopers Plains, global real estate giant Colliers International is redeveloping former public house estates. This has attracted an investment of $600 million in town houses for sale or rent.
Demolishing former public housing estates adds to housing supply problem at the lower end of the housing market. For such corporate giants, recycling these former public housing estates is just another niche in the wider property market of inner city home units, office complexes and industrial estates.
There is scant evidence that market forces alone can deliver such outcomes. It is hardly the fault of property developers if the current negative gearing system is oriented towards the middle and upper ends of the housing market.
State governments have the policy capacity to steer property developers in more positive directions by rebuilding an affordable social market in housing and community development. Current housing prices are moving in radically different directions.
The price for units developed by Colliers International at Killara on Sydney’s North Shore Line commences at $1.050 million for units without garage space. Units in Collier International’s Mary Lane in Brisbane with one car space are priced from $830,000 for a two bedroom apartment.
The opportunism shown by political leaders in negative gearing property investments should be a cause for real concern:
Almost one in two federal politicians own an investment property, according to an analysis of their registers of interests.
The publicly available forms show that at least 97 federal members and senators, or their partners, own an investment property.
A handful own more than 10, while 50 MPs own more than two investment properties.
But as all sides of politics debate the merits of negative gearing – how many federal politicians are negative gearing their own investment properties?
Consolidating Remnants of the Australian Social Market in Housing
Just some of the $11 billion that is currently being allocated by the federal LNP to negative gearing taxation concessions could provide the initial seed capital for housing funds in the states and territories. Additional investment could be encouraged from the Australian and overseas corporate sectors as commercial and public relations priorities.
Such integrated development packages could be provided through public-private partnerships with the housing funds at minimal cost to the government sector.
Hedge-fund investments in corporatized public sector housing funds at national, state or territory levels could provide immense advantages to business corporations and entrepreneurs from adjacent Asian markets in particular. The appeal of investment in a stable economy with a strong currency could be irresistible in the context of current global financial volatility.
For Australian corporations, the prestige in being involved in delivering integrated development projects with a quota of affordable housing units might have immense public relations value. Corporate logos were clearly visible on the recyclable bags offered to support the recent Clean Up Australia Day. Why not extend this to support for affordable housing and community development strategies?
Although the housing components of the Central Park Development Project on Sydney’s Broadway are directed largely to the upper end of the housing market, the capacity of developers to recycle similar residential and industrial land near transport hubs is worth more consideration as an achievable option through new private-public partnerships.
Even without these social market structures, co-operation between the Ipswich City Council and major construction firm Sekisui House is delivering new communities in the Ripley Valley within the constraints of existing market-oriented housing models.
The $1.5 billion Ripley Town Centre is leading the way in smart and sustainable design, by re-imagining how a community interacts with its surrounds. Once complete, the world-class destination will be a shining example of urban construction living harmoniously with nature, featuring tree-lined streets and laneways, parklands, leafy walkways, green rooftops and so much more. But it’s not just nature that will feel the benefit of this sprawling 25-hectare precinct.
This style of development has its limitations as the preferred housing supply curve usually favours commercial priorities without the infusion of government-sponsored social housing priorities.
In the case of the West Village Project in Inner Brisbane, the Queensland Government has intervened to reduce the intensity of development which was approved under the Brisbane City Council Plan to modify the intensity of redevelopment.
Policy steering mechanisms should have been available to widen housing affordability levels in this project (ABC News Online 7 November 2016).
Property developer Sekisui House has responded predictably with a restatement of the financial advantages of its local construction projects to the Queensland economy.
Japanese development giant Sekisui House is forging ahead with $3.7 billion of works in southeast Queensland, including its controversial Brisbane and Sunshine Coast developments.
The Tokyo and Osaka-listed company — among the world’s biggest residential builders — is set to launch its $800 million West Village mixed-use development in Brisbane’s West End and is pursuing its $900m hotel and residential complex at Yaroomba Beach, near Coolum on the Sunshine Coast. It is also beginning construction of its $1.5bn Ipswich development, Ripley Valley Town Centre, with the appointment of Hutchinson Builders for the $40m retail first stage Largely absent from the current debate over the future of West Village is the up-market nature of the housing options.
Progressive future housing funds can assist in adding new diversity to the outcomes of integrated property developments without compromising the profitability of the entire projects.
The best defence against the high levels of support for One Nation in disadvantaged outer metropolitan, regional and and rural electorates at the forthcoming Queensland state election is surely to offer solutions to real affordability problems at a time when wage rates and employment levels are being systematically eroded by the federal LNP.
Denis Bright (pictured) is a registered teacher and a member of the Media, Entertainment and Arts Alliance (MEAA). Denis has recent postgraduate qualifications in journalism, public policy and international relations. He is interested in promoting discussion about progressive pragmatic public policies compatible with contemporary globalization.
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