Remember when only men could own property? No? There’s a reason for that

Our residential property market is clearly in crisis, a point on which many Australians now agree. What is less clear is how we fix it.

There is no silver bullet, not even relaxed planning laws. Solutions will be diverse, but we will only begin to find them when we radically recalibrate our conception of residential property.

Australians view residential property as “an asset class” to build personal and family wealth.Credit: Dominic Lorrimer

For the past three decades, tax law, public discussion, and media coverage have encouraged Australians to view residential property as “an asset class” to build personal and family wealth. Not surprisingly, that is exactly how residential property has increasingly functioned. For example, half of all strata title apartments are owned by investors.

Australians have not been encouraged to recognise residential property as a universal necessity for survival and a halfway decent life, and residential property has increasingly failed to perform that function. Homelessness is increasing, entire generations are unable to buy their first home, and millions of people, including those with good incomes, are experiencing housing stress.

Property ownership and markets are not naturally occurring phenomena; they are legal constructs. That is not nearly as pretentious or esoteric as it sounds. In the past, only men could own property, and there was a market in human beings.

That is no longer the case because the legal system has changed what constitutes enforceable property rights. Property rights, and their regulation, including taxation, are always the result of legal choices that flow from our underlying convictions about what we think property is for.

What ideas should underpin our conception of residential property?

First, residential property is not an optional consumer item; it is essential. Without a secure, affordable home, people will not have the necessary stability to build a decent life, nor can they contribute fully to society or the economy.

Second, land is finite; we cannot manufacture more. If I keep three cars in my garage and don’t drive them, that does not affect anyone else’s ability to own a car. But if I have three homes I keep empty or only let to tourists, that will affect people who need a home.

NSW is in the process of trying to “manufacture” more land by building higher, but that is complicated by a range of factors, including the fact that land is finite. There are not unlimited parcels of land on which to build multiple storeys.

Third, because property is essential and finite, we need to pay attention to its distribution in the population. Some people having property, for example investors, will be at the expense of others, for example first homebuyers. Every time someone buys an investment apartment, someone else does not become a homeowner.

First homebuyers, with good incomes able to service a mortgage, then move down to compete with people on lower incomes for rental properties, including those who have increasingly been pushed out of public housing. The current private rental market is a desperate, crowded site of finite resources.

Fourth, property rights create the kind of society we live in. The fact that everyone, regardless of race, gender or religion can now own property, or that banks must give borrowers an opportunity to remedy defaults before exercising their power of sale, creates a fairer and better society.

Property rights that allow landlords to evict tenants who have complied with their leases, give some people tax breaks for owning multiple houses or permit developers to demolish affordable apartments to replace them with fewer luxury ones, makes society less so.

Australia is grappling with a deepening housing crisis, yet taller buildings present their own problems.Credit: Bloomberg

These four ideas need to drive solutions to our property crisis. Laws need to change to promote an equal distribution of what is a finite and essential resource among the population. No one should be incentivised to buy a second, third or fourth home, when others have none.

Property rights should not include those that harm others, particularly the great harm of denying them a home. Changes will adversely affect a limited section of the community, but property laws and regulation always change. If they didn’t, we’d still have feudal overlords.

Ultimately, if we are balancing the wealth generating function of residential property with its function of providing for basic human dignity, it is clear which should prevail. Now all we need is a political party with the common sense to act.

Cathy Sherry is a professor at Macquarie Law School and executive member of Smart Green Cities.

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