Immigration and ideology add fuel to housing crisis

Housing Minister Clare O'Neil (left) visits a Greenfield site for 17 new commonwealth funded social homes in Canberra. Picture: Martin Ollman

I was trying to remember who the federal housing minister had been before Clare O’Neil – it was Julie Collins – after I decided to write about the housing crisis. That tells you a lot.

I use the term “crisis” deliberately because the features are all there: a collapse in housing affordability, rising rents, widespread shortage of suitable accommodation, growing waiting lists for social housing; and rising homelessness.

No doubt, Collins would rattle off various achievements, such as setting a target of 1.2 million new homes in five years, increases to the Commonwealth Rent Assistance; the establishment of the Housing Australia Future Fund; handing out billions of dollars to the states and territories, and; various ill-conceived programs.

Let’s be clear: the target is a complete joke and will not be met, not even close. Merely setting a target does not make it a good policy.

But a core problem is this: while the federal government has some levers it can pull to alter the stock of housing, most of the control rests with the states and local governments. And in any case, the building of new homes is almost entirely reliant on the private sector. Housing is the equivalent of a veritable Eton Mess.

As in all markets, the forces of supply and demand are dominant. The role of the federal government in determining the migrant intake, which in turn is the major contributor to (excessive) population growth, is at the heart of the crisis.

With the population growing 2-2½ per cent per year post-Covid – adding more than another Canberra each year – the federal government has been contributing to the housing crisis while grabbing more packs of expensive Band-Aids to offset the impact. There was never any scenario in which the private sector could accommodate this extra demand for housing in such a short space of time.

Ostensibly, the federal government is intent on lowering net migration and thereby reducing the rate of population growth. The problem is that it has utterly failed to do so. Its target for last financial year was 295,00 – it will have overshot this by at least 25 per cent.

And anyone who tries to tell you that the influx of international students has not contributed to the housing crisis is talking through their hat. You cannot have nearly one million international students and their accompanying persons in the country and not make an impression on the housing market – they must live somewhere.

Julie Collins

While studiously ignoring the demand side of the equation caused by excessive population growth, the federal and state governments seek to intervene in the housing market by implementing measures that further add to demand, at least for owner-occupied dwelling.

For many years, economists have pointed out that the benefits of first homeowner grants, shared equity schemes and the like are essentially snaffled by the vendors and not the buyers. This hasn’t prevented governments of all persuasions implementing these schemes.

Some economists have also pointed out that lengthy and costly development approval processes hold back the construction of new apartment buildings and detached homes. If approvals could become more streamlined and cheaper, then many of the problems of securing more supply would disappear.

The reality is far more complicated and is overlaid by an essentially ideological obsession that development on urban fringes is bad and that the only way forward is up – in middle suburbs and close to existing transport links. The fact that many people, particularly with families, don’t want to live in high-rise apartment buildings is regarded as irrelevant.

Greater housing density is the flavour of the month (or year, or decade) with the federal and most state governments. The fact that unionised workers are always involved in the construction of high-rise buildings is just a plus for Labor governments.

In this context, the findings of a recent survey undertaken by the Institute of Public Affairs is telling. Residents of a new suburb on the fringes of Melbourne, made up largely of detached housing, were asked whether they would prefer to live in a closer-in suburb in an apartment, all other things being the same, including price. The vast majority preferred to live in stand-alone housing, even if it is located a long way from the CBD and the current infrastructure is not ideal.

To impose the ideology – which contains the faulty assumption that there is a lot of unused infrastructure in middle suburbs – every level of government has gone out of its way to make stand-alone housing an expensive, if not impossible, option. This is being achieved by inordinate delays to the approval of new housing estates, higher infrastructure charges and taxes, and additional costs of expanded building codes.

Add in the rapidly rising cost of labour and materials and the detached housing sector is in the doldrums, having been the central part of the creation of new residential housing in the past.

There are also serious problems in the apartment sector of the market, even though state governments, particularly the New South Wales government through its Transport-Oriented Planning zones, have been bending over backwards to facilitate the building of new high-rise buildings.

Of course, many members of the public are only too aware of the problems. Shoddy construction requiring expensive remedial work, inadequate parking (planning in both Victoria and NSW does not permit any parking in some new apartment buildings), and exploitative and unregulated strata management.

At the same time, children are often cooped up in these apartments – playing on screens, no doubt – because there is inadequate recreational space close by and it is impractical for adults to always accompany them.

In any case, it is now generally uneconomic for developers to construct apartments that are affordable for those on low to medium incomes. The cost of building apartments has risen by over one-third in five years. This makes it impossible to price these apartments to secure enough pre-sales and make a profit.

Clare O’Neil

As a result, projects are not proceeding even though there are development approvals. There are scores of unused DAs in Melbourne, for instance. At the top end of the market, construction is ongoing, but that is neither here nor there to solving the housing crisis.

In the meantime, the waiting list for social housing continues to grow, notwithstanding the many additional billions of dollars the federal government has handed over to state governments to add to the stock of social housing.

Between March and June this year, the waiting list for social housing in Victoria increased by some 3000, to nearly 52,000, with another 9000 on the transfer list. (These figures were previously combined, which tells you a lot.) The net increase in social housing in Victoria has been minimal as older stock is condemned.

The bottom line is that crisis is a strong term, but one that is deserved. Disaster, catastrophe or calamity could also be used. Without constraining demand by lowering the migrant intake, the scene has been set for widespread misery and hardship.

The actions of all levels of government are mainly contributing to the problems rather than creating solutions.