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Marist College Canberra News

Cracking the Housing Affordability Code

Louis Jang

misconceptions amongst the public and


W eve been looking at getting into the
propose options for much-needed reform.
market for a few years now, Tegan Gatherer A common criticism that commentators often
explains on the ABC 7.30 report. I watch, claim is that young people simply to prefer to
intrigued; buying a home is not too far in the live at home and/or are just too lazy to buy
distant future, and making sensible financial property. However, this criticism can be
choices early are vital for home ownership. debunked by both statistics and qualitative
However, the story gradually becomes research on the finances of young people,
somewhat disconcerting, with a voice over which point to the fact that for many young
playing, Tegan may never get to buy a home Australians, purchasing a home in the
in the city that she grew up in. As I continue foreseeable future is simply not a reality. In a
to watch, I become increasingly unsettled as recent TED talk, economist Eliza Owen
she explains buying a home is simply not an estimates that if you have a job that pays $20
option for her, her dreams shattered as she per hour, you would have to work over 47, 000
has been informed she will need a $100, 000 hours to buy a house at a median price. As
deposit. I had previously seen media articles many young people study full or part time and
talking about decreasing housing affordability, are reliant on casual or part time work, or are
but I never expressed much interest, thinking in low-paying entry level jobs or internships,
it was a minor issue that would not affect me, this cost is far out of reach. The Perceptions of
and as long as I saved, I would be fine. I was Housing Affordability report by property data
now not so sure, and eager to see whether analysts Core Logic, found that 62% of
Tegans experiences reflected the broader respondents who were living at home only did
demographic of young people, I decided to so because they could not afford to buy
investigate further. property.

What I found was that young people are So why is this crisis so little understood by
constantly being told that we cannot afford older generations? The reality is, as John
houses simply as a result of our inability to Daley describes, younger households,
save and excessive consumption habits of particularly those on lower incomes, used to
dining out and overseas travel. However, these be able to buy houses in Australia and now
arguments reveal how little many Australians they cant. What many older generations fail
understand the current housing crisis. This to understand is that housing prices have risen
article strives to debunk some common by over 250% since the mid 1990s and the
median house in Sydney is now above $1 suggested reform measure that the government
million. Home ownership is at its lowest point could implement. This could include creating
since the aftermath of World War Two. new suburbs or government housing, available
So what if anything needs to be done to rectify for purchase or lower-cost rentals that would
the situation? Well, what is clear, is that action be relatively affordable. There is also the
needs to be implemented soon, or many viable possibility of allowing developers to
leading economists estimate that the induce a bigger footprint, in return for
consequences may exceed that of the Global providing more affordable housing. However,
Financial crisis. Aside from the economic this is not a solution. As chief executive of the
consequences, Ross Gittins point out Committee for Sydney, Tim Williams, says,
homeownership is a basic Australian right. every year, we build in any city in the world
Indeed, young people deserve the security and about 2 percent more housing. Guess what?
stability of home ownership that older That is not enough to affect the house prices,
Australian citizens were granted. The situation which are determined by the 97 per cent.
is so severe that some commentators such as
Liberal MP John Alexander have claimed that On the other hand, apartments are essential to
their only advice to young Australians is to this solution, outlined by Nerida Conisbee,
buy a lottery ticket. Our future cities need apartments in the right
areas, not housing in the wrong ones,
When implementing solutions to the housing pointing to statistics that show high levels of
crisis it is important to recognise that many apartment development moderating price
individuals engage in negative gearing with growth. Conisbee debunks solutions that
justified intentions. This is outlined by Ross suggest building housing on the fringes of
Higgins, the lower and middle-class ones cities, which is expensive and often leads to
who are saving up their hard-earned money, undesirable social outcomes. Further, he
taking some risk and trying to build up their doesnt suggest that large apartments should
future, they might only have one property so be developed in suburbs, which creates more
they don't have much flexibility." Thus, we traffic and car parking requirements, but
need to keep in mind those who have worked argues that we should introduce dense
hard for their investment properties and who apartments where there is demand. I believe
rely on these properties for income when this is the most important measure that needs
reducing the cost of rental properties and to be implemented, however, as economist
housing. This is particularly important as Chris Richardson points out, other reform too
many of these individuals may have needs to be implemented and the government
borrowed from banks or third parties to alone cannot curb sky-high house prices in
initially deposit on the property. Australias cities.

Nevertheless, the situation is not completely It is often suggested that young people who
dire and solutions are available, however cannot afford homes in the capital cities
complex they may be. There are many should move to rural areas or other, less
different opinions on potential solutions, expensive cities. Whilst this may be a viable
however what is clear is that not one solution option for some, depending on an individuals
can be adopted to solve the crisis. Instead, a career, it is often not feasible. Moving to a
multi-faceted approach is necessary. rural town has been emphasised by Deputy
Prime Minister Barnaby Joyce. However, this
Firstly, government reform is necessary. suggestion has been rightfully criticised as
Increasing the supply of homes is a commonly out of touch. Rural towns have significantly

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less jobs available, particularly in white collar their homes. However, this duty may account
industries. Furthermore, despite pricing being for older individuals living in family homes
evidently cheaper in pricing, particularly with empty rooms as opposed to downsizing.
compared to major cities such as Sydney or Furthermore, higher stamp duty was
Melbourne, they lack the convenience and introduced in the previous financial year and it
diversity that larger cities offer. made no major differences to the crisis.
Between January and March, there was a $315
An interesting solution that has been proposed million increase on the first quarter of the last
is that of house-sharing between younger and financial year, and this made little difference
older generations. This solution is largely to affordable crisis.
based off the statistic that over 500, 000 homes
in NSW occupied by residents over 50 had at Finally, a less drastic, but effective measure
least two empty bedrooms. To combat that can be adopted by young people is to
concerns about undesirable housemates, it is read up and study economics. As advised by
suggested that the future program includes economist Eliza Owens, this could be
criteria to match the applicant's. Another studying economics at school or university or
similar and effective option for reform is to something as simple as reading economic
encourage homeowners to rent out spare journals regularly. This would help young
rooms or granny flats to younger individuals. people understand the market and can make
This is a win-win situation, as the homeowner appropriate financial decisions. Hopefully, in
gets extra rent and the renter is granted more the short-term, this would result in less
affordable rent whilst they save for a home. people experiencing disappointment as Tegan
did.
Stamp duty is also a commonly referred to
solution. Stamp duty is a frictional tax with
creates disincentives for moving homes. Many
argue that introducing a high stamp duty
would prevent negative gearing, and from
homeowners seeking to excessively profit off