tag:theconversation.com,2011:/us/topics/housing-prices-215/articlesHousing prices – The Conversation2024-03-06T19:15:33Ztag:theconversation.com,2011:article/2240602024-03-06T19:15:33Z2024-03-06T19:15:33ZInterest rates are expected to drop but trying to out-think the market won’t guarantee getting a good deal<p><em>This article is part of The Conversation’s series examining the housing crisis. Read the other articles in the series <a href="https://theconversation.com/au/topics/housing-series-2024-153769">here</a>.</em></p>
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<p>With most economists expecting interest rates to start falling later this year, prospective home buyers might be weighing up whether to buy now for fear of strong competition for stock, or waiting until repayments are lower.</p>
<p>The financial markets and private sector economists expect the Reserve Bank to start cutting interest rates later this year. But the average forecaster is expecting just one cut in the next 12 months, of 0.25%.</p>
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<p>While rates have risen 13 times since May 2022, the drop won’t be so far nor so fast.</p>
<p>Even by the end of 2026 rates will probably only be around 1% lower than now.</p>
<p>And this may be as low as interest rates go. The interest rates we saw during the COVID recession were arguably the <a href="https://www.bankofengland.co.uk/-/media/boe/files/speech/2015/stuck.pdf">lowest in human history</a>. </p>
<p>We are highly unlikely to return to these lows.</p>
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<img alt="Graph of interest rates dating back to 1575, going down since 1975" src="https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=277&fit=crop&dpr=1 600w, https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=277&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=277&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=348&fit=crop&dpr=1 754w, https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=348&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/578495/original/file-20240228-18-jx645r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=348&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.bankofengland.co.uk/-/media/boe/files/speech/2015/stuck.pdf">Bank of England</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<h2>Neutral interest rates</h2>
<p>In normal times, we would expect interest rates to be higher than inflation. People can reasonably expect to be compensated for delaying spending. The margin by which interest rates exceed inflation in the medium-term is known as the <a href="https://www.rba.gov.au/speeches/2022/sp-ag-2022-10-12.html">neutral real rate of interest</a>. </p>
<p>This Goldilocks rate would apply when the Reserve Bank is neither trying to squeeze inflation nor stimulate demand. </p>
<p>The Reserve has used <a href="https://www.rba.gov.au/speeches/2022/sp-ag-2022-10-12.html">nine different approaches</a> to estimate this neutral real rate. The average result is that it may have dropped from around 3% in the 1990s to around 1% in the 2020s.</p>
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<p>This is also around the <a href="https://www.bis.org/publ/qtrpdf/r_qt2403b.htm">average value estimated in comparable countries</a>. In these days of global financial markets, it could be expected that there would be similar trends across countries. The decline in the global neutral real rate may be due to a <a href="https://www.brookings.edu/articles/the-hutchins-center-explains-the-neutral-rate-of-interest/">reduction in the global economic growth rate associated with population ageing and higher global savings</a>.</p>
<p>The Reserve Bank aims for inflation to average around the midpoint of its <a href="https://www.rba.gov.au/education/resources/explainers/australias-inflation-target.html">2-3% target range</a>. So if the neutral real rate is around 1%, this would imply that the Reserve’s <a href="https://www.rba.gov.au/statistics/cash-rate/">cash rate</a> (at which banks lend to each other overnight) would be around 3.5%.</p>
<p>This is about what the forecasters are expecting by the end of 2026.</p>
<p>Commercial banks <a href="https://www.rba.gov.au/education/resources/explainers/banks-funding-costs-and-lending-rates.html">set the interest rates</a> they charge on their loans by adding a margin to the Reserve Bank’s cash rate.</p>
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Read more:
<a href="https://theconversation.com/the-help-to-buy-scheme-will-help-but-wont-solve-the-housing-crisis-224956">The Help to Buy scheme will help but won't solve the housing crisis</a>
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<p>They set the interest they pay on deposits by subtracting a margin from the cash rate. The difference between the two (and any fee income) meets the costs of running the bank such as wages and premises, allows for some loans not being repaid and provides some profits. The margins will be smaller if the banking market is very competitive.</p>
<p>Banks generally move their mortgage interest rates in line with the cash rate. If by the end of 2026 the cash rate is 1% lower, it is likely home loan interest rates will also be around 1% lower. This would reduce the monthly repayment on a 30-year loan for $1 million by $700.</p>
<h2>The impact of (somewhat) lower interest rates on house prices</h2>
<p>If the housing market is reasonably efficient, these broadly expected decreases in interest rates should largely be already “priced in” by investors. This would suggest relatively little impact as the expected cuts materialise.</p>
<p>But some potential homebuyers will be able to borrow more once interest rates drop. And many of them will choose to do so. They may then bid house prices up.</p>
<p>This is why <a href="https://theconversation.com/mortgage-and-inflation-pain-to-ease-but-only-slowly-how-31-top-economists-see-2024-218927">most economists are forecasting house prices to rise further</a> during 2024. The average expected increase is 5% in Sydney and 3% in Melbourne. </p>
<p>The increases are comparable to the expected rises in incomes so affordability will not significantly worsen. But buying a home will not be getting any easier.</p>
<p>A similar pattern of expected easing interest rates leading to higher house prices is being observed <a href="https://www.ft.com/content/b6d89def-aea4-4790-9ff5-cddf32f3b36c">around the world</a>.</p>
<p>Renters may be hoping landlords will pass on interest rate decreases to them. But they are likely to be disappointed. Rents have risen not due to interest rate rises but because the vacancy rate is low. With strong population growth, this is unlikely to change soon.</p>
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Read more:
<a href="https://theconversation.com/urbanisation-and-tax-have-driven-the-housing-crisis-its-hard-to-see-a-way-back-but-covid-provides-an-important-lesson-223548">Urbanisation and tax have driven the housing crisis. It's hard to see a way back but COVID provides an important lesson</a>
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<h2>What to do?</h2>
<p>Trying to out-think the market is unlikely to work.</p>
<p>Not buying your dream home and instead waiting for a drop in interest rates may be a mistake. But so might panic-buying something that’s not what you want out of fear of further rises in house prices.</p><img src="https://counter.theconversation.com/content/224060/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins was formerly a senior economist at the Reserve Bank and the Australian Treasury and was secretary to the Senate Select Committee on Housing Affordability in Australia in 2008.</span></em></p><p class="fine-print"><em><span>Craig Applegate does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite different theories, there is no simple answer to whether prospective home buyers are better off buying before or after the expected interest rate drop in the next year.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraCraig Applegate, Assistant Professor, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2189112024-02-01T19:05:15Z2024-02-01T19:05:15ZBuying a renovated home? You could be up for an extra 10% GST, but it’s a grey area. Here’s a way to end the uncertainty<figure><img src="https://images.theconversation.com/files/567017/original/file-20231221-27-8ftn73.jpg?ixlib=rb-1.1.0&rect=0%2C9%2C6218%2C4123&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/construction-new-part-old-house-before-535324108">CapturePB/Shutterstock</a></span></figcaption></figure><p>A home buyer usually does not pay goods and services tax (GST) on a home except if they buy a new home that has not been sold before as residential property. However, when a home that has been “<a href="https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/antsasta1999402/s40.75.html">substantially renovated</a>” is <a href="https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/antsasta1999402/s40.65.html">sold</a>, the buyer may have to pay GST. This can add 10% to the price of the home for the buyer. </p>
<p>The problem home buyers face is that what qualifies as a “substantial renovation” is uncertain. The Australian Taxation Office does provide some guidance on this in a <a href="https://www.ato.gov.au/law/view/document?docid=GST/GSTR20033/NAT/ATO/00001">ruling</a>. However, the <a href="https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/antsasta1999402/s195.1.html">definition</a> is subject to interpretation.</p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4605598">My research</a> has looked at the approaches to answering this question in Australia, Europe and Canada. Whether a renovation has transformed an existing home into a “new home” for GST purposes has been the subject of litigation in almost all countries where such a distinction is made. The experience of other countries may provide a guide to reforms that could be made in Australia to provide home buyers and sellers with more certainty.</p>
<p>If tax law applied a test based on the renovation cost as a percentage of the post-renovation resale value of the home to determine if there is a substantial renovation, that would give buyers greater certainty.</p>
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Read more:
<a href="https://theconversation.com/how-much-can-i-spend-on-my-home-renovation-a-personal-finance-expert-explains-160696">How much can I spend on my home renovation? A personal finance expert explains</a>
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<h2>Renovation boom has added to uncertainties</h2>
<p><a href="https://theconversation.com/more-rented-more-mortgaged-less-owned-what-the-census-tells-us-about-housing-185893">Two-thirds of Australians</a> live in homes they own (outright or with a mortgage). Home renovations appear to have <a href="https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release">become increasingly popular</a>. </p>
<p>Housing is becoming less affordable, the latest <a href="https://www.corelogic.com.au/news-research/reports/housing-affordability">ANZ CoreLogic Housing Affordability Report</a> shows. Housing prices and rents have increased, along with the cost of debt. It is taking longer to save for a home deposit. There is a housing supply shortage. </p>
<p>Fewer home owners can afford to move. Many are renovating instead. Landlords, too, are often renovating to take advantage of higher rents. </p>
<p>Not all renovations are publicly reported, but <a href="https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release">Australian Bureau of Statistics data</a> show both owner-occupiers and investors have been taking out more loans for alterations, additions and repairs since the start of COVID-19. </p>
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<h2>Why renovations can make buyers liable for GST</h2>
<p>Most existing home purchases are not subject to GST. GST is payable when buying a newly built home and potentially when buying a “substantially renovated” home. </p>
<p>GST taxes the value of consumption of many goods and services. The value of consumption is assumed to be the market value. </p>
<p>GST is charged when a “new home” is first bought. For the sake of simplicity, it is assumed the purchase price of a new home when it is first bought is equal to the present value of all future consumption of the home. This means future buyers of the home generally don’t have to pay GST.</p>
<p>However, where a home is substantially renovated it is assumed most of the original value of the home that was subject to GST the first time it was sold has been consumed. The value added by a substantial renovation means the home is regarded as new. A buyer of a substantially renovated home may be required to pay 10% GST. </p>
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Read more:
<a href="https://theconversation.com/building-costs-have-soared-is-it-time-to-abandon-my-home-renovation-plans-188298">Building costs have soared. Is it time to abandon my home renovation plans?</a>
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<h2>But what is a ‘substantial renovation’?</h2>
<p>A minor repair will clearly not lead to substantial value being added to a home. On the other hand, if a home is demolished and replaced by a new one, the buyer of the new home may have to pay GST. It’s less clear what the GST treatment should be when a renovation falls somewhere in between these two extremes. </p>
<p>Canadian cases provide helpful examples of renovations falling along the spectrum. This issue is often litigated in Canada partly because home owners may be eligible for GST rebates where they live in a substantially renovated home. The outcomes of these legal cases have been inconsistent. </p>
<p>In <a href="https://www.canlii.org/en/ca/tcc/doc/2003/2003tcc929/2003tcc929.html?autocompleteStr=Lair%20v%20The%20Queen&autocompletePos=1">one case</a>, a basement was added, one floor of the house was gutted and renovated, the electrical system, plumbing, flooring, roof and windows were replaced, and a kitchen was extended. The court decided this was a substantial renovation. </p>
<p>In <a href="https://canlii.ca/t/fznbj">another case</a>, a new hallway was added, part of the roof and the ceilings were raised, the house was re-insulated, and a porch was added. A garage was demolished and replaced with a two-storey addition and basement. The addition included living space, a bedroom and bathroom. The court decided this was not a substantial renovation, despite significant value being added.</p>
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Read more:
<a href="https://theconversation.com/nzs-housing-market-drives-inequality-why-not-just-tax-houses-like-any-other-income-208003">NZ’s housing market drives inequality – why not just tax houses like any other income?</a>
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<h2>So how can we settle the issue?</h2>
<p>A test could be adopted in law to provide certainty about what is a substantial renovation. </p>
<p>A logical test could deem a home renovation to be substantial if its cost is 50% or more of the post-renovation resale value of the home. The cost of the renovation could be verified with receipts.</p>
<p>This means minor changes that do not add significant value to a home would not lead to a future buyer having to pay GST. GST would be potentially payable only when most of the value of the home being bought has been added by a renovation.</p><img src="https://counter.theconversation.com/content/218911/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christine Peacock does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A buyer could have to pay GST on a ‘substantially renovated’ home, but there’s often uncertainty about whether a renovation counts as substantial or not. A simple test could resolve the issue.Christine Peacock, Lecturer in Law, Federation University AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2111202023-08-28T02:37:04Z2023-08-28T02:37:04ZThink curbing overseas migration will end the housing crisis? It won’t – and we can’t afford to do it<p>With the nation feeling the pressures of a housing crisis, some believe the Australian government needs to ease housing demand by limiting international migration. </p>
<p>To others, this sentiment comes across as xenophobic. They dismiss it outright, based on moral grounds. How can a <a href="https://www.des.qld.gov.au/multicultural-queensland-month">nation of settlers</a>, built on <a href="https://acij.org.au/about-us/acknowledgement-of-country/">unceded Indigenous land</a>, contemplate the notion of closing its borders to new migrants?</p>
<p>Leaving the moral arguments aside, it is worth looking at the data to find out if there is any merit to the idea of limiting housing demand by curbing migration – as opposed to increasing housing supply to make housing more affordable. </p>
<p>The evidence from pandemic-era data and longer-term migration and housing trends provides little support for the idea that curbing migration is a solution. And the future impacts on the economy and an ageing population would be costly for Australia, as the latest <a href="https://treasury.gov.au/intergenerational-report">Intergenerational Report</a> reminds us. </p>
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Read more:
<a href="https://theconversation.com/australia-is-missing-500-000-migrants-but-we-dont-need-visa-changes-to-lure-them-back-182322">Australia is missing 500,000 migrants, but we don't need visa changes to lure them back</a>
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<h2>Why does Australia take in migrants?</h2>
<p>First off, it is crucial to understand that Australia’s international migration program is not driven by charity. For a start, the percentage of humanitarian migrants is minuscule, <a href="https://www.abs.gov.au/statistics/people/people-and-communities/permanent-migrants-australia/latest-release">about 10%</a> of Australia’s permanent migrant intake. And, compared to other OECD countries, it is <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=251988">very difficult</a> for migrants to bring family members, such as parents or siblings, to Australia.</p>
<p>Among non-refugees, <a href="https://www.abs.gov.au/statistics/people/people-and-communities/permanent-migrants-australia/latest-release">younger and highly skilled migrants dominate</a> the lot. They provide much-needed labour skills and sustain the economy. Migrants help Australia as much as Australia helps them achieve their life goals. </p>
<p>Clearly, limiting international migration is not a realistic policy option. </p>
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Read more:
<a href="https://theconversation.com/when-we-open-up-open-up-big-economists-say-we-need-more-migrants-177359">When we open up, open up big: economists say we need more migrants</a>
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<h2>What’s the level of international migration?</h2>
<p>The level of overseas migration is very high at present so, yes, migrants are contributing to housing demand in the short term. </p>
<p>However, this situation is only temporary. Much of it is so-called “recuperation migration” to make up for border closures that all but halted immigration during the pandemic. In 2020-21, Australia experienced a veritable exodus, with a net population <a href="https://www.abs.gov.au/statistics/people/population/overseas-migration/latest-release">loss of 85,000 people</a>. Very few migrants were allowed in until late 2022. </p>
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<p>The annual overseas migration intake is expected to <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/Budget/reviews/2023-24/Immigration">peak at 400,000 people</a> in 2022-23 before returning to 260,000 in 2024-25. This will be close to the long-term average before the pandemic. It will not fully make up for the lost population growth during the pandemic. </p>
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Read more:
<a href="https://theconversation.com/whats-behind-the-recent-surge-in-australias-net-migration-and-will-it-last-203155">What's behind the recent surge in Australia's net migration – and will it last?</a>
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<h2>Housing supply is the long-term problem</h2>
<p>The housing crisis has been decades in the making. Housing prices were on an upward trend while the annual overseas migration intake remained constant in the decade leading to COVID-19. </p>
<p>Tellingly, even as Australia lost population during the pandemic, the real estate industry <a href="https://www.mortgagebusiness.com.au/property/17774-the-property-market-3-years-after-covid">estimates</a> that “from September 2020 to April 2022, the nation experienced the sharpest recorded upswing in home values (28.6%)”. </p>
<p>This shows that factors other than migration have been at play. </p>
<p>Let’s look beyond international migration numbers and compare the net population growth to the housing supply. According to <a href="https://www.afr.com/politics/federal/how-to-solve-australia-s-housing-crisis-20230502-p5d4w9">former senior Reserve Bank economist Tony Richards</a>, the national dwelling stock stopped expanding in line with overall population growth in 2001. That’s also when the number of property investors <a href="https://www.theguardian.com/australia-news/2023/jun/04/a-quarter-of-australias-property-investments-held-by-1-of-taxpayers-data-reveals">began to increase</a>. </p>
<p>Since 2001, the demand for housing has far exceeded the supply. The shortfall has been especially marked in the most populous states – New South Wales, Victoria and Queensland. By 2021, the national dwelling shortfall was <a href="https://www.afr.com/politics/federal/how-to-solve-australia-s-housing-crisis-20230502-p5d4w9">more than 1.3 million units</a>. </p>
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Read more:
<a href="https://theconversation.com/the-market-has-failed-to-give-australians-affordable-housing-so-dont-expect-it-to-solve-the-crisis-192177">The market has failed to give Australians affordable housing, so don't expect it to solve the crisis</a>
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<h2>Is most population growth due to migrants?</h2>
<p>Yes, but not by much. Until the COVID-19 pandemic, about 40% of population growth in Australia was through natural increase and 60% through international migration. Recuperation migration means migrants are contributing a bit more to the mix now.</p>
<p>Overall in Australia, the average number of children per woman reached a <a href="https://www.abs.gov.au/statistics/people/population/births-australia/latest-release">historical low of 1.58</a> in 2021. Birth rates among international migrants are <a href="https://link.springer.com/article/10.1007/s12134-020-00767-0">similar to the national average</a>. This is because migrants tend to be highly skilled, particularly in cities, and people in that group are more career-focused and have fewer children. </p>
<p>Low birth rates might be good news for those holding <a href="https://www.theguardian.com/books/2023/jul/22/pro-extinctionis-longtermim-effective-altruism-human-extinction-emile-torres">pro-extinctionist views</a>. Others may see it as an <a href="https://www.euronews.com/next/2023/04/04/china-sees-first-population-decline-in-six-decades-where-does-the-eu-stand">economic disaster in the making</a>. </p>
<p>However, the nation is recording about <a href="https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/latest-release">300,000 births a year</a>. This figure has been constant for a decade. Our population is youthful relative to other OECD countries, with a median age of 42. This means housing demand is not about to stop. </p>
<h2>What about internal migration?</h2>
<p>In some regions, like South-East Queensland, the internal migration of Australian residents is compounding the impact of immigration. This is not new. </p>
<p>The graph below shows data from 2021-22. At the time, Brisbane and its surroundings were particularly attractive as other states struggled to contain the pandemic. </p>
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<p>But <a href="https://population.gov.au/sites/population.gov.au/files/2021-09/anticipating_the_impact_of_covid-19_on_internal_migration.pdf">historic data</a> from the 1980s onward show Queensland has long been a net population receiver. The state owes its longstanding popularity to its warmer climate and lower housing prices.</p>
<p>The recent spike in interstate migration to South-East Queensland combined with international migration to create a perfect storm. While Sydney’s and Melbourne’s housing markets have been <a href="https://www.smh.com.au/property/news/sydney-melbourne-among-top-five-least-affordable-cities-in-the-world-to-buy-a-home-20220316-p5a574.html">notoriously unaffordable</a> for a while, Brisbane is the <a href="https://theconversation.com/the-post-covid-crisis-hit-queensland-hardest-with-100-000-households-needing-low-cost-housing-heres-how-it-can-recover-199514">latest arrival</a> on the front lines of the housing affordability battle.</p>
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<strong>
Read more:
<a href="https://theconversation.com/the-post-covid-crisis-hit-queensland-hardest-with-100-000-households-needing-low-cost-housing-heres-how-it-can-recover-199514">The post-COVID crisis hit Queensland hardest. With 100,000 households needing low-cost housing, here's how it can recover</a>
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<h2>The bottom line</h2>
<p>International migration contributes to the housing demand but it’s hardly the only, or even the main, cause of the housing crisis. The problem cannot be solved by curbing migration. </p>
<p>To make Australian housing affordable again, we need to increase housing supply in line with demand. We also need to stop <a href="https://www.smh.com.au/national/nsw/the-real-reason-housing-supply-isn-t-keeping-up-with-demand-20230821-p5dy40.html">inflationary investments</a> in existing housing by abolishing tax rules such as negative gearing and capital gains tax.</p>
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Read more:
<a href="https://theconversation.com/australias-housing-crisis-is-deepening-here-are-10-policies-to-get-us-out-of-it-204026">Australia’s housing crisis is deepening. Here are 10 policies to get us out of it</a>
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<img src="https://counter.theconversation.com/content/211120/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dorina Pojani has received research grant funding from a variety of domestic and international organisations, including the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Aude Bernard currently receives funding from the Australian Research Council.</span></em></p>COVID-19 halted immigration and housing affordability got much worse. We’d feel the impacts of internal migration and undersupply of affordable housing even if we again blocked migrants from overseas.Dorina Pojani, Associate Professor in Urban Planning, The University of QueenslandAude Bernard, Senior Lecturer, Queensland Centre for Population Research, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2084772023-07-02T03:10:15Z2023-07-02T03:10:15ZTwo more RBA rate hikes, tumbling inflation, and a high chance of recession: how our forecasting panel sees 2023-24<figure><img src="https://images.theconversation.com/files/534767/original/file-20230629-21-vu0a05.png?ixlib=rb-1.1.0&rect=299%2C305%2C3914%2C1678&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">DALL·E/Shutterstock</span></span></figcaption></figure><p>Of the 27 leading economists assembled by The Conversation to forecast the financial year that’s just begun, every one expects inflation to continue to fall.</p>
<p>The official quarterly measure of inflation peaked at 7.8% in the year to December and is now <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">7%</a>, and the newer monthly measure peaked at 8.4% and is now <a href="https://www.abs.gov.au/media-centre/media-releases/monthly-cpi-indicator-annual-rise-56-may-2023">5.6%</a>.</p>
<p>What’s at issue is how quickly inflation will continue to fall, how many more times the Reserve Bank will push up interest rates to make sure it falls as quickly as it wants, and the damage those rate hikes will do to an already very weak economy.</p>
<p>Twelve of the 27 think a recession is either more likely than not, or an even chance. And almost all expect a “per-capita recession”, in which economic growth fails to keep pace with population growth, sending living standards backwards.</p>
<p>Now in its <a href="https://theconversation.com/au/topics/conversation-economic-survey-81354">fifth</a> year, The Conversation survey draws on the expertise of leading forecasters in 25 Australian universities, think tanks and financial institutions – among them economic modellers, former Treasury, International Monetary Fund and Reserve Bank officials, and a former member of the Reserve Bank board.</p>
<h2>Two more interest rate hikes this year</h2>
<p>After 12 interest rate hikes that lifted the Reserve Bank’s cash rate from 0.1% to 4.1% in a little over a year, the panel expects two more.</p>
<p>The panel predicts a cash rate of <a href="https://cdn.theconversation.com/static_files/files/2736/2023-24_CONVERSATION_AU_FORECASTING_SURVEY.pdf">4.5%</a> by the end of this year, followed by a decline to 4.3% by the middle of next year, and to 3.9% by the end of 2024.</p>
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<p>Asked to specify the month in which the cash rate will peak, and how high it will go, the panel settled on a peak of 4.7% in November. </p>
<p>A cash rate of 4.7% would lift the typical rate on a new mortgage from 5.4% to 6%, adding a further $200 per month to the cost of servicing a $600,000 loan. </p>
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<p>But the extra pain would be short-lived. Asked how long the cash rate would stay at its peak before being cut, the panel’s average guess was <a href="https://cdn.theconversation.com/static_files/files/2736/2023-24_CONVERSATION_AU_FORECASTING_SURVEY.pdf">six months</a>, meaning rates would begin to fall in June next year.</p>
<p>Several of those surveyed warned against expecting rates ever to fall back to anything like the emergency lows of 2020 and 2021. Others noted that the one thing that could force the Reserve Bank to cut rates faster than expected was a recession.</p>
<h2>Plummeting inflation, an uptick in real wages</h2>
<p>The panel expects inflation to slide from 7% to 5.2% by the end of the year, then to 3.9% by mid-2024, and to 2.9% a year later – putting it back within the Reserve Bank’s 2-3% target band.</p>
<p>Although steep, the fall in inflation isn’t as fast as predicted by the bank <a href="https://www.rba.gov.au/publications/smp/2023/may/forecasts.html">itself</a> (3.6% by mid-2024) or the <a href="https://images.theconversation.com/files/534717/original/file-20230629-27-c3e0pf.PNG">Treasury</a> (3.25% by mid-2024).</p>
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<p>Barrenjoey Chief Economist Jo Masters said while price pressure from imported goods and fuel was easing, inflation was increasingly being driven by the prices of services such as rents that tended to be persistent.</p>
<p>Margaret McKenzie of Federation University identified the reopening of borders as a source of downward pressure on prices, saying it would ease labour shortages. </p>
<p>Moody’s Analytics’ Harry Murphy Cruise said although weaker spending was putting downward pressure on inflation, the Reserve Bank seemed unwilling to let that take its course and wanted to slow inflation more quickly, risking “knocking the wind out” of an already fragile economy.</p>
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Read more:
<a href="https://theconversation.com/going-down-the-6-graphs-that-show-economic-growth-shrinking-206068">Going down: the 6 graphs that show economic growth shrinking</a>
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<p>A welcome upside of much lower inflation forecasts is a forecast of the first increase in real wages in three years, albeit a small one.</p>
<p>The panel expects wages growth of 4% in the financial year ahead, just beating price growth of 3.9%. The resulting 0.1% increase in the so-called real wage would be followed by a more substantial increase of 0.7% in 2024-25 as wages growth of 3.6% topped price growth of 2.9%.</p>
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<h2>A per-capita (if not an actual) recession</h2>
<p><a href="https://www.abc.net.au/news/2023-06-16/nz-enters-a-recession-as-economy-shrinks-again/102477992">New Zealand</a> is already in a recession, and the panel assigns probabilities of 59% and 42% to the prospect of recessions in the United Kingdom and United States respectively, with the most likely start for both being the final three months of this year.</p>
<p>Throughout 2023, the panel expects economic growth of just 1.2% in the US and historically weak growth of 4.9% in China, suggesting Australia’s biggest customer for minerals will be unable to provide much help as Australia’s own economic growth dwindles.</p>
<p>The panel is forecasting Australian economic growth of just 1.2% in 2023 – the lowest rate outside a recession in more than 30 years, climbing to just 1.5% in the year to June 2024 and 2.3% in the year to June 2025. </p>
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<p>AMP Chief Economist Shane Oliver said if the low growth rate turns into what is usually called a recession (two consecutive quarters of shrinking gross domestic product) it will be because the Reserve Bank pushes up interest rates too far for highly indebted Australians to withstand.</p>
<p>He said consumer spending is almost certain to shrink as debt servicing costs hit a record high and, on the Bank’s <a href="https://www.rba.gov.au/publications/fsr/2022/oct/box-b-the-impact-of-rising-interest-rates-and-inflation-on-indebted-households-cash-flows.html">own analysis</a>, 15% of households with a variable-rate mortgage – roughly a million people – experience negative cash flow.</p>
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Read more:
<a href="https://theconversation.com/why-rba-governor-philip-lowe-wants-to-damage-the-economy-further-207022">Why RBA Governor Philip Lowe wants to damage the economy further</a>
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<p>Asked to estimate the chance of the Australian economy going into recession in the next two years, the panel’s average answer was <a href="https://cdn.theconversation.com/static_files/files/2736/2023-24_CONVERSATION_AU_FORECASTING_SURVEY.pdf">38%</a>, well up from the <a href="https://theconversation.com/higher-interest-rates-falling-home-prices-and-real-wages-but-no-recession-top-economists-forecasts-for-2023-198975">26%</a> the panel assigned to a recession in February’s survey.</p>
<p>KPMG Chief Economist Brendan Rynne assigned a 100% probability to what he called a “shallow, extended recession”, in which growth is first weighed down by a downturn in housing investment, followed by a slowdown in business investment.</p>
<p>The average forecast start date of a recession, should there be one, is the final three months of this year.</p>
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<p>The panel’s economic growth forecast of 1.5% for 2023-24 is well below the Treasury’s forecast of population growth of 2%, suggesting output per person will shrink in what is called a <a href="https://www.amp.com.au/content/dam/amp-au/documents/insights/recession-risk-oi-16-2023v2.pdf">per-capita recession</a>.</p>
<h2>Unemployment climbing, albeit slowly</h2>
<p>The panel expects a gradual increase in the unemployment rate from its present near-50-year low of 3.6% to 4.3% by mid-next year, followed by an increase to 4.6% by mid-2025.</p>
<p>The forecasts are in line with those of the Treasury and Reserve Bank, and suggest Australia is unlikely to surrender the big gains in employment made in the aftermath of the COVID lockdowns and return to the pre-COVID unemployment rate of 5%.</p>
<p>University of Tasmania economist Mala Raghavan said while job markets would become less tight as the economy weakened and as foreign students and migrants returned, the impact would be felt first in the underemployment rate, which reflects the extent to which workers are working fewer hours than they want.</p>
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<h2>Less household buying, higher house prices</h2>
<p>The panel expects growth in real household spending of just 1.5% in 2023-24, meaning the amount bought per household is likely to shrink.</p>
<p>Yet at the same time, it is forecasting continued modest growth in home prices, which climbed for the <a href="https://www.corelogic.com.au/news-research/news/2023/home-value-index-shows-housing-values-increase-in-june,-but-the-pace-of-growth-has-slowed">fourth month in a row</a> in June after falling since mid-2022.</p>
<p>Most of the panel expects further growth in Sydney and Melbourne home prices in the 12 months ahead, with only four panel members predicting declines. The average forecast is for both Sydney and Melbourne prices to climb a further 2%.</p>
<p>Former Productivity Commission economist Jenny Gordon identified renewed migration as a driver of demand, offset by declining real wages and the risk of a recession.</p>
<p>Jo Masters said sellers appeared to be withdrawing supply, with total listings a third lower than normal, while the buyers appeared to have higher incomes than before and lower debt-to-income ratios, meaning they were less troubled by high interest rates.</p>
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<h2>Tiny share market growth, tiny budget deficit</h2>
<p>The panel expects the budget surplus for the financial year <a href="https://www.finance.gov.au/publications/commonwealth-monthly-financial-statements/2023/mfs-may">just ended</a> to be followed by only a <a href="https://cdn.theconversation.com/static_files/files/2736/2023-24_CONVERSATION_AU_FORECASTING_SURVEY.pdf">tiny</a> budget deficit of A$9.4 billion in 2023-24, which would be less than 0.4% of GDP.</p>
<p>Two panellists, Mariano Kulish and Stephen Anthony, expect this year’s surplus to be followed by another one of $18 billion to 20 billion. Anther, Jenny Gordon, expects this year’s surplus to be followed by a budget in balance. </p>
<p>The forecasts reflect an iron ore price expected to stay near US$104 per tonne at the end of the year, instead of falling towards US$60 as forecast in the budget.</p>
<p>The panel expects modest share market growth of 3% in the year to June 2024, with the results sensitive to home prices (through the profits of financial corporations) and minerals prices (through the profits of mining companies).</p>
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<h2>The Conversation’s Economic Panel</h2>
<p><em>Click on economist to see full profile.</em></p>
<p><iframe id="tc-infographic-882" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/882/0a0836b37189a0c0b4ab743abff911624a51c29e/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p><strong><a href="https://cdn.theconversation.com/static_files/files/2736/2023-24_CONVERSATION_AU_FORECASTING_SURVEY.pdf">Download the results on one page</a></strong></p><img src="https://counter.theconversation.com/content/208477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The good news includes a return to real wage growth and a restrained increase in unemployment. The bad news includes even higher home prices and a per-capita recession.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1989752023-02-05T03:08:42Z2023-02-05T03:08:42ZHigher interest rates, falling home prices and real wages, but no recession: top economists’ forecasts for 2023<figure><img src="https://images.theconversation.com/files/508174/original/file-20230205-13-n69h0m.png?ixlib=rb-1.1.0&rect=317%2C0%2C3676%2C1982&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Wes Mountain/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Australia’s Reserve Bank is set to push up rates once again at its first meeting for the year on Tuesday, according to <a href="https://cdn.theconversation.com/static_files/files/2528/2023CONVERSATIONFORECASTING_SURVEYResponses.pdf">all but two</a> of the 29 leading economists surveyed by The Conversation at the start of 2023. </p>
<p>Those experts predict we will still be living with higher rates by the end of the year, although they should start to come down in 2024.</p>
<p>Their average forecast is an increase in the bank’s <a href="https://www.rba.gov.au/statistics/cash-rate/">cash rate target</a> from 3.1% to 3.6% during 2023. That’s enough to add an extra A$190 to the monthly cost of servicing a $600,000 variable mortgage, bringing the total increase in the cost of servicing such a mortgage since the bank began hiking rates in May 2022 to more than $1,000.</p>
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<p>All but three of the specialists surveyed expect the Reserve Bank’s cash rate target to peak during 2023, and on average the panel expects it to fall back to close to its present level during 2024.</p>
<p>Panelist Jo Masters of Barrenjoey Capital says the bank’s keenness to bring down inflation will be tempered by the knowledge that a large number of borrowers are set to exit the very cheap three-year fixed-rate loans they took out early in the pandemic and are facing very steep increases indeed.</p>
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<p>The highest forecast for a peak in the cash rate is from former Reserve Bank research manager Peter Tulip, who expects a cash rate of 5% by December 2024 – enough to add a further $725 to the monthly cost of servicing a $600,000 mortgage.</p>
<p>The panel assembled by The Conversation includes macroeconomists, economic modellers, former Treasury, International Monetary Fund and financial market economists, and a former member of the Reserve Bank board. </p>
<p>Most expect inflation to fall sharply from here on, with all but five believing the quarterly rate will turn out to have peaked at 7.8% in <a href="https://theconversation.com/with-inflation-still-rising-the-rba-will-almost-certainly-lift-interest-rates-in-february-198504">December 2022</a>.</p>
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<p>Financial markets economist Warren Hogan says the food and fuel prices pushed up by Russia’s invasion of Ukraine are already falling, and the only question is how quickly inflation falls, and how soon it returns to the Reserve Bank’s <a href="https://www.rba.gov.au/inflation/inflation-target.html">2-3%</a> target band.</p>
<p>Former federal Labor minister Craig Emerson says, unlike in the 1970s, wage rises aren’t helping sustain inflation. Then, more than half the Australian workforce was unionised and wage setting was centralised. Today only <a href="https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/trade-union-membership/latest-release">one-eighth</a> of the workforce is unionised and most wages are not set centrally.</p>
<p>The panel expects real wages to go backwards for the third consecutive year in 2023, as wages growth of 3.9% is overpowered by prices growth of 4.5%.</p>
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<p>Wage growth is expected to fall back to 3.6% in 2024 as the economy weakens and as an increase in immigration helps fill labour shortages. But the average forecast is wage growth to outstrip price rises next year for the first time since 2020, as inflation falls back to 3.2%.</p>
<h2>Recession unlikely at home, more likely abroad</h2>
<p>The panel assigns a 26% probability to a <a href="https://www.rba.gov.au/education/resources/explainers/recession.html">recession</a> in the next two years, an increase on the <a href="https://theconversation.com/sky-high-mortgages-7-1-inflation-and-a-20-chance-of-recession-how-the-conversations-panel-sees-the-year-ahead-185411">20%</a> it assigned in mid-2022.</p>
<p>Former Department of Foreign Affairs and Trade chief economist Jenny Gordon says if Europe goes into a recession in its 2023-24 winter and China’s recovery is slow, a recession in Australia will become more likely.</p>
<p>While the panel expects China’s decision to end COVID lockdowns will lift its growth rate from 3% in 2022 to 4.7% in 2023, it does not expect anything like a return to the previous growth rates of 8% or more. </p>
<p>Industry economist Julie Toth says China is facing resource depletion and <a href="https://theconversation.com/chinas-population-is-now-inexorably-shrinking-bringing-forward-the-day-the-planets-population-turns-down-198061">population decline</a>, as well as a cyclical downturn in industrial and residential investment. COVID-19 presents an immediate threat to its people and economy.</p>
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Read more:
<a href="https://theconversation.com/chinas-population-is-now-inexorably-shrinking-bringing-forward-the-day-the-planets-population-turns-down-198061">China's population is now inexorably shrinking, bringing forward the day the planet's population turns down</a>
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<p>The panel assigns a 42% probability to a recession in the United States within the next two years, a 57% probability to a recession in the European Union, and a 73% probability to a recession in the United Kingdom.</p>
<p>Four of the economists surveyed believe the UK recession has already started. As in the US, it is likely to result from the run of interest rate increases put in place to contain inflation. </p>
<p>University of Tasmania economist Mala Raghavan expects the US to skirt an outright recession and instead experience a “rolling recession”, in which different parts of the economy take time to turn down.</p>
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<p>KPMG forecaster Sarah Hunter says while Australia should avoid a recession as commonly described (two consecutive quarters in which production shrinks) economic growth could well turn negative for one quarter at the start of the year, as household spending turns down and mining shipments are disrupted by floods.</p>
<p>Regardless, the economy will be “very weak by historic standards” in 2023. The panel expects economic growth of only 1.7% in 2023, climbing to 2.5% by 2026.</p>
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<p>The panel is forecasting very weak growth in household spending of <a href="https://cdn.theconversation.com/static_files/files/2528/2023CONVERSATIONFORECASTING_SURVEYResponses.pdf">2.2%</a> over the year to December, and a further decline in the household saving ratio from 6.9 to 5.1%.</p>
<p>Non-mining business investment is expected to hold up, climbing 2.8% over the year to December, up from 1.75%. Mining investment is expected to climb 3.4%, with much depending on demand from the rest of the world.</p>
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<strong>
Read more:
<a href="https://theconversation.com/how-housing-made-rich-australians-50-richer-leaving-renters-and-the-young-behind-and-how-to-fix-it-195189">How housing made rich Australians 50% richer, leaving renters and the young behind – and how to fix it</a>
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<p>Home prices are expected to fall further in 2023 in response to higher interest rates, slipping another 7% in Sydney and 6% in Melbourne. </p>
<p>AMP economist Shane Oliver says the buying power of someone on average full-time earnings with a 20% deposit has fallen by more than one quarter as a result of interest rate hikes, and prices are yet to fully reflect this.</p>
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<h2>Jobs to hold up</h2>
<p>Australia’s unemployment rate dipped below 4% for the first time in five decades in 2022. It is expected to stay below 4% (at 3.96%) in 2023 and then remain below 5% in 2024 even as immigration builds up, in part because low unemployment has made <a href="https://theconversation.com/why-unemployment-is-set-to-stay-below-5-for-years-to-come-188705">previously unemployed Australians employable</a>.</p>
<p>As former Deloitte Access director Chris Richardson puts it, previously hard to employ Australians have been “polishing their skills and their resumes”.</p>
<p>Federation University economist Margaret McKenzie also points to the large amount of <a href="https://theconversation.com/an-extra-60-600-australians-found-work-in-may-heres-why-wages-arent-moving-much-184929">sick leave</a> being taken, creating demand for workers to fill the gaps.</p>
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<p>On average, the panel is expecting a flat share market in the year ahead, but the forecasts range from growth of 8% to a decline of 17%, led down by weaker bank stocks and household spending as interest rate increases bite. </p>
<p>The panel expects the iron ore price to remain roughly steady at US$105 throughout 2023, rather than falling to the US$55 assumed in the budget.</p>
<p>Partly as a result, the panel is forecasting a budget deficit of <a href="https://cdn.theconversation.com/static_files/files/2528/2023CONVERSATIONFORECASTING_SURVEYResponses.pdf">A$29.4 billion</a> in 2022-23, down from the officially forecast $36.9 billion.</p>
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<h2>The Conversation’s Economic Panel</h2>
<p><em>Click on economist to see full profile.</em></p>
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<p><strong><a href="https://cdn.theconversation.com/static_files/files/2528/2023CONVERSATIONFORECASTING_SURVEYResponses.pdf">Download the 2023 economic survey</a></strong></p><img src="https://counter.theconversation.com/content/198975/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Conversation’s 29-member panel expects very weak economic growth and recessions in much of the rest of the world, but there’s good news down the track for Australians’ buying power.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1932042023-01-25T13:24:55Z2023-01-25T13:24:55ZAtlanta’s BeltLine shows how urban parks can drive ‘green gentrification’ if cities don’t think about affordable housing at the start<figure><img src="https://images.theconversation.com/files/505972/original/file-20230123-3880-1m5d4s.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5409%2C3187&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A pedestrian walking along the BeltLine in Atlanta on Feb. 17, 2016, passes townhomes under construction. </span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/MortgageRates/85b0bf9c6bc94185a45205a672d7e70c/photo">AP Photo/David Goldman</a></span></figcaption></figure><p>Is Atlanta a good place to live? Recent rankings certainly say so. In September 2022, Money magazine rated Atlanta the <a href="https://money.com/atlanta-georgia-best-places-to-live-2022/">best place to live in the U.S.</a>, based on its strong labor market and job growth. The National Association of Realtors calls it the <a href="https://www.nar.realtor/magazine/real-estate-news/10-housing-markets-expected-to-lead-the-nation-in-2023">top housing market to watch in 2023</a>, noting that Atlanta’s housing prices are lower than those in comparable cities and that it has a rapidly growing population. </p>
<p>But this is only part of the story. My new book, “<a href="https://www.ucpress.edu/book/9780520387645/red-hot-city">Red Hot City: Housing, Race, and Exclusion in Twenty-First Century Atlanta</a>,” takes a deep dive into the last three decades of housing, race and development in metropolitan Atlanta. As it shows, planning and policy decisions here have promoted a heavily racialized version of gentrification that has excluded lower-income, predominantly Black residents from sharing in the city’s growth.</p>
<p>One key driver of this division is the <a href="https://beltline.org/">Atlanta BeltLine</a>, a 22-mile (35-kilometer) loop of multiuse trails with nearby apartments, restaurants and retail stores, built on a former railway corridor around Atlanta’s core. Although the BeltLine was designed to connect Atlantans and improve their quality of life, it has driven up housing costs on nearby land and pushed low-income households out to suburbs with fewer services than downtown neighborhoods. </p>
<p>The BeltLine has become a prime example of what urban scholars call “<a href="https://doi.org/10.1038/s41467-022-31572-1">green gentrification</a>” – a process in which restoring degraded urban areas by adding green features drives up housing prices and pushes out working-class residents. If cities fail to prepare for these effects, gentrification and displacement can transform lower-income neighborhoods into areas of concentrated affluence rather than thriving, diverse communities. </p>
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<figcaption><span class="caption">This promotional video from Atlanta BeltLine, Inc. describes the project’s emphasis on increasing Atlantans’ access to green spaces.</span></figcaption>
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<p>The U.S. currently faces a <a href="https://www.nytimes.com/2022/12/30/realestate/housing-market-prices-interest-rates.html">nationwide housing affordabilty crisis</a>. Many factors have contributed to it, but as an <a href="https://scholar.google.com/citations?user=YpAWsOMAAAAJ&hl=en">urban studies scholar</a>, I believe it is important to learn from Atlanta’s experience. </p>
<h2>No more Black majority</h2>
<p>U.S. cities generally are diverse places, and many of them are becoming more so. But the city of Atlanta is going <a href="https://www.usnews.com/news/cities/articles/2020-01-22/measuring-racial-and-ethnic-diversity-in-americas-cities">in the opposite direction</a>: It’s becoming wealthier and more white. </p>
<p>In 1990, 67% of the city’s residents were Black; by 2019, that share had fallen to 48%. At the same time, the share of adults with a college degree rose from 27% to more than 56%. Median income in the city increased from 60% of the median income of the <a href="https://www.ajc.com/news/atlanta-news/population-in-atlanta-how-large-is-metro-atlanta/DMC7A3RM7JCPRK57GBTOI5RBII/">much larger Atlanta metropolitan area</a> to 110%. Median family income in the city in 2021 dollars nearly doubled, rising from approximately $50,000 to $96,000. </p>
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<a href="https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Map showing the BeltLine's position within the City of Atlanta." src="https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=704&fit=crop&dpr=1 600w, https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=704&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=704&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=885&fit=crop&dpr=1 754w, https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=885&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/506140/original/file-20230124-24-b9m9ej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=885&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Atlanta’s BeltLine surrounds the city’s downtown.</span>
<span class="attribution"><span class="source">Dan Immergluck</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>The most rapid gentrification occurred from 2011 onward, after the <a href="https://www.investopedia.com/terms/f/foreclosure-crisis.asp">2008-2010 foreclosure crisis</a>. Globally, urban scholars call this period one of “<a href="https://www.american.edu/spa/metro-policy/upload/contextualizing-gentrification-chaos.pdf">fifth-wave” gentrification</a>, in which a large increase in rental demand triggered speculation in rental real estate that drove up housing costs. </p>
<p>In Atlanta, this was when the BeltLine really hit its stride after being proposed in the early 2000s and formally adopted as a <a href="https://beltline.org/wp-content/uploads/2019/03/Redevelopment-Area-and-Tax-Allocation-District-Creation-Legislation.pdf">tax increment financing district</a>, or TIF, in 2005. In these districts, anticipated increases in property tax revenues are used to front-fund development projects. No urban development project in metro Atlanta – and perhaps in the entire country – has been more transformative.</p>
<h2>Driving gentrification and displacement</h2>
<p>Even before the BeltLine TIF district was adopted, boosters, developers, consultants and many city officials began touting the benefits of a proposed public-private partnership that could remake large parts of the city. Shortly after the special taxing district for the project was formally adopted, the city of Atlanta created an affiliated nonprofit, <a href="https://beltline.org/organizer/atlanta-beltline-inc/">Atlanta BeltLine, Inc.</a>, to implement and manage the BeltLine. </p>
<p>In 2004, Yale architect <a href="https://www.architecture.yale.edu/about-the-school/news/in-memoriam-alexander-garvin">Alexander Garvin</a> published a report called “<a href="https://beltline.org/wp-content/uploads/2004/12/The-BeltLine-Emerald-Necklace-Study_Alex-Garvin-Associates-Inc..pdf">The BeltLine Emerald Necklace: Atlanta’s New Public Realm</a>.” “The BeltLine’s future users are an attractive market,” Garvin wrote. “Early word of the project has already accelerated real estate values.” In 2005, one developer called the BeltLine the “<a href="https://books.google.com/books?id=2O19EAAAQBAJ&pg=PA67&lpg=PA67&dq=the+%E2%80%9Cmost+exciting+real+estate+project+since+Sherman+burned+Atlanta.%E2%80%9D">most exciting real estate project since Sherman burned Atlanta</a>.” </p>
<p>Many neighborhoods that the BeltLine runs through, especially on the south and west sides of the city, had experienced decades of disinvestment and were predominantly Black and lower-income. But boosters weren’t worried about investors and speculators buying up land near the BeltLine, and didn’t prepare for displacement and exclusion. Garvin’s report did not mention the terms “affordable,” “gentrification,” “lower-income” or “low-income.” </p>
<p>In a <a href="http://saportakinsta.s3.amazonaws.com/wp-content/uploads/2017/05/immergluck-2007.pdf">2007 study</a> for the community group <a href="https://www.georgiastandup.org/">Georgia Stand-Up</a>, I found that property values were increasing much faster near the BeltLine than in areas farther from it. This meant that property taxes rose for many lower-income homeowners, and landlords of rental properties were likely to raise rents in response. This process directly displaced lower-income families and made many areas around the BeltLine unaffordable for them.</p>
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<p>The BeltLine TIF ordinance included some provisions for funding affordable housing, but as I show in my book, they were fundamentally insufficient and flawed. The BeltLine was the work of a coalition, including core members of Atlanta’s traditional “<a href="https://books.google.com/books?hl=en&lr=&id=bEITAAAAYAAJ&oi=fnd&pg=PR9&dq=Stone+Atlanta+Urban+Regime&ots=mg2iyVlGu4&sig=vICy3M8GI88SfGLDUCQgSZH82u4#v=onepage&q=Stone%20Atlanta%20Urban%20Regime&f=false">urban regime</a>” – elected officials and the downtown business elite. Their vision produced a wealthier, whiter city population. </p>
<h2>Noninclusive growth</h2>
<p>Rather than focusing on securing land for affordable housing when values were low, Atlanta BeltLine, Inc. prioritized building trails and parks. These features helped boost property values, accelerating gentrification and displacement.</p>
<p>After the <a href="https://www.federalreservehistory.org/essays/subprime-mortgage-crisis">subprime mortgage crisis</a> in 2007-2010, foreclosures put pressure on housing markets. Atlanta lost about 7,000 low-cost rental units from 2010 to 2019. Meanwhile, construction of new, pricier apartments boomed: Permits were issued for more than 37,000 units over roughly the same period. </p>
<p>By my calculation, Atlanta’s job market exploded from 330,000 jobs in 2011 to over 437,000 jobs by 2019. Companies like Google, Honeywell and Microsoft moved in, often with city and state subsidies. Many new jobs paid over $100,000 per year and went to young, highly skilled workers, driving up housing demand. </p>
<p>In 2017 the Atlanta Journal-Constitution ran a high-profile <a href="https://www.ajc.com/news/local/how-the-atlanta-beltline-broke-its-promise-affordable-housing/0VXnu1BlYC0IbA9U4u2CEM/">investigative series</a> documenting that the BeltLine had produced just 600 units of affordable housing in 11 years – far off the pace required to meet its target of 5,600 by 2030. Some of these units had been resold to high-income households. Soon afterward, <a href="https://roughdraftatlanta.com/2017/08/23/atlanta-beltline-ceo-stepping/">the CEO of Atlanta BeltLine, Inc. resigned</a>. </p>
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<p>That year, a student and I redid my 2007 study on home values around the BeltLine. Once again, we found that during the years we examined – this time, from 2011 to 2015 – home prices near the BeltLine <a href="https://doi.org/10.1080/02723638.2017.1360041">rose much faster than in areas farther from it</a>. The BeltLine was certainly not the only cause of gentrification and racial exclusion in Atlanta, but it was a key contributor. </p>
<p>Atlanta BeltLine, Inc. has increased its affordable housing activity in recent years, and in late 2020, it initiated a program to pay the increased property taxes of legacy residents. However, by this point in the BeltLine’s existence, displacement prevention efforts may be too little, too late. By May 2021, only 128 homeowners had applied for the program. <a href="https://nextcity.org/urbanist-news/the-atlanta-beltline-wants-to-prevent-displacement-of-longtime-residents">Just 21 had received assistance</a>.</p>
<h2>Putting affordability first</h2>
<p>What can other cities learn from Atlanta’s experience? In my view, the most important takeaway is the importance of <a href="https://shelterforce.org/2017/09/01/sustainable-large-scale-sustainable-urban-development-projects-environmental-gentrification/">front-loading affordable housing efforts</a> in connection with major redevelopment projects.</p>
<p>This means assembling and banking nearby land as early as possible to be used later for affordable housing. Cities also should limit property tax increases for low-income homeowners and for property owners who agree to keep a substantial portion of their rental units affordable. They might offer low-cost, long-term financing to existing lower-cost rental properties – again, in exchange for keeping rent affordable. </p>
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<p><a href="https://www.nytimes.com/interactive/2022/08/09/headway/anacostia-bridge.html">Some large-scale urban redevelopment projects</a>, such as the 11th Street Bridge Park in Washington, seem to be making serious efforts to <a href="https://create.umn.edu/toolkit/">anticipate and mitigate gentrification and displacement</a>. I hope that more cities will follow this lead before undertaking “transformative” projects.</p><img src="https://counter.theconversation.com/content/193204/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dan Immergluck does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A longtime critic of Atlanta’s BeltLine explains how the popular network of parks has increased inequality in the city and driven out lower-income residents.Dan Immergluck, Professor of Urban Studies, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1957972022-12-19T13:34:42Z2022-12-19T13:34:42ZInflation, unemployment, the housing crisis and a possible recession: Two economists forecast what’s ahead in 2023<figure><img src="https://images.theconversation.com/files/500277/original/file-20221212-95892-bx0dn2.jpg?ixlib=rb-1.1.0&rect=5%2C0%2C3493%2C2334&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Although a recession is likely on the horizon, it's uncertain how deep it might go.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/bills-background-royalty-free-image/157168369?phrase=U.S.%20Money&adppopup=true">Cimmerian/E+ via Getty Images</a></span></figcaption></figure><p><em>With the <a href="https://www.bls.gov/news.release/cpi.nr0.htm">current U.S. inflation rate at 7.1%</a>, <a href="https://www.economist.com/briefing/2022/12/08/rising-interest-rates-and-inflation-have-upended-investing">interest rates rising</a> and <a href="https://www.bloomberg.com/news/features/2022-09-08/why-did-housing-costs-explode-during-the-pandemic">housing costs up</a>, many Americans are wondering if a recession is looming.</em></p>
<p><em>Two economists discussed that and more in a recent wide-ranging and exclusive interview for The Conversation.</em>
<em>Brian Blank is a <a href="https://www.business.msstate.edu/directory/dbb109">finance professor at Mississippi State University</a> who specializes in the study of corporations and how they respond to economic downturns. Rodney Ramcharan is an <a href="https://www.marshall.usc.edu/personnel/rodney-ramcharan">economist at the University of Southern California</a> who previously held posts with the Federal Reserve and the International Monetary Fund.</em></p>
<p><em>Both were interviewed by Bryan Keogh, deputy managing editor and senior editor of economy and business for The Conversation.</em></p>
<p><em>Below are some highlights from the discussion. Answers have been edited for brevity and clarity.</em></p>
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<figcaption><span class="caption">Brian Blank and Rodney Ramcharan talk about the economic outlook for 2023.</span></figcaption>
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<p><strong>Are we headed for a recession in 2023?</strong></p>
<p><strong>Brian Blank:</strong> The consensus view among most forecasters is that there is a recession coming at some point, <a href="https://www.reuters.com/markets/us/goldman-ceo-says-reasonable-chance-us-recession-2023-2022-10-18/">maybe in the middle of next year</a>. I’m a little bit more optimistic than that consensus. </p>
<p>People have been calling for a recession for months now, and this seems to be the most anticipated recession on record. I think that it could still be a ways off. <a href="https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/chart/">Consumer balance sheets</a> are still relatively strong, stronger than we’ve seen them for most periods. </p>
<p>I think that the labor market is going to remain hotter than people have expected. Right now, over the last eight months, the labor market has added more jobs than anticipated, which is <a href="https://www.nytimes.com/2022/12/02/business/economy/jobs-report-november.html">one of the strongest streaks on record</a>. And I think that until consumer balance sheets weaken considerably, we can expect consumer spending, which is the largest part of the economy, to continue to grow quickly.</p>
<p>[But this] doesn’t mean that a recession is not coming. There’s always a recession somewhere down the road. </p>
<p><strong>Rodney Ramcharan:</strong> Indeed, yes, there’s a likelihood that the economy is going to contract in the next nine months. The president of the New York Fed expects the unemployment rate to go up from 3.5% currently to somewhere <a href="https://www.globest.com/2022/11/30/unemployment-could-hit-5-next-year-says-new-york-fed-president/?">between 4% to 5% in the next year</a>. And I think that will be consistent with a recession. </p>
<p>In terms of how much worse it can be beyond that, it’s going to depend on a number of things. It could depend on whether the Fed is going to accept a higher inflation rate over the medium term or whether it’s really committed to getting the inflation rate down to the 2% rate. So I think that’s the trade-off.</p>
<p><strong>Will unemployment go up?</strong></p>
<p><strong>Blank:</strong> [Unemployment] hasn’t risen much, and maybe it’ll pick up to somewhere close to 4%. Many are expecting something like four and a half percent. And I think that’s certainly possible. And I think that we can see small upticks in the coming months. </p>
<p>But I don’t think it’s going to rise as quickly as some people are expecting, in part because what we’ve seen so far is a lack of labor force participation. Until more people enter the labor market, I think there are going to be plenty of jobs to go around.</p>
<p><strong>What is your outlook on interest rates?</strong></p>
<p><strong>Ramcharan:</strong> As people find it more and more difficult to find jobs, or to get jobs as they begin to lose jobs, I think that’s going to dampen spending. And we’re seeing that now as the cost of borrowing has gone up sharply, and the Fed is expecting that. </p>
<p>The expectation is the federal funds rate will <a href="https://www.cnbc.com/2022/11/02/fed-raises-borrowing-costs-with-another-jumbo-interest-rate-hike.html#:">go up to 5% by next year</a>. If you tack on another couple of points, because of the risk involved, then the cost to borrow to buy a home could potentially get up to 8% for some people. And that could be very expensive. </p>
<p>And the flip side of this for businesses is there’s potentially going to be a slowdown in cash flow. If consumers are not spending, then the revenues that businesses depend on to make investments might not be there.</p>
<p>The additional piece in this puzzle is what the banks will then do. I think banks are going to begin to <a href="https://www.investopedia.com/terms/c/creditcrunch.asp">curtail the extension of credit</a>. So not only will interest rates go up for the typical consumer and the typical business, it’s also likely that they are more likely to experience denial of credit, and so that should together begin to slow spending quite a bit. </p>
<p><strong>After massive increases in housing prices, what caused them to suddenly drop?</strong></p>
<p><strong>Ramcharan:</strong> As the Fed lowered interest rates, there was a massive shift among the population for various reasons. They decided that housing was the right investment or the right thing. And so when 50 million people all collectively decide to buy homes, the supply of homes is reasonably constrained in the short run. And so that led to this massive increase in house prices and in rents. </p>
<p>In the last three months, the housing market <a href="https://slate.com/business/2022/10/housing-prices-real-estate-interest-rates-federal-reserve-california.html">has cooled sharply</a>. We’re now seeing house prices beginning to fall. I would imagine, going forward, the housing market cooling is going to be a major driver behind the slowdown in the inflation rate and in <a href="https://www.investopedia.com/terms/r/reit.asp">real estate investment trusts</a>. So that’s positive. </p>
<p><strong>Our recent election just changed the composition of Congress. How will that affect the economy?</strong></p>
<p><strong>Blank:</strong> Certainly, when we have a divided Congress, we’re less likely to see decisions made that involve passing legislation that might support the economy. And I think it’s likely the Republican House is going to become a little bit <a href="https://www.nbcnews.com/business/economy/midterm-election-inflation-economy-what-it-means-rcna56473">more conservative with spending</a>. </p>
<p>And so if we do start to see a downturn, I think you’re less likely to see legislation that might help support an economy that could be in need of it. That is going to make the job of the Federal Reserve more important. </p>
<p><strong>How certain are these predictions?</strong></p>
<p><strong>Ramcharan:</strong> I just want to be careful here and let your viewers know that we’re making these statements based on theory, because the inflation that we’re experiencing now comes about from a pandemic, and there really is no evidence, there’s no data available, that people can look to to say, “What happens to an economy after a pandemic?” That data does not exist. </p>
<p>So we’re trying to piece together the data we do have with the theories we do have, but there’s a huge band of uncertainty about what’s going to happen.</p>
<p><em>Watch the <a href="https://www.youtube.com/watch?v=M-UfSnXu3k8">full interview here</a>.</em></p><img src="https://counter.theconversation.com/content/195797/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Although many say the economic outlook for next year appears bleak, there is room for optimism.D. Brian Blank, Assistant Professor of Finance, Mississippi State UniversityRodney Ramcharan, Professor of Finance and Business Economics, University of Southern CaliforniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1917372022-12-06T13:33:55Z2022-12-06T13:33:55ZWhat’s really driving ‘climate gentrification’ in Miami? It isn’t fear of sea-level rise<figure><img src="https://images.theconversation.com/files/498578/original/file-20221201-16851-81jshh.jpg?ixlib=rb-1.1.0&rect=0%2C118%2C5270%2C3550&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Residents of Miami’s Little Haiti have been fighting plans for a luxury development for several years.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/HousingProtestLittleHaiti/53e68bb02b8f410b89000e997d87e0cb/photo">AP Photo/Lynne Sladky</a></span></figcaption></figure><p>Miami’s Little Haiti has been an immigrant community for decades. Its streets are lined with small homes and colorful shops that cater to the neighborhood, a predominantly Afro-Caribbean population with a median household income <a href="https://www.floridahealth.gov/_media/miami-dade/community-reports/miamidade-cha.pdf">well below Miami’s</a>. </p>
<p>But Little Haiti’s character may be changing.</p>
<p>A <a href="https://magiccitydistrict.com/masterplan/">$1 billion real estate development</a> called the Magic City Innovation District is planned in the neighborhood, with luxury <a href="https://magiccitydistrict.com/news/magic-city-innovation-district-gets-utilities-will-include-2598-apartments/">high-rise apartments</a>, high-end shops and glass office towers.</p>
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<img alt="Two women walk past Cafe Creole, with vibrant paintings on the side, including one wall reading 'Stand up lil Haiti' with a raised fist." src="https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/498577/original/file-20221201-20-fidq7x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Little Haiti’s streets have been lined with murals and mom-and-pop shops for generations, but that’s changing.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/women-walk-past-a-mural-in-the-little-haiti-neighborhood-on-news-photo/684275454">Joe Raedle/Getty Images</a></span>
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<p>The developers <a href="https://magiccitydistrict.com/press/magic-city-innovation-district-little-haiti-creates-leasing-ethos-committing-to-sustainability-and-social-responsibility/">emphasize their commitment to sustainability</a>. But high-end real estate investments like this raise property values, pushing up property taxes and the cost of living for surrounding neighborhoods. </p>
<p>The potential effect on shops and homeowners and on the culture of the community has <a href="https://static1.squarespace.com/static/561dcdc6e4b039470e9afc00/t/5d02759f1e38b30001a4c9d4/1560442275234/CJP-LittleHaiti_FactSheet_0619-2.pdf">stoked controversy</a> and protests. Nearby <a href="https://therealdeal.com/miami/2022/07/29/crunch-fitness-founder-beefs-up-retail-portfolio-with-18m-purchase-in-little-haiti/">strip malls</a> have been bought up for new development, leaving long-time businesses with fewer affordable options. <a href="https://www.miaminewtimes.com/news/little-haiti-hemmed-in-by-big-development-projects-15509997">Other big developments</a> are now being planned. </p>
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<p>Some <a href="https://www.cnn.com/2019/07/11/us/miami-little-haiti-climate-gentrification-weir-wxc/index.html">media</a> and urban scholars have labeled what’s happening here “<a href="https://doi.org/10.1088/1748-9326/aabb32">climate gentrification</a>.”</p>
<p>It’s the idea that investors and homebuyers are changing their behavior and moving from coastal areas into poorer, higher-elevation neighborhoods like Little Haiti, which sits on a ridge less than a mile from the bay, in anticipation of worsening climate change risks, such as sea-level rise. Miami is often held up as an example.</p>
<p>But are Miami’s investors and homebuyers really motivated by climate change?</p>
<h2>A different kind of gentrification</h2>
<p>The story goes that Miami homebuyers are abandoning the coasts – where high tides can already bring street flooding in some areas – and are looking for higher-elevation areas because they want to escape climate change.</p>
<p>That isn’t what we’re finding, though.</p>
<p>In <a href="https://climatecommunication.yale.edu/visualizations-data/ycom-us/">Yale’s Climate Opinion Survey</a> of Miami-Dade County in 2021, only half of Miami residents said they believe global warming will harm them personally – far lower than the 70% who said that in Delaware and the <a href="https://www.nature.com/articles/nclimate2728">90% in Canada, Western Europe and Japan</a>. Another survey <a href="https://www.miamiherald.com/latest-news/article163066413.ece/binary/Miami_Dade_Real_%20Estate_Study_2017.pdf">found 40%</a> of Miami-Dade residents weren’t concerned about the impact climate change might have on the market. </p>
<p>In a new study, our team at the University of Miami found <a href="https://doi.org/10.1016/j.cities.2022.104025">a more nuanced picture</a> of what is actually pushing homeowners to higher ground.</p>
<p>For the most part, we found that the shift away from the coasts is fueled by costs. Flood risk plays a role through the rising cost of flood insurance, but much of the shift is plain old gentrification – developers looking for cheaper land and spinning it as a more sustainable choice to win over public officials and future residents.</p>
<p>Rather than bottom-up pressure built on residents’ alarm about sea-level rise, we found a continuation of the usual rational investment decisions.</p>
<h2>Developers are driving the process</h2>
<p>Present-day “climate gentrification” in Miami is largely determined and <a href="https://doi.org/10.1016/j.cities.2022.104025">driven by capitalist investment opportunities</a> – relatively lower prices and greater expected returns – which are the characteristics of the traditional gentrification process.</p>
<p>We found that neither homebuyers nor real estate agents are driving this process today in Miami. Rather, developers are <a href="https://doi.org/10.1016/j.cities.2022.104025">using the concept of climate risk to market properties</a> in more elevated areas and are working in tandem with policymakers to facilitate urban redevelopment.</p>
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<p>Miami is very different from other global cities, in that its wealthy homebuyers and second-home buyers exhibit fewer concerns about rising sea levels and climate change. A large percentage of Miami homebuyers – <a href="https://www.miamirealtors.com/2021/11/02/88230/">about 13% in 2021</a> – don’t live in the U.S. and <a href="https://www.ucpress.edu/book/9780520297111/the-global-edge">may evaluate risk differently</a>, seeing Miami properties as safer investments than they have at home or as future second homes. </p>
<p>Miami’s gentrification also isn’t limited to higher-elevation neighborhoods. In coastal areas such as <a href="https://en.wikipedia.org/wiki/Gentrification_of_Miami">Miami Beach</a>, taxes and housing and rental prices are rising, and poorer people are being pushed out of neighborhoods. Miami’s average rent is now <a href="https://business.fau.edu/executive-education/overvalued-rental-markets/">over $2,800 a month</a>, up 16% from October 2021 to October 2022. That’s about $800 higher than the U.S. average, and it rose at nearly twice the national rate over the past year.</p>
<h2>Coastal homebuyers should be more concerned</h2>
<p>Climate change is without question a risk for Miami. The insurance industry <a href="https://www.mckinsey.com/capabilities/sustainability/our-insights/will-mortgages-and-markets-stay-afloat-in-florida">warns that sea-level rise</a> and moderate flooding of up to 1 foot will affect 48% of total properties in oceanfront Miami-Dade County by 2050. </p>
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<p>Homebuyers should be more concerned than they are.</p>
<p>We believe “climate gentrification” is a meaningful concept for exploring how the impacts and costs of climate change will shift housing and urban inequalities in the future. But so far, <a href="https://doi.org/10.1016/j.cities.2022.104025">the idea that gentrification is fueled by climate change in Miami</a> doesn’t match reality.</p><img src="https://counter.theconversation.com/content/191737/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Miami is often held up as an example of ‘climate gentrification.’ But a closer look finds a bigger driver of flashy new developments in low-income neighborhoods.Richard Grant, Professor of Geography and Urban Studies, University of MiamiHan Li, Assistant Professor of Geography, University of MiamiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1946242022-12-04T19:01:21Z2022-12-04T19:01:21ZHomeless numbers have jumped since COVID housing efforts ended – and the problem is spreading beyond the big cities<p>The numbers of people who are homeless have risen sharply across Australia, with soaring housing costs emerging as the biggest driver of the increase. The <a href="https://www.launchhousing.org.au/ending-homelessness/research-hub/australian-homelessness-monitor">Australian Homelessness Monitor 2022</a>, released today, reports that the average monthly number of people using homelessness services increased by 8% in the four years to 2021-22. That’s double the population growth rate over that period. </p>
<p>Just <a href="https://www.crisis.org.uk/ending-homelessness/homelessness-knowledge-hub/homelessness-monitor/england/the-homelessness-monitor-great-britain-2022/">as in other countries</a>, the 2020 COVID-19 emergency accommodation programs achieved <a href="https://theconversation.com/states-housed-40-000-people-for-the-covid-emergency-now-rough-sleeper-numbers-are-back-on-the-up-154059">sudden reductions in rough sleeping</a> in cities such as Sydney, Melbourne and Brisbane. But these remarkable gains were only temporary.</p>
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<a href="https://theconversation.com/states-housed-40-000-people-for-the-covid-emergency-now-rough-sleeper-numbers-are-back-on-the-up-154059">States housed 40,000 people for the COVID emergency. Now rough sleeper numbers are back on the up</a>
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<p>In the first major homelessness analysis spanning the COVID crisis years, we also show numbers have been rising in some parts of the country at rates far above the national trend. The problem has been growing especially rapidly in non-metropolitan areas. This trend is consistent with the boom in regional <a href="https://www.theguardian.com/australia-news/2022/aug/17/australias-regional-housing-boom-slows-but-housing-stress-still-a-major-concern">housing prices</a> and, more especially, <a href="https://www.abc.net.au/news/2022-11-30/rental-affordability-index-cost-of-living-australia-cities/101712026">rents</a> sparked by the pandemic.</p>
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<p>The homelessness that has long been a sad feature of our biggest cities has clearly spread to regional and rural Australia. </p>
<p>Many other patterns in the changing scale and nature of homelessness in Australia are ongoing trends that pre-date the 2020-21 public health emergency. This period appears to have had relatively little effect on these trajectories, which include a growing proportion of older adults, as well as First Nations peoples and those affected by mental ill-health. </p>
<p>As the chart below shows, <a href="https://www.aihw.gov.au/reports/australias-welfare/housing-affordability">unaffordable housing</a> is playing an increasing role in people becoming homeless.</p>
<iframe title="Reasons people seek homelessness services help" aria-label="Interactive line chart" id="datawrapper-chart-UN6WX" src="https://datawrapper.dwcdn.net/UN6WX/1/" scrolling="no" frameborder="0" style="border: none;" width="100%" height="450" data-external="1"></iframe>
<h2>Social housing programs are welcome but overdue</h2>
<p>The pandemic triggered significant and welcome commitments to social housing programs by the new federal government and some state governments. The recent federal budget confirmed funding for <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/budget-speech-2022-23">20,000 new social housing dwellings</a> over five years. </p>
<p>Several states had already announced a set of <a href="https://thefifthestate.com.au/innovation/residential-2/states-social-housing-boom-no-substitute-for-federal-funding-commitment/">self-funded programs of a similar scale</a> as part of their post-COVID economic recovery measures.</p>
<p>Social housing offers secure tenancies at below-market rents. It’s <a href="https://www.tandfonline.com/doi/full/10.1080/02673037.2018.1520819">a crucial resource</a> for both preventing and resolving homelessness.</p>
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Read more:
<a href="https://theconversation.com/1-million-homes-target-makes-headlines-but-cant-mask-modest-ambition-of-budgets-housing-plans-193289">1 million homes target makes headlines, but can't mask modest ambition of budget's housing plans</a>
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<p>Together, these new programs will – at least temporarily – halt the long-term decline in social housing capacity. The sector’s share of the nation’s housing stock has been <a href="https://cityfutures.ada.unsw.edu.au/documents/689/Waithood_final.pdf">shrinking for most of the past 25 years</a>.</p>
<p>By our reckoning, the government programs should deliver a net increase of about 9,000 social rental dwellings in 2024. This will be the first year for decades in which enough dwellings will be built to maintain the sector’s share of Australia’s occupied housing stock.</p>
<p>But sustaining this achievement will require more funding beyond the current commitments. Otherwise, the decline will resume.</p>
<h2>Affordability is the big issue, but some need other help</h2>
<p>As a recent Productivity Commission <a href="https://www.pc.gov.au/inquiries/completed/housing-homelessness/report/housing-homelessness.pdf">report</a> acknowledged, homelessness is primarily a housing problem. In <a href="https://www.communityhousing.com.au/wp-content/uploads/2022/10/PC-report-briefing-FINAL.pdf">its words</a>, “fundamentally, homelessness is a result of not being able to afford housing”. </p>
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<p>While other reasons do contribute to some people becoming homeless, most people experiencing homelessness have no long-term need for personal support. And many who do have high support needs can access and keep tenancies when suitable affordable housing is available.</p>
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<a href="https://theconversation.com/ive-been-on-the-waiting-list-for-over-20-years-why-social-housing-suitable-for-people-with-disabilities-is-desperately-needed-193455">'I've been on the waiting list for over 20 years': why social housing suitable for people with disabilities is desperately needed</a>
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<p>At the same time, the most disadvantaged rough sleepers may require a great deal of help to overcome their problems. The <a href="https://theconversation.com/eliminating-most-homelessness-is-achievable-it-starts-with-prevention-and-housing-first-151182">widely acclaimed</a> “housing first” model successfully does this. As <a href="https://www.iza.org/publications/dp/15678/making-it-home-evidence-on-the-long-run-impact-of-an-intensive-support-program-for-the-chronically-homeless-on-housing-employment-and-health">other recent research</a> emphasises, for many chronic rough sleepers helped into secure housing, withdrawing such support – even after three years – markedly increases their risk of becoming homeless again.</p>
<p>Australian governments need to better recognise the case for expanding the supply of permanent supportive housing. This involves integrating long-term affordable housing with ongoing support services where required.</p>
<p>Only a few such projects operate in Australia. There is no general framework to fund them, especially the support services. </p>
<p>Lengthy rough sleeping is typically a symptom of societal failure. All too often, for those affected, this failure starts from infancy.</p>
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Read more:
<a href="https://theconversation.com/eliminating-most-homelessness-is-achievable-it-starts-with-prevention-and-housing-first-151182">Eliminating most homelessness is achievable. It starts with prevention and 'housing first'</a>
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<h2>Housing the chronically homeless pays for itself</h2>
<p>The Productivity Commission report <a href="https://www.communityhousing.com.au/wp-content/uploads/2022/10/PC-report-briefing-FINAL.pdf">advocated</a> a “high-needs-based [social] housing subsidy to ensure housing is affordable and tenancies can be sustained”. Logically, since this is essentially a social work (not social security) responsibility, it is the states and territories, and not the Commonwealth, that should bear the cost.</p>
<p>This may sound like a big ask for underfunded governments. But state and territory budgets stand to benefit from avoiding the costs that recurrent and chronic homelessness imposes on departments such as health and justice. As our <a href="https://theconversation.com/supportive-housing-is-cheaper-than-chronic-homelessness-67539">previous research shows</a>, we spend enormous amounts of public money responding to the consequences of leaving people in a state of chronic homelessness.</p>
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<p>A model for funding permanent supportive housing needs to be developed. Ideally, this process should involve all Australian governments, perhaps as part of discussions to advance the <a href="https://www.ahuri.edu.au/research/brief/need-robust-australian-national-housing-and-homelessness-plan">National Housing and Homelessness Plan</a>. Federal Labor <a href="https://theconversation.com/1-million-homes-target-makes-headlines-but-cant-mask-modest-ambition-of-budgets-housing-plans-193289">pledged</a> this project will take shape in 2023.</p>
<p>More broadly, these deliberations must be underpinned by recognition that our current ways of developing, operating and <a href="https://theconversation.com/explainer-the-financialisation-of-housing-and-what-can-be-done-about-it-73767">commodifying</a> housing produce homelessness. A plan to end homelessness requires a plan to overhaul our housing system so it produces enough suitable and affordable housing for all Australians.</p>
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Read more:
<a href="https://theconversation.com/the-market-has-failed-to-give-australians-affordable-housing-so-dont-expect-it-to-solve-the-crisis-192177">The market has failed to give Australians affordable housing, so don't expect it to solve the crisis</a>
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<p><em>The authors acknowledge research funder <a href="https://www.launchhousing.org.au/">Launch Housing</a>.</em></p><img src="https://counter.theconversation.com/content/194624/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hal Pawson receives funding from Launch Housing, the Australian Research Council, the Australian Housing and Urban Research Institute and Crisis UK.</span></em></p><p class="fine-print"><em><span>Cameron Parsell receives funding from Launch Housing, as well as the Australian Research Council.</span></em></p>The main driver of homelessness in Australia is housing costs – post-COVID rents, house prices and interest rates are all much higher. To house everyone, the housing system needs a major overhaul.Hal Pawson, Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW SydneyCameron Parsell, Professor, School of Social Science, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1831132022-05-16T20:00:09Z2022-05-16T20:00:09ZSuper for housing or the government as a co-owner: how Liberal and Labor home-buyer schemes compare<figure><img src="https://images.theconversation.com/files/463169/original/file-20220516-65422-iuuv5g.jpg?ixlib=rb-1.1.0&rect=0%2C985%2C5985%2C2983&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>At their <a href="https://theconversation.com/view-from-the-hill-undecided-voters-give-narrow-victory-to-albanese-181495">first televised debate</a> four weeks ago, Scott Morrison and Anthony Albanese were asked by an audience member how each would help his kids afford to buy their own home. Neither had much to offer.</p>
<p>Now, in the final week of the campaign, housing affordability is a red-hot point of difference between the parties. </p>
<p>Each plan reflects the core values of the party pushing them, but both sidestep the major reforms needed to improve housing affordability for all.</p>
<p>On the plus side, at least both are somewhat limited, which means neither should push up house prices dramatically if implemented, contrary to some <a href="https://www.9news.com.au/national/australia-property-superannuation-to-cause-house-price-explosion/1afe002c-272d-4a93-9779-6128db999c7b">hyperbolic warnings</a>. </p>
<h2>Coalition’s ‘super home buyer’ scheme</h2>
<p>The Coalition’s plan, announced on Sunday, is to allow first-home buyers to withdraw up to 40% of their superannuation balance, up to a maximum of A$50,000, for a mortgage deposit. They must return the amount withdrawn, plus or minus any capital gain or loss, when they sell the property.</p>
<p>This amounts to borrowing from your super account. You lose the return your super savings would have accrued, but you gain the return on your house, in the form of avoided rent and any capital gain.</p>
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<a href="https://theconversation.com/view-from-the-hill-scott-morrison-tells-liberal-launch-im-just-warming-up-as-he-pitches-on-home-ownership-183100">View from The Hill: Scott Morrison tells Liberal launch 'I'm just warming up', as he pitches on home ownership</a>
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<p>The concept is similar in principle to a recommendation of the recent <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability">parliamentary inquiry into housing affordability</a>, chaired by Liberal MP Jason Falinski, calling for super balances to be used as collateral for home loans.</p>
<p>But allowing buyers to actually withdraw money from their super may require super funds to change their investment strategies – investing more in higher-liquidity, lower-return assets – which might be problematic for some super funds with a lot of younger members.</p>
<p>Around a quarter of all homes sold are to first-home buyers, amounting to around 150,000 houses in the past year. While all first-home buyers would be eligible, not everyone would access the scheme, nor use it in the same way.</p>
<p>Some won’t have enough super for it to make much difference. Some will choose not to use the scheme because they don’t want to draw down their super.</p>
<p>Some will offset part of their own private saving or take out a smaller loan. Some will get into the market a little earlier than they otherwise would have. And some will get into the market when they otherwise would not have.</p>
<p>While some have claimed the Coalition’s policy would undermine people’s security in retirement, in fact the opposite is the case.</p>
<p>Home ownership and superannuation are the two pillars of independent financial security in retirement. Owning a home will be preferable to super for many because it is exempt from the pension assets test.</p>
<p>And given housing is by far the biggest form of consumption, owning a home is a far less risky form of retirement savings, albeit potentially at a lower return.</p>
<p>What really matters is the total quantum of retirement assets, and that those assets are allocated in the way that best secures their retirement. So a scheme that enables portability between different forms of retirement saving makes sense.</p>
<h2>Labor’s ‘help to buy’ scheme</h2>
<p>Labor’s plan is to become an equity partner in 10,000 homes a year. It will chip in up to 40% of the cost of a new home, and 30% for an existing home.</p>
<p>To qualify, individuals must earn less than $90,000 a year, and couples a combined $120,000 a year. There will be a cap on the property value, according to location. In Sydney this will be up to $950,000.</p>
<p>Labor’s scheme is far more generous than the Coalition’s, but it also covers far fewer people.</p>
<p>The 10,000 lucky buyers a year who qualify will be able to finance a property worth an extra $380,000. In contrast, the Coalition’s scheme gives buyers up to $250,000 more in purchasing power (but a lot less for the vast majority with lower super balances).</p>
<p>Labor’s policy also entails a very large subsidy.</p>
<figure class="align-center ">
<img alt="Anthony Albanese at the Labor Party's campaign launch on Sunday, May 1 2022." src="https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463261/original/file-20220516-22-sl7azh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Anthony Albanese at the Labor Party’s campaign launch on Sunday, May 1 2022.</span>
<span class="attribution"><span class="source">Lukas Coch/AAP</span></span>
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</figure>
<p>If you or I invested 40% in an investment property, we’d also receive 40% of the rental income. Under Labor’s plan, the government won’t. Taxpayers will therefore gift up to 40% of the rent the occupier would otherwise have paid – worth up to around $15,000 a year – forever.</p>
<p>A small portion will be offset by the owner-occupier picking up the govermnment’s share of rates, insurance, and maintenance. But the rest is gravy. That’s why it costs more than $80 million a year.</p>
<p>In previous shared-equity schemes (proposed as far back as <a href="https://coolabahcapital.com/wp-content/uploads/2019/10/Research-Innovative-Approaches-to-Reducing-the-Costs-of-Home-Ownership-2003.pdf">2003</a>) the lender was to chip in a proportion of the equity, but took a higher proportion of the gain to compensate for this loss.</p>
<p>The income limit of $90,000 is also well above the median income of <a href="https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/employee-earnings-and-hours-australia/may-2021">$61,000</a>, making the subsidy a generous form of middle-class welfare. Like a lottery for a lucky few.</p>
<p>Labor argues the scheme will make money for taxpayers through capital gains when properties are eventually sold. But consider that instead the government could invest $10 billion a year in listed property trusts, which would provide a lower-risk portfolio of housing assets at a far higher return. So, relatively speaking, Labor’s policy would run at a loss.</p>
<h2>How much will they push up house prices?</h2>
<p>Both policies attempt to improve housing affordability by addressing the demand side of the market. That means they both suffer from the problem of all such schemes: by increasing buyers’ purchasing power, they push up prices.</p>
<p>But commentary suggesting either will create a <a href="https://www.9news.com.au/national/australia-property-superannuation-to-cause-house-price-explosion/1afe002c-272d-4a93-9779-6128db999c7b">house price explosion</a> is overstated in my view.</p>
<p>First-home buyers are about a quarter of the market. And about half of all 40-year-olds have less than $80,000 in their super, which means the maximum they could withdraw under the Coalition’s scheme is $30,000. And it’s not a first home owner’s grant - participants have skin in the game.</p>
<p>Labor’s plan is of course capped at 10,000 places.</p>
<p>I expect both parties’ schemes to put some modest upward pressure on house prices in the short term – as all schemes focused on demand do – blunting some of the help they offer. The Coalition’s scheme a bit more so given it will extend to more buyers, albeit at a lower amount.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/for-first-homebuyers-its-labors-help-to-buy-versus-the-coalitions-new-home-guarantee-which-is-better-182276">For first homebuyers, it's Labor's Help to Buy versus the Coalition's New Home Guarantee. Which is better?</a>
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</em>
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<h2>Supply is the real problem</h2>
<p>It’s hard for me to get too enthused about any scheme that increases demand but does nothing about the supply side, which is the ultimate source of high house prices.</p>
<p>Australia’s population has doubled since 1970, and yet we all live, more or less, in the same places, fighting over the same bits of land. With greater density, the cost of that land rises. We can only contain housing costs by using that land more efficiently, or having people move to where land is more plentiful.</p>
<p>Increasing housing supply isn’t simply a case of building more houses. It’s also about having the right kind of homes in the right locations. On that, devolving decision making down to the street level, as <a href="https://policyexchange.org.uk/publication/strong-suburbs/">proposed</a> in the United Kingdom, is a promising idea.</p>
<p>And Labor’s plan to set up a National Housing Supply and Affordability Council is a welcome development that will hopefully help achieve some progress.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/more-affordable-housing-with-less-homelessness-is-possible-if-only-australia-would-learn-from-nordic-nations-182049">More affordable housing with less homelessness is possible – if only Australia would learn from Nordic nations</a>
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<p>Tax and transfer policy also plays a role. State government stamp duty discourages turnover, which prevents better housing matches, driving up prices. Exempting the family home from federal taxation and the assets test for the pension does the same, discouraging downsizing.</p>
<p>The Coalition’s proposal, backed by Labor, to allow people to sell their house, downsize, and put the proceeds in super will help. But we need more.</p>
<p>Negative gearing is a perennial villain but is over-hyped. It’s not clear it has a meaningful effect on house prices, and removing it actually introduces a <a href="https://theconversation.com/election-surprise-negative-gearing-isnt-a-rort-but-something-else-is-117247">distortion</a> into the tax system. The real culprit is the overly generous 50% discount on capital gains tax, which is why people use negative gearing in the first place.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/election-surprise-negative-gearing-isnt-a-rort-but-something-else-is-117247">Election surprise. Negative gearing isn’t a rort — but something else is</a>
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<p>After the reception received by an ambitious (albeit somewhat misguided) tax policy agenda at the 2019 election, it may be a while before we make any meaningful progress on that front. For now, the choice between the major parties is between these relatively limited demand-side schemes. Take your pick.</p><img src="https://counter.theconversation.com/content/183113/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Hamilton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Both major parties’ schemes would put upward pressure on house prices – but not much. Here’s why, according to a former Australian Treasury official.Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1822812022-05-01T07:59:46Z2022-05-01T07:59:46ZAlbanese pledges to make gender pay equity a Fair Work Act objective<p>Anthony Albanese has pledged a Labor government would make gender pay equity an objective of the Fair Work Act and strengthen the Fair Work Commission’s powers to order pay rises for workers in low paid industries dominated by women. </p>
<p>The gender equity promise was one of five initiatives in the opposition leader’s policy speech, delivered to an audience of the Labor faithful in Perth on Sunday. </p>
<p>Paying tribute to care worker’s efforts in the pandemic, Albanese said they were the “arteries of our nation” and must be given “the respect and the investment they deserve”. </p>
<p>A Labor government would set up a care and communities sector expert panel and a pay equity expert panel to improve expertise within the commission. </p>
<p>Two former prime minsters, Paul Keating and Kevin Rudd, were at the launch, and Albanese was introduced by Western Australian Premier Mark McGowan. Newly-elected South Australian Premier Peter Malinauskas was also in the audience. </p>
<p>Education spokeswoman Tanya Plibersek, a very popular Labor figure, was missing from the launch, amid commentary in recent days that she has not been prominent during the campaign. Albanese said earlier in the weekend that Plibersek would be missing because she was representing him at Sunday’s May Day rally in Sydney. </p>
<p>Albanese - who has just emerged from a bout of COVID - told his audience that as prime minister he would want to “work with all premiers, regardless of which party they are from. I want to bring all the states together and get things done for the whole country.” </p>
<p>In other announcements, Albanese said Labor would build more electric vehicle charging stations across Australia, reduce pharmaceutical charges, make it easier for people to purchase houses by having the government take partial equity in them, and invest $1 billion in a fund for value-adding to resources. </p>
<p>He said building more electric vehicle charging stations would close the gaps in the network.</p>
<p>“That means you’ll be able to drive an electric vehicle across the country. Adelaide to Perth, Brisbane to Mount Isa. </p>
<p>"Together with Labor’s already announced electric vehicle discount, we’ll make it easier and cheaper for your next car to be electric. </p>
<p>"Imagine a future where you don’t have to worry about petrol bills”. </p>
<p>On pharmaceuticals, Albanese said Labor would reduce the cost of medication on the Pharmaceutical Benefits Scheme (PBS) by $12.50, making it cheaper for general patients. This would mean the maximum people paid for a PBS script would be $30, a reduction of 29%. </p>
<p>Someone taking one medication a month would save $150 a year. Labor’s changes to the PBS would start on January 1 next year. </p>
<p>The government has also just announced also a cut in the cost of medical scripts - by $10 a script.</p>
<p>Under Labor’s “help to buy” housing initiative, the federal government would provide an equity contribution for 10,000 aspiring home owners annually. The scheme would be available for low and middle income earners. </p>
<p>“If you have saved 2% of you deposit, we will contribute up to 40% of the purchase price of a new home or 30% for an existing home”, Albanese said.</p>
<p>He said the plan “will assist Australians to buy a home with a smaller deposit, smaller mortgage and smaller mortgage repayments.</p>
<p>"An Australian Labor government will help you achieve the great Australian dream of homeownership”. </p>
<p>Albanese also announced that as part of Labor’s proposed national reconstruction fund it would invest $1 billion in developing value-adding products from the nation’s resources.</p>
<p>“We will take resources like lithium and nickel - essential elements of the batteries that will power the vehicles of the future - and instead of shipping them to another country to make batteries, we’ll have what we need to make them right here”.</p>
<p>“We’ll bring manufacturing back home”.</p>
<p>Urging Australians to “vote for a better future”, Albanese said: “As your prime minister I won’t run away from responsibility. I won’t treat every crisis as a chance to blame someone else.</p>
<p>"I will show up, I will step up, I will bring people together. I will lead with integrity and treat you with respect”</p><img src="https://counter.theconversation.com/content/182281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Anthony Albanese on Sunday formally launched Labor’s campaign, with promises for low paid women, and aspiring home buyers.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1718982021-11-23T13:29:43Z2021-11-23T13:29:43ZA new ratings industry is emerging to help homebuyers assess climate risks<figure><img src="https://images.theconversation.com/files/432916/original/file-20211119-15-949yl9.jpg?ixlib=rb-1.1.0&rect=32%2C0%2C5317%2C3473&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"> A cabin is illuminated by firetruck lights as the Caldor Fire burns near Lake Tahoe in California on Aug. 31, 2021.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/lake-tahoe-ca-august-31-2021-a-cabin-is-illuminated-by-fire-news-photo/1234991812">Wally Skalij/Los Angeles Times via Getty Images</a></span></figcaption></figure><p>As climate change fuels <a href="https://www.ncdc.noaa.gov/billions/">large-scale natural disasters</a>, the real estate mantra of “location, location, location” is taking on new meaning. In 2021, homeowners have contended with threats including <a href="https://www.reuters.com/article/us-usa-weather/texas-deep-freeze-leaves-millions-without-power-21-dead-idUSKBN2AG257">paralyzing cold on the Great Plains</a>, <a href="https://www.latimes.com/california/story/2021-08-30/photos-evacuation-order-south-lake-tahoe-caldor-fire">wildfire evacuations in the West</a> and flooding from the <a href="https://www.theadvocate.com/baton_rouge/news/weather_traffic/article_1f46ecc6-b800-11eb-827e-8b1465c85bce.html">South</a> to <a href="https://abcnews.go.com/US/idas-remnants-deluge-york-jersey-flooding-rain-tornadoes/story?id=79780365">New York City and New England</a>.</p>
<p>Buying a house is complicated enough in a market that <a href="https://www.nytimes.com/2021/11/12/magazine/real-estate-pandemic.html">has become supercharged</a> in many U.S. cities. Emerging climate change risks will further complicate those decisions. Investors will be less likely to regret their decisions if they do due diligence in researching local climate risks. Mortgage lenders will face less risk of borrowers defaulting, and <a href="https://hbr.org/2017/08/how-the-insurance-industry-can-push-us-to-prepare-for-climate-change">insurers will face fewer losses</a>, if they factor climate risks into decisions on loans and insurance policies.</p>
<p>I study <a href="https://scholar.google.com/citations?user=lfkXE9kAAAAJ&hl=en">environmental economics</a>, and in my recent book, “<a href="https://yalebooks.yale.edu/book/9780300246711/adapting-climate-change">Adapting to Climate Change: Markets and the Management of an Uncertain Future</a>”, I explore how the rise of Big Data will help people, firms and local governments make better decisions in the face of climate risks. I see the emergence of a climate risk analysis industry for real estate as a promising development, but believe the federal government should set standards to ensure that it provides reliable, accurate information.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/F_pKB_C1NdQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Climate change is increasingly affecting home values across the U.S. Not everyone can afford to live in risky areas.</span></figcaption>
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<h2>Prices send climate signals, but not everyone listens</h2>
<p>Home prices reflect implicit judgments about whether properties are good investments – including the house and the area around it. For example, the current <a href="https://www.zillow.com/ca/home-values/">median home value in California</a> is nearly US$720,000 – more than twice the <a href="https://ycharts.com/indicators/us_existing_home_median_sales_price">national median</a>. This difference reflects a judgment that California offers a desirable climate, lifestyle and job opportunities. </p>
<p>People who buy property in California are betting that the state will continue to be a great place to live in the future. If climate change devastates large portions of it, buyers could regret their investment.</p>
<p>Recent research studying U.S real estate shows that <a href="https://doi.org/10.1016/j.jfineco.2019.03.013">flood risk</a> and <a href="https://doi.org/10.1016/j.jeem.2018.07.005">fire risk</a> are reflected in current housing prices. Properties that are perceived to be riskier sell for a lower price – but it’s not clear whether these climate price discounts fully compensate buyers for the risks they are exposed to. </p>
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<p>Concern about emerging climate risks varies, <a href="https://doi.org/10.1080/00139157.2016.1208995">due partly to the partisan divide</a>. It’s fair to assume that some buyers will be eager to purchase homes in locations that others view as too risky. When people disagree about the probability of a bad outcome, the more optimistic bidder is <a href="https://doi.org/10.1016/j.rie.2017.11.002">more likely to purchase the asset</a>.</p>
<p>Climate change is making extreme weather events, such as tropical storms and flooding, <a href="https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM_final.pdf">more frequent and intense</a> in many places. Will people’s risk perceptions shift along with these changes? Studies show that many <a href="https://doi.org/10.1093/rfs/hhab122">people underestimate climate risks to housing</a>. </p>
<p>As Nobel laureate economist <a href="https://www.nobelprize.org/prizes/economic-sciences/2001/akerlof/facts/">George Akerlof</a> has shown, asymmetric information in markets – when sellers know more about a product than buyers – can impede trade. Buyers rightly fear getting stuck with a “lemon,” whether it’s a used car or a house that floods with every big storm. </p>
<p>In the auto market, rating systems like <a href="https://www.carfax.com/">Carfax</a> help level the playing field; in the real estate industry, climate concerns are creating an opportunity for a nascent industry of climate risk screening modelers offering similar service for homebuyers.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Map of weather and climate disasters in 2021." src="https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=416&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=416&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432918/original/file-20211119-16-8mdzjc.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=416&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">During the first nine months of 2021, there were 18 separate billion-dollar weather and climate disaster events across the U.S. that caused $104.8 billion in damages.</span>
<span class="attribution"><a class="source" href="https://www.ncdc.noaa.gov/billions/">NOAA</a></span>
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<h2>Like Standard & Poor’s but for climate risk</h2>
<p>Just as Moody’s and Standard & Poor’s rate private companies’ creditworthiness to help inform investor decisions, a growing set of firms seek to assess spatially refined climate risks, ranging from flooding to extreme heat and wildfire risk. These companies include <a href="https://climatecheck.com/">Climate Check</a>, <a href="https://firststreet.org/">First Street Foundation</a>, <a href="https://jupiterintel.com/">Jupiter Intelligence</a>, <a href="https://esg.moodys.io/climate-solutions">Moody’s ESG Solutions Group</a> and <a href="https://www.rms.com/">RMS</a>. </p>
<p>Climate risk raters use recent natural disasters to compare the geography of recent flood events to what their model predicts. Typically, they combine peer-reviewed research in climatology and hydrology with a climate change model to generate risks maps. First Street Foundation has posted <a href="https://firststreet.org/research-lab/published-research/flood-model-methodology_overview/">a step-by-step overview</a> of its modeling approach.</p>
<p>[<em>Like what you’ve read? Want more?</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-likethis">Sign up for The Conversation’s daily newsletter</a>.]</p>
<p>Like any emerging industry, spatially refined climate prediction has grown unevenly. Some models are scientifically sound and highly precise, while others are lower quality. In a normal market, consumers would select the winning products through market competition – but for climate risk forecasts, it may take years to assess which offerings are most reliable. </p>
<p>I believe the federal government should play a role in screening the new generation of climate risk products. Regulators could work with the National Science Foundation to create a jury of experts to evaluate the new products. </p>
<p>One way to quality-check these offerings would be to foster a competition in which teams post forecasts about the likely locations of disasters in 2022, and then are ranked early in 2023 based on how well they predicted actual outcomes. This kind of annual review could nudge participants to upgrade their models regularly. One potential example is <a href="https://www.kaggle.com/c/AlgorithmicTradingChallenge">algorithmic trading competitions in financial markets</a>, in which contestants develop new models to accurately predict how the stock market will respond to large trades.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Man stands next to foundation wall with large crack." src="https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432919/original/file-20211119-19-tth6xv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Sahadeo Bhagwandin shows the buckled foundation of his home in the Queens borough of New York City after it was surrounded by flood waters during Hurricane Ida, Sept. 17, 2021.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/TropicalStormsFloodInsurance/0f14b70a65ae49219743e17cd44606d7/photo">AP Photo/Bobby Caina Calvan</a></span>
</figcaption>
</figure>
<h2>Saving lives and protecting assets</h2>
<p>Climate risk assessment firms could help make the U.S. real estate sector more resilient by helping homebuyers become more sophisticated and realistic property shoppers. Lending patterns will shift as banks offer borrowers less-generous terms for riskier properties. This incentive should nudge people to bid more for relatively safer properties and to seek to live in less risky areas. </p>
<p>Such shifts in turn could nudge changes in local land use and zoning laws to <a href="https://urban-regeneration.worldbank.org/node/21">upzone</a> – allow higher-value or denser uses – in <a href="https://archive.curbed.com/2020/1/30/21115351/upzoning-definition-affordable-housing-gentrification">relatively safer areas</a>. Building more homes in less risky areas would make climate adaptation more affordable.</p>
<p>Climate change confronts people with fundamental uncertainty. I see developing the skills and infrastructure to better predict local climate risks as a useful strategy for adapting to climate risks. If forecasters can develop trusted predictive models, people will face less future regret about their real estate investments and less risk in their daily lives.</p><img src="https://counter.theconversation.com/content/171898/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew E. Kahn gave a March 2021 Keynote Address at a Conference hosted by RMS. He was paid less than $5,000 for this talk.
Kahn has an academic research partnership with First Street Foundation that allows him to use their data in his peer reviewed academic research. He is not paid for this research. </span></em></p>Private companies rate all kinds of investments, from stocks to used cars. Now, they’re starting to analyze climate risks to local real estate – but how reliable are their findings?Matthew E. Kahn, Provost Professor of Economics and Spatial Sciences, USC Dornsife College of Letters, Arts and SciencesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1689592021-10-12T03:57:38Z2021-10-12T03:57:38ZAs home prices soar, we have an inquiry almost designed not to tell us why<p>Never has an inquiry into the skyrocketing price of homes been more urgent. </p>
<p>Rarely has one been as insultingly ill-suited as the one under way right now.</p>
<p>Midway through last year in the midst of COVID, the average forecast of the 22 leading economists who took part in The Conversation mid-year survey was for no increase in home prices whatsoever in the year ahead (actually for <a href="https://theconversation.com/no-big-bounce-2020-21-economic-survey-points-to-a-weak-recovery-getting-weaker-amid-declining-living-standards-141184">slight falls</a>).</p>
<p>At that time the typical (median) Sydney house price was A$1 million, where it stayed until the end of the year.</p>
<p>Then it took off. In the ten months to the start of this month the typical Sydney house price soared $300,000 to <a href="https://www.corelogic.com.au/sites/default/files/2021-09/211001_CoreLogic_HomeValueIndex_Oct21_FINAL.pdf">$1.3 million</a> – a breathtaking increase (and an awfully big penalty for delaying buying) of $1,000 each day.</p>
<p>For apartments, the increase isn’t as big, although still extraordinary. The cost of delaying buying a typical Sydney apartment has been $334 each day.</p>
<p>The cost of delaying buying a typical Melbourne house has been close to $600 per day, the cost of delaying buying a typical Melbourne apartment $150 per day.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/home-prices-are-climbing-alright-but-not-for-the-reason-you-might-think-158776">Home prices are climbing alright, but not for the reason you might think</a>
</strong>
</em>
</p>
<hr>
<p>In that time, in the year in which the typical Australian home price climbed 20.3%, the typical Australian wage climbed just 1.7%</p>
<p>What people stretched to the limit or now locked out of the housing market are desperate to know is</p>
<ul>
<li><p>why it is happening</p></li>
<li><p>when it is likely to stop</p></li>
<li><p>what (if anything) we can do about it.</p></li>
</ul>
<p>Instead, we have been given an inquiry into affordability in name only. Seriously. The parliamentary inquiry commissioned by the treasurer in July and chaired by backbencher Jason Falinski is called an inquiry into <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability">affordability and supply</a>, but the word “affordability” appears in none of its three <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability/Terms_of_Reference">terms of reference</a>.</p>
<h2>It’s an inquiry into ‘supply’</h2>
<p>Instead, the terms of reference refer to the impact of taxes, charges and other things settings on “housing supply”.</p>
<p>I guess the idea is that it is obvious that supply is the key to affordability, but it rather negates the idea of holding an inquiry, and it sits oddly with the explosion in prices we have seen in a year in which building approvals have surged by a near-record <a href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/latest-release#data-download">224,000</a> and our population has as good as <a href="https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/mar-2020">stayed still</a>.</p>
<p>In its submission to the inquiry the <a href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">Reserve Bank</a> includes a graph showing the supply of housing (the stock of houses and apartments) <a href="https://images.theconversation.com/files/425801/original/file-20211011-23-1xzz029.PNG">outpacing</a> population growth for the best part of the decade leading up to the latest price explosion.</p>
<h2>Supply has been holding up</h2>
<p>But in a sense (and stay with me here) whoever drafted the restricted terms of reference is right. Housing affordability is linked to the supply of housing.</p>
<p>And housing affordability has been doing okay.</p>
<p>In evidence to the inquiry last month Treasury assistant secretary John Swieringa drew a <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/toc_pdf/Standing%20Committee%20on%20Tax%20and%20Revenue_2021_09_14_9113.pdf;fileType=application%2Fpdf#search=%22committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/0000%22">distinction</a> between housing affordability (best measured by the cost of renting housing) and the cost of buying a house, which was partly an investment.</p>
<blockquote>
<p>When you are a purchaser of a house you are partly investing in an asset and partly buying dwelling services; whereas when you are renting it’s probably a cleaner read on what cost dwelling services is.</p>
</blockquote>
<p>That clean read – rent as a proportion of income – hasn’t much changed in 20 years. For middle earners it has remained comfortably between <a href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">20% and 25%</a> of household disposable income.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425838/original/file-20211012-20-k8uip0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Home loan payments take up less of income.</span>
<span class="attribution"><span class="source">hameleonsEye/Shutterstock</span></span>
</figcaption>
</figure>
<p>The Reserve Bank says advertised rents for units in Sydney and Melbourne have drifted down by $30 to $50 per week over the past five years while rents in other places have mostly drifted higher.</p>
<p>As it happens, it says another measure of housing affordability is improving.</p>
<p>The cost of home loan payments as a proportion of income has been falling since the onset of COVID. Dramatically lower interest rates mean payments take up less household disposable income than they did five years ago, even with the much higher prices.</p>
<h2>The problem is accessibility</h2>
<p>What has worsened is what the Reserve Bank calls “housing accessibility”, to distinguish it from housing affordability. </p>
<p>Accessibility is the ability of a first time owner or renter to get into the market at all by finding the deposit or bond.</p>
<p>Astounding price growth and five years of weak income growth have pushed up the cost of an average first home deposit from 70% of income to more than 80%.</p>
<p>On average it now takes a 24-35 year old nine years of tucking away one fifth of their income each year to save for a typical Sydney deposit, up from five to six years a decade ago.</p>
<hr>
<p><strong>Average First Home Buyer Deposit</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=238&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=238&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=238&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=299&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=299&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=299&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Owner-occupier; estimated as a share of average annual household disposable income using average first home buyer commitment size and assuming 20 per cent deposit. Seasonally adjusted and break-adjusted.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">RBA, ABS</a></span>
</figcaption>
</figure>
<hr>
<p>It’s okay if you have a parent who can get their hands on money, almost impossible if you don’t. In the words of former Reserve Bank official Peter Tulip, it’s making home ownership <a href="https://www.afr.com/property/residential/why-apra-can-t-fix-the-housing-market-20210928-p58vgy">hereditary</a>.</p>
<p>He’s not the first person to have noticed.</p>
<p>Liberal backbencher John Alexander chaired the Coalition’s 2015 inquiry into <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Home_Ownership">home ownership</a>. He said then we were “on track to becoming a Kingdom where the Lords own all the land and the biggest Lord will be King and the enslaved serf tenant is paying rent to the Lord to become wealthier”.</p>
<h2>Ownership is becoming hereditary</h2>
<p>Prime Minister Turnbull and Treasurer Scott Morrison used the 2016 election (in which they attacked Labor’s plan to limit tax breaks for landlords) to <a href="https://www.smh.com.au/politics/federal/housing-crisis-not-just-about-supply-says-liberal-mp-who-wants-his-inquiry-back-20161025-gsafv6.html">shut down</a> Alexander’s inquiry, and only agreed to restart it with someone else as chair. It had considered 30 hours of evidence.</p>
<p>The chair of this current (limited) inquiry seems <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/toc_pdf/Standing%20Committee%20on%20Tax%20and%20Revenue_2021_09_14_9113.pdf;fileType=application%2Fpdf#search=%22committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/0000%22">unperturbed</a>.</p>
<p>He opened September’s hearings saying no question was off-limits, no idea too stupid, all forms of inquiry were worthwhile. It’d be great if that was true.</p><img src="https://counter.theconversation.com/content/168959/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fine print shows its an inquiry into housing “supply”, but supply isn’t a particularly urgent problem.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1590342021-05-04T14:23:13Z2021-05-04T14:23:13ZThe Bank of Canada must seize the pandemic moment and do more for Canadians<figure><img src="https://images.theconversation.com/files/398428/original/file-20210503-19-1f00981.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3751%2C2645&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A woman walks past the Bank of Canada building in Ottawa in September 2017. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Adrian Wyld</span></span></figcaption></figure><p>The <a href="https://www.bankofcanada.ca/">Bank of Canada</a>, like central banks around the world, is currently facing enormous upheaval and uncertainty due to the enduring COVID-19 pandemic. </p>
<p>Will its leadership seize the moment as an opportunity to innovate and respond to the challenges ahead, including rising inequality and climate change? Or will it treat the present crisis as a temporary exception, hoping to return to business as usual once the pandemic recedes?</p>
<p>This spring, the bank released the <a href="https://www.bankofcanada.ca/toward-2021-renewing-the-monetary-policy-framework/toward-2021-outreach/lets-talk-inflation/consultations-with-canadians/">results of its consultations with Canadians</a> as part of its ongoing mandate review. This is an historic opportunity for our central bank and the federal government to make the bank work better for the Canadian people.</p>
<p>As academics specializing in philosophy and economics, and politics, respectively, we’d like to highlight two key themes that emerged in the Bank of Canada’s consultations with Canadians.</p>
<h2>Wealth inequality, climate action</h2>
<p>First, many Canadians are deeply concerned about the increasingly unequal distribution of wealth in this country — particularly by the way it has been driven by <a href="https://www.cbc.ca/news/canada/photos/canada-real-estate-prices-scroller-1.6004260">skyrocketing house prices.</a> Second, some Canadians would like to see the Bank of Canada take the threat of climate change seriously as it plays its key role in ensuring price and financial stability.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-action-job-creation-are-top-post-pandemic-priorities-for-canadians-156739">Climate action, job creation are top post-pandemic priorities for Canadians</a>
</strong>
</em>
</p>
<hr>
<p>How could the bank do better in tackling these two core problems — the scourge of rising inequality and the future shocks of climate change?</p>
<p>On inequality, there are many useful models around the world. Although Canadians like to think we’re more progressive than our neighbour to the south, American are actually well ahead of us in rethinking the role of their central bank. </p>
<p><a href="https://www.federalreserve.gov/newsevents/speech/powell20200827a.htm">The United States Federal Reserve’s recent shift towards what’s known as average inflation targeting,</a> a strategy that seeks to balance inflation and growth over the medium term, gives it more flexibility to boost employment.</p>
<figure class="align-center ">
<img alt="'The Bank of Canada' is etched onto a stone wall." src="https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&rect=0%2C533%2C5476%2C3009&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=387&fit=crop&dpr=1 600w, https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=387&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=387&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=486&fit=crop&dpr=1 754w, https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=486&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/398426/original/file-20210503-19-1joypcg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=486&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Bank of Canada in Ottawa in December 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>Such a strategy, if combined with a dual mandate of price stability and employment, would allow the Bank of Canada to pay more attention to the needs of all Canadians. The bank’s public consultations suggest there’s in fact considerable support for such a move.</p>
<p>While this would be a first and important step in modernizing the Bank of Canada’s mandate, we need to go further and take a more careful look at some of the policy tools that the central bank has been using in the last year. </p>
<h2>Quantitative easing</h2>
<p>Since the COVID-19 crisis took hold, the Bank of Canada joined other central banks in engaging in what’s called <a href="https://www.bankofcanada.ca/2020/12/how-quantitative-easing-works/">quantitative easing</a>, initiating massive purchases of financial assets. As a result, its <a href="https://www.bankofcanada.ca/2019/08/bank-canada-balance-sheet/">balance sheet has increased by close to 500 per cent since March 2020</a>.</p>
<p>Such liquidity injections by central banks are clearly necessary. The question is <em>how</em> this liquidity should be injected.</p>
<p>Suppose your doctor prescribes you a drug that is known to have serious side effects. Wouldn’t you want her to look into alternative treatments? The experience with quantitative easing since 2008 shows that it has two serious side effects, both of which pertain to some of the core concerns of Canadians.</p>
<p>First, it exacerbates inequality. While the central bank may want to see a good portion of the injected liquidity used to stimulate real economic activity, this is not something it can control. Instead, a lot of the liquidity has ended up in stock markets and housing markets, benefiting wealthy asset owners and helping to push the cost of owning a house beyond the means of many Canadians.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Mark Carney gestures." src="https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=465&fit=crop&dpr=1 754w, https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=465&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/398463/original/file-20210503-15-1llm6fr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=465&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Mark Carney, then the governor of the Bank of England, speaks at a news conference in December 2019.</span>
<span class="attribution"><span class="source">(AP Photo/Kirsty Wigglesworth)</span></span>
</figcaption>
</figure>
<p>As Mark Carney, then governor of the Bank of England, acknowledged in 2014, “<a href="https://www.bis.org/review/r140528b.htm">the distributional consequences of the response to the financial crisis have been significant</a>.” The same is true today.</p>
<p>Second, when quantitative easing includes buying corporate bonds, it facilitates access to capital markets for the firms in question. Central banks appeal <a href="https://www.cepweb.org/central-bank-market-neutrality-is-a-myth/">to the idea of “market neutrality”</a> and claim that an asset purchase that reflects current bond volumes on capital markets does not favour anyone in particular.</p>
<p>But in countries like Canada, when you <a href="https://www.investopedia.com/articles/investing/062813/why-companies-issue-bonds.asp">buy a collection of corporate bonds</a> compared to <a href="https://www.reference.com/business-finance/outstanding-bonds-836fc7a1b6253cbf#:%7E:text=Outstanding%20bonds%20are%20those%20bonds,the%20company%20to%20the%20investor.&text=Interest%20is%20to%20be%20returned,those%20bonds%20are%20considered%20paid.">the outstanding bonds on the market</a>, you inevitably reinforce the status quo with its many companies that have large carbon footprints. That slows the transition to a more sustainable economy.</p>
<h2>Politics comes with the territory</h2>
<p>Some will caution that independent central banks should not get involved with such deeply political issues. The answer to this is simply: It’s too late for that. Political decisions come with the territory of central banking today, and we’d better develop innovative policy instruments to reflect this reality.</p>
<p>Other central banks are adapting already. In December, the <a href="https://www.snb.ch/en/mmr/speeches/id/ref_20201217_tjn/source/ref_20201217_tjn.en.pdf">Swiss National Bank announced</a> that its asset purchases will exclude all companies primarily active in coal mining. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Christine Lagarde addresses European lawmakers" src="https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/398465/original/file-20210503-15-caex5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Christine Lagarde, European Central Bank president, addresses European lawmakers in Brussels in February 2021.</span>
<span class="attribution"><span class="source">(AP Photo/Olivier Matthys)</span></span>
</figcaption>
</figure>
<p>Perhaps more significantly, the <a href="https://www.ecb.europa.eu/home/html/index.en.html">European Central Bank</a> has vowed to take a more active stance on climate change since Christine Lagarde has taken over as president.</p>
<p>Unconventional policies can also be used to alleviate — instead of exacerbate — inequality. One idea is to transfer money to citizens through <a href="https://www.investopedia.com/articles/personal-finance/082216/what-difference-between-helicopter-money-and-qe.asp">so-called helicopter money</a> rather than rely on institutional investors to transform quantitative easing measures into economic stimulus initiatives. The policy response to COVID-19, particularly <a href="https://www.cbc.ca/news/politics/cerb-ei-benefits-covid19-1.5743537">the Canadian Emergency Response Benefit (CERB)</a>, actually provides an interesting blueprint for this.</p>
<p>The overall tone of the Bank of Canada’s consultations report seems to suggest that the institution is more comfortable with the status quo than with serious innovation. </p>
<p>But our central bank actually has <a href="https://www.bankofcanada.ca/2000/10/can-a-bank-change/">a history of being an innovator in monetary policy</a>. In 1975, it was among the first central banks to <a href="https://www.imf.org/external/pubs/ft/fandd/2014/03/basics.htm">adopt monetarism</a>, the practice of controlling the money supply to stabilize the economy. And it was the second to adopt <a href="https://www.bankofcanada.ca/2020/08/understanding-inflation-targeting/#:%7E:text=After%20trying%20a%20few%20different,in%20good%20overall%20economic%20performance.">inflation targeting</a> in 1991, when it was still an untested approach. </p>
<p>To confront today’s many challenges, the Bank of Canada needs to rediscover that innovative zeal.</p><img src="https://counter.theconversation.com/content/159034/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Dietsch receives funding from the Social Sciences and Humanities Research Council of Canada. He is a member of the advisory board of the Council on Economic Policies. </span></em></p><p class="fine-print"><em><span>Jacqueline Best receives funding from the Social Sciences and Humanities Research Council of Canada.</span></em></p>Unconventional policies can be used to alleviate — instead of exacerbate — inequality, something Canadians are clamouring for. The Bank of Canada needs to rediscover its former innovation zeal.Peter Dietsch, Professor, Département de Philosophie, Université de MontréalJacqueline Best, Professor of Political Studies, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1585182021-04-08T20:10:42Z2021-04-08T20:10:42ZVital signs: to fix Australia’s housing affordability crisis, negative gearing must go<figure><img src="https://images.theconversation.com/files/393740/original/file-20210407-21-k94xlq.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5362%2C2705&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Dan Himbrechts/AAP</span></span></figcaption></figure><p>House prices are back in the news, and out of control.</p>
<p>In the past three months the median house price in Sydney has risen by more than A$100,000 to A$1.12 million. Sydney’s median residential property price (including houses and apartments) is now <a href="https://www.nation.lk/online/australian-house-prices-in-march-surge-at-the-fastest-pace-in-32-years-corelogic-data-shows-69815.html">2.6% above its previous high-water mark</a>, recorded in August 2017, before lending criteria were tightened (and COVID-19 struck).</p>
<p>Even areas far from central Sydney, such as the Central Coast, have recorded double-digit percentage increases.</p>
<p>What exactly is driving these sharp rises is a matter of debate. Australia’s economic recovery from COVID-19 has been stronger than many thought. The prospect of most Australians being vaccinated and international borders reopening provides further hope – even if our vaccine roll-out has been less than stellar in its planning and execution.</p>
<p>Of course, interest rates are at historic lows. More to the point, loans that can be fixed for three or five years have become much cheaper and more widely used as well. This has given borrowers the capacity to borrow larger sums.</p>
<p>The federal government has contributed, too, with a suite of measures targeted at first-home buyers. Like all such measures, these look attractive at the individual level but simply translate into higher prices. Schemes like the “first home owner grant” should really be called the “seller subsidy”.</p>
<p>Finally there is the elephant in the room: irrational exuberance. </p>
<p>Who knows how much “fear of missing out” has played into price rises. Against the backdrop of a worldwide public health and economic crisis, one might think buyers would be a little more circumspect about their future incomes.</p>
<p>But apparently not so much.</p>
<h2>Our housing affordability problem</h2>
<p>Sadly, there is little new about the fact that Australia – and the largest capital cities in particular – have a serious housing affordability problem. It has been that way for at least a decade.</p>
<p>Sydney and Melbourne are routinely ranked among the top half-dozen most expensive cities in the world when comparing housing prices to average incomes earned in those cities.</p>
<p>Home ownership rates have fallen more or less constantly. Young people are basically excluded from home ownership unless they have very high incomes or parents with the means and inclination to provide financial help.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The top 25 most unaffordable metropolitan areas from a survey of 92 major markets in eight nations for the third quarter of 2020." src="https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=721&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=721&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=721&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=906&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=906&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393920/original/file-20210408-13-1pklzx4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=906&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<hr>
<p>On top of this, household debt levels in Australia are disturbingly high – reflecting the large mortgages people who do manage to claw their way into the housing market have to take out.</p>
<p>Sure, that is matched against the high asset values of the property they have bought. But as any student on economic history knows, that’s little comfort when an asset price bubble bursts. </p>
<p>To put it another way: asset prices come and go, but debt is forever.</p>
<p>So here we are again. The housing market is so frothy it has seriously reduced financial mobility at the individual level, and it threatens financial stability at the macro level.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/zoning-isnt-to-blame-for-australias-soaring-house-prices-154482">Zoning isn’t to blame for Australia’s soaring house prices</a>
</strong>
</em>
</p>
<hr>
<h2>Quick fixes that won’t work</h2>
<p>Let’s start by ruling out some of the supposed quick fixes for getting property prices under control. </p>
<p>Some say the Reserve Bank of Australia should hike interest rates to make it harder for borrowers to pay such high prices. But the RBA should mainly focus on its inflation target (one it has missed year after year), getting unemployment down and wages growth up. Those things all require low interest rates.</p>
<p>To calm the frenzy, the Australian Prudential Regulation Authority could use so-called “macroprudential tools”. These are requirements on financial institutions to limit systemic risks. In the past the financial regulator has set policies to limit credit growth and curb the proportion of “interest-only mortgages” (mortgages that don’t require principal payments). It can and should do these things, though it has a pretty spotty track record at acting in a timely and effective manner.</p>
<p>Perhaps most importantly, both sides of politics need to revisit Australia’s almost unique and certainly odd system of allowing interest payments on rental properties to be offset against a person’s taxable income – that is, “negative gearing”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/negative-gearing-reforms-could-save-a-1-7-billion-without-hurting-poorer-investors-92679">Negative gearing reforms could save A$1.7 billion without hurting poorer investors</a>
</strong>
</em>
</p>
<hr>
<h2>Phasing out negative gearing</h2>
<p>Such deductions are permissible for other asset classes such as stocks – and have been for 100 years or so. But no “ordinary” Australian wage earner can get big loans to bet on the stock market. Even wealthy investors cannot get anything like the leverage they can in residential property in other asset classes.</p>
<p>This is a peculiarity flowing from the amount of capital banks need to hold against property loans. It’s a market failure that should be addressed.</p>
<p>The best way to do this – as I pointed out in <a href="http://research.economics.unsw.edu.au/richardholden/assets/mckell_negative-gearing_a4_web.pdf">a report for the McKell Institute</a> in mid-2015 – is to gradually phase out negative gearing over time, and allow it only for new dwellings in future. Expanding housing supply would also be very helpful.</p>
<p>Labor took a policy based on this report to two elections. It lost both – although perhaps the last loss had more to with other things, including a quite separate and less appealing franking credit policy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/words-that-matter-whats-a-franking-credit-whats-dividend-imputation-and-whats-retiree-tax-111423">Words that matter. What’s a franking credit? What’s dividend imputation? And what's 'retiree tax'?</a>
</strong>
</em>
</p>
<hr>
<p>The Coalition almost pre-empted Labor by reforming negative gearing in 2015/16. But then prime minister Malcolm Turnbull bowed to pressure from then treasurer and negative-gearing fan Scott Morrison.</p>
<p>Housing affordability remains a serious problem in Australia. We need to tackle it now, and with a multi-pronged approach. If we don’t, we risk the future of young Australians and our financial system at the same time.</p><img src="https://counter.theconversation.com/content/158518/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is president-elect of the Academy of the Social Sciences in Australia and is a member of the strategic council of the Blueprint Institute.</span></em></p>Failing to address skyrocketing housing prices risks the future of young Australians and the financial system.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1544822021-03-10T19:07:22Z2021-03-10T19:07:22ZZoning isn’t to blame for Australia’s soaring house prices<figure><img src="https://images.theconversation.com/files/388730/original/file-20210310-13-1ekmz2e.jpg?ixlib=rb-1.1.0&rect=28%2C191%2C3031%2C1788&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Jandrie Lombard/Shutterstock</span></span></figcaption></figure><p>Among the many explanations put forward for <a href="https://www.9news.com.au/national/australia-first-home-buyers-priced-out-of-property-market-by-extreme-offers/d7de770f-c492-46fa-a774-bda0ea45718e">soaring home prices</a>, one we hear repeatedly is <a href="https://www.afr.com/policy/economy/zoning-rules-cost-home-buyers-a-fortune--and-itll-get-worse-says-rba-20180308-h0x6uh">zoning</a> — the regulations that govern the purposes for which land can be used, including how densely people can be housed in different locations.</p>
<p>The real estate industry says if only we <a href="https://udia.com.au/media-release/housing-affordability-woes-need-solutions/">relaxed the zoning rules</a> and allowed more houses and apartments to be built on each block, housing would be cheaper, maybe A$355,000 per unit cheaper if the <a href="https://www.rba.gov.au/publications/rdp/2020/pdf/rdp2020-04.pdf">Reserve Bank</a> is right.</p>
<p>It’s a story as grounded in simplicity as it is (on the part of developers) in self-interest. </p>
<p>The simple story is that zoning regulations restrict development, restricted development means restricted supply of houses and apartments, and restricted supply means higher prices. Scrap the planning laws, the argument goes, and property developers will shower the market with housing, driving down prices.</p>
<p>So effective is the mantra it has become part of the official story in <a href="https://www.gov.uk/government/publications/fixing-our-broken-housing-market">Britain</a> and the <a href="https://bpr.berkeley.edu/2020/04/06/no-more-picket-fences-how-sb50-could-have-solved-the-california-housing-crisis/">United States</a>, and to <a href="https://www.rba.gov.au/publications/rdp/2020/pdf/rdp2020-04.pdf">some extent</a> here.</p>
<p>What’s missing is evidence. </p>
<p>Studies which point the finger at the planning system almost universally fail to quantify the extent of housing permitted by planning regulations and how it has changed over time. </p>
<h2>Rarely have changes in zoning been examined</h2>
<p>Analysis by Australia’s <a href="https://www.rba.gov.au/publications/rdp/2018/pdf/rdp2018-03.pdf">Reserve Bank</a> for example, treats zoning rules as though they exist in stasis; an ever-present yet spatially-varied regulation measured by whatever price remains once structure and land values are subtracted.</p>
<p>Our <a href="https://osf.io/zkt7v/">new research</a> fills the gap by measuring changes in zoning at the level of individual properties in greater Brisbane.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/388744/original/file-20210310-20-synd5d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The 19 Brisbane centres studied.</span>
</figcaption>
</figure>
<p>We examined 20 years of changes to zoning, housing supply and prices across more than 25,000 sites in 19 major centres subject to <a href="https://journals.sagepub.com/doi/full/10.1177/2399808320951583">repeated</a> zoning changes designed to encourage urban infill. </p>
<p>The centres had within them a wide variety of land use types (detached dwellings, medium-density dwellings, commercial and retail
use, etc.) and housing densities. We reviewed and mapped historic and current rules to determine how the zoned capacity changed on each site.</p>
<p>We combined this with data on the changes in land use on each site, changes to the actual supply of dwellings, and property prices.</p>
<p>If the semi-official story was true, we would have expected increases in zoned capacity to lead to falling prices.</p>
<p>Our results show no such thing. Locations with increased zoned capacity for housing saw increased (not reduced) property prices. Across the selected sites, houses increased in value by a factor of three and apartments by 2.3 over the two decades studied, as they did elsewhere in Australia.</p>
<h2>Weaker zoning, not weaker prices</h2>
<p>During this time, the zoned capacity for housing at these locations doubled. But there was no rush to take up the increase in capacity.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/388735/original/file-20210310-17-nz1aqv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Developers hold off until prices are right.</span>
</figcaption>
</figure>
<p>The vast majority of sites (94%) were not developed within five years of the zoning changes. </p>
<p>Even after 20 years, 71% of the extra capacity remained unexploited.</p>
<p>We found evidence for an alternative story: that planning regulations permit development, but it is the market price that determines if and where development occurs. </p>
<p>Higher sales prices make development more feasible. </p>
<p>Under this story, developers select their sites, build, and sell in strong markets and wait or avoid selling when markets are weak. </p>
<p>This partly explains why locations with highest initial property prices were the <a href="https://www.tandfonline.com/doi/full/10.1080/08111146.2020.1792284">most likely</a> to be developed.</p>
<p>Like all good stories, the semi-official one contains an element of truth. If the planning system failed to allow for enough growth, it would almost certainly drive up prices. </p>
<h2>Rarely is supply a problem</h2>
<p>To avoid this, planning authorities go to <a href="https://planning.dsdmip.qld.gov.au/planning/better-planning/state-planning/regional-plans/seqrp/lsdm">great lengths</a> to ensure there is enough zoned capacity to cater for projected growth. </p>
<p>This is one reason why we <a href="https://osf.io/r925z">don’t have a housing supply problem</a>. Deregulating the planning system won’t change that, but nor will it ease price pressure. </p>
<p>What it will do is reduce the environmental and other benefits zoning provides, while continuing to allow developers to sell properties at times <a href="https://www.sciencedirect.com/science/article/pii/S1051137720300449">of their choosing</a>.</p>
<p>What is driving up house prices now has little to do with zoning, and it is happening worldwide. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076">When houses earn more than jobs: how we lost control of Australian house prices and how to get it back</a>
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<p>Throughout the globe we have seen increases in easy access to cheap credit and tax regimes that encourage speculative property investment. </p>
<p>Unlike planning regulations, which vary hugely by location, these macroeconomic factors are common. They help explain why the housing affordability crisis transcends national boundaries. </p>
<p>It is the liberalisation of finance and the treatment of housing as an investment product that got us into this mess. Further liberalisation of planning regulations is unlikely to get us out.</p><img src="https://counter.theconversation.com/content/154482/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cameron Murray receives funding from the Halloran Research Trust. </span></em></p><p class="fine-print"><em><span>Mark Limb does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australian data suggest that prices do not fall when zoning is relaxed.Mark Limb, Lecturer in Urban and Regional Planning, Queensland University of TechnologyCameron Murray, Research Fellow - Henry Halloran Trust, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1390392020-06-08T19:48:43Z2020-06-08T19:48:43ZThe housing boom propelled inequality, but a coronavirus housing bust will skyrocket it<figure><img src="https://images.theconversation.com/files/339683/original/file-20200604-130951-cnpdbv.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5742%2C3440&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">iStock</span> <span class="attribution"><span class="license">Author provided</span></span></figcaption></figure><p>A housing boom that lasted from the mid-1980s with only minor interruptions has <a href="https://theconversation.com/how-the-housing-boom-has-driven-rising-inequality-102581">added to rising income inequality</a> in Australia. Yet an impending housing market bust, triggered by the coronavirus pandemic and the resulting spike in unemployment, will not restore greater equality. On the contrary, recent history shows housing busts can <a href="http://web.stanford.edu/group/recessiontrends-dev/cgi-bin/web/sites/all/themes/barron/pdf/IncomeWealthDebt_fact_sheet.pdf">worsen inequality</a>. </p>
<p>Those who benefit most from a boom are not those who pay the price when it busts. And those harmed by the boom often become even more vulnerable during the bust. </p>
<p>Our analysis highlights the risks for people who bought their first home at the peak of the boom. We estimate 24,000 households are at very high risk because they took out large loans that might soon exceed their home value and also work in sectors with high job losses. Another 135,200 are at high risk and 121,000 are at moderate risk.</p>
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Read more:
<a href="https://theconversation.com/how-the-housing-boom-has-driven-rising-inequality-102581">How the housing boom has driven rising inequality</a>
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<h2>Coronavirus has set up a housing bust</h2>
<p>Experts have long cited an upsurge in unemployment as the main threat to house price growth. This risk became reality with the coronavirus pandemic. Over the seven weeks from mid-March to early May, <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6160.0.55.001Media%20Release1Week%20ending%202%20May%202020?opendocument&tabname=Summary&prodno=6160.0.55.001&issue=Week%20ending%202%20May%202020&num=&view=">jobs fell by 7.3%</a>. </p>
<p>Unless employment rapidly recovers, the housing market is facing a major downturn. In one worst-case scenario released by the Commonwealth Bank, <a href="https://www.abc.net.au/news/2020-05-13/coronavirus-commonwealth-bank-house-prices-economy-unemployment/12241338">house prices could fall by up to 32% </a> over the next two years. </p>
<h2>Recent first-time buyers are most vulnerable</h2>
<p>Households that can hold on to their homes and weather the storm until the market recovers are not substantially harmed. Established owners, who bought their homes before or early in the boom years, have enjoyed the largest increase in their home values, and the largest reductions in their debt. This puts them in a position of relative resilience to a housing market bust.</p>
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<strong>
Read more:
<a href="https://theconversation.com/why-falling-house-prices-do-less-to-improve-affordability-than-you-might-think-111267">Why falling house prices do less to improve affordability than you might think</a>
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<p>In contrast, <a href="https://dra.american.edu/islandora/object/auislandora%3A70463/datastream/PDF/view">evidence from the 2008 housing crisis</a> in the United States shows which households are most at risk. These were households that bought their first home with no deposit, or a very low one, in the period leading up to the 2008 crash. The crash left these households “underwater”, trapped with an asset worth less than their mortgage debt. Many defaulted on their mortgages, fuelling the housing market’s downward spiral. </p>
<p>The Australian housing market and financial institutions differ from those in the United States in 2008 in fundamental ways. Still, Australian households that bought their houses at the peak of the boom and have now lost their jobs in the coronavirus pandemic are facing the highest risk. </p>
<p>These include 24,000 recent (2014-5 to 2017-18) first home buyers who borrowed over 80% of the value of their home and were employed in <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0">industries where jobs have now collapsed</a>. Another 135,200 recent first home buyers with high loan-to-valuation ratios are also at risk of going “underwater”, with homes worth less than their debt. Many of them are also in precarious employment, irrespective of the pandemic. (These figures do not include first home buyers in 2018-19, for which data are not yet available.) </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=264&fit=crop&dpr=1 600w, https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=264&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=264&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=332&fit=crop&dpr=1 754w, https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=332&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/337161/original/file-20200523-124840-haxmey.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=332&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Recent first home buyers at risk in a COVID-19 housing bust.</span>
<span class="attribution"><span class="source">Source: Liss Ralston; data from ABS Survey of Income and Housing 2014-5 to 2017-8</span></span>
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<em>
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Read more:
<a href="https://theconversation.com/build-social-and-affordable-housing-to-get-us-off-the-boom-and-bust-roller-coaster-113113">Build social and affordable housing to get us off the boom-and-bust roller coaster</a>
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<h2>Renters’ relief could be short-lived</h2>
<p>Many private renters hope a housing downturn will translate into lower rents and perhaps give them a chance to buy their first home in a more affordable market. However, this is not always the case in a downturn. In the US from 2007 to 2009, despite declining house prices, <a href="https://www.urban.org/sites/default/files/publication/27011/1001550-Rental-Market-Stresses-Impacts-of-the-Great-Recession-on-Affordability-and-Multifamily-Lending.PDF">rental affordability stress has only increased</a>.</p>
<p>In Australia, the sudden decline in international students and short-term rentals has <a href="https://www.theage.com.au/national/victoria/inner-city-rental-vacancy-rate-nearly-triples-amid-covid-19-student-exodus-20200523-p54vri.html">increased long-term rental vacancies in some areas</a>. <a href="https://www.smh.com.au/national/nsw/a-very-good-time-to-upgrade-tenants-bag-bargains-as-landlords-drop-rents-20200523-p54vp9.html">Reports suggest</a> rents are going down, especially at the upper end of some rental markets. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/as-coronavirus-hits-holiday-lettings-a-shift-to-longer-rentals-could-help-many-of-us-134036">As coronavirus hits holiday lettings, a shift to longer rentals could help many of us</a>
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<p>However, in the longer run, the slowdown in housing construction will create supply shortages, leaving rental vacancies low and rents high. Many landlords, mostly “mum and dad” investors, have taken <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0020/16904/AHURI-Final_Report-296-Private-rental-in-transition-institutional-change-technology-and-innovation-in-Australia.pdf">large loans to finance their property investment</a>. They will need to keep rents high to hold on to their investment properties. </p>
<p>Lower house prices will enable some households to become home owners for the first time, after being locked out of the market during the boom years. These households could benefit from a coronavirus housing bust if the market then recovers. Even so, their gains will do little to change the overall trend of rising inequality made worse by the housing downturn.</p>
<h2>We need to flatten out booms and busts</h2>
<p>Improved housing affordability is necessary to reduce social and economic inequality. A housing downturn will reduce house prices. But this downturn, when coupled with rising unemployment, will not deliver greater equality, especially if it’s followed by yet another boom. </p>
<p>Australia has flattened the curve of COVID-19 infections. To be successful in reducing inequality, we need to flatten the curve of both booms and busts in the housing market cycle. And only a <a href="https://theconversation.com/coronavirus-lays-bare-5-big-housing-system-flaws-to-be-fixed-137162">thorough overhaul of national housing policy</a> will achieve that. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/coronavirus-lays-bare-5-big-housing-system-flaws-to-be-fixed-137162">Coronavirus lays bare 5 big housing system flaws to be fixed</a>
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<img src="https://counter.theconversation.com/content/139039/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ilan Wiesel receives funding from the Australian Research Council and Lord Mayor's Charitable Foundation. </span></em></p><p class="fine-print"><em><span>Liss Ralston has previously received funding from Lord Mayor's Charitable Foundation and AHURI.</span></em></p><p class="fine-print"><em><span>Wendy Stone receives funding from the Australian Research Council (ARC) and the Australian Housing and Urban Research Institute (AHURI). </span></em></p>You’d think falling housing prices might help people on low incomes, but history shows downturns often increase inequality. And many buyers who took out big loans during the housing boom are at risk.Ilan Wiesel, Senior Lecturer in Urban Geography, The University of MelbourneLiss Ralston, Urban Statistician, Centre for Urban Transitions, Swinburne University of TechnologyWendy Stone, Associate Professor, Centre for Urban Transitions and Director, Australian Housing and Urban Research Institute Swinburne Research Centre, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1325832020-03-04T18:46:44Z2020-03-04T18:46:44ZAffordable housing: It’s not just a big city problem anymore<figure><img src="https://images.theconversation.com/files/317635/original/file-20200227-24676-b3xvxt.jpg?ixlib=rb-1.1.0&rect=27%2C452%2C3025%2C1557&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People in Atlantic Canada cities, including Charlottetown, are nervous about rising house prices as young people return and immigration fuels economic growth.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Awareness of affordability issues and the crunch to find suitable housing has made national headlines and was a focal issue in the 2019 <a href="https://globalnews.ca/news/5925997/leger-poll-affordability-canada-election/">federal election</a>. </p>
<p>The rising cost of housing in Canada’s three largest cities — Toronto, Vancouver <a href="https://montrealgazette.com/business/local-business/real-estate/montreal-housing-market-posts-largest-price-increase-in-nine-years">and Montréal</a> — has gained a lot of attention. It has pushed many people to <a href="https://www.theglobeandmail.com/real-estate/article-vancouvers-affordability-crisis-is-hampering-its-much-touted/">smaller secondary urban centres</a> and is linked to the renaissance of Canada’s mid- and small-sized cities.</p>
<p>Atlantic Canadian cities, for example, are now booming after decades of stagnation. This is in large part due to <a href="https://www.thechronicleherald.ca/news/local/halifax-gets-bigger-younger-richer-halifax-partnerships-annual-index-report-323090/">young people returning to the region and the rise of immigration</a>, which are changing the face of the region’s cities and fuelling their economies, but also putting pressure on their affordability.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/how-newcomer-entrepreneurs-are-making-a-difference-in-atlantic-canada-95770">How newcomer entrepreneurs are making a difference in Atlantic Canada</a>
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<p>Cities in Atlantic Canada sell their high quality of life, their smaller size and their comparative lower cost of living compared to other cities across the country. But smaller communities cannot take it for granted that these features will not change as they attract more people. </p>
<p>A new report from the <a href="http://perceptionsofchange.ca/AffordabilityReport2019.pdf">Perceptions of Change project</a> investigated how residents in the region’s major cities perceive recent changes, and found that people are largely supportive of economic changes but are concerned about affordability.</p>
<p>A clear majority of residents surveyed in Charlottetown, Moncton, Halifax and St. John’s — 60 per cent across the four cities — feel that the economic changes over the past five to 10 years have been “for the better.” There is much consensus on this issue, save for St. John’s where a majority of people felt things had turned for the worse. This is likely tied to the fall in the price of oil and its effects on the Newfoundland and Labrador economy.</p>
<h2>People feel incomes are rising</h2>
<p>People in the four cities also largely found that incomes were improving over the past five to 10 years. Across those cities, 59 per cent felt that people in their city had higher incomes in recent years. </p>
<p>The only outlier, again, was St. John’s, which is likely tied to the <a href="https://www.theglobeandmail.com/report-on-business/economy/newfoundlands-economic-woes/article29297377/">economic downturn</a> that the city and Newfoundland and Labrador as a whole have faced since the collapse of oil prices in 2014 to early 2015.</p>
<p>Even so, a greater share of St. John’s residents felt there was more income rather than less, and the majority felt that things were about the same.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=435&fit=crop&dpr=1 600w, https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=435&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=435&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=546&fit=crop&dpr=1 754w, https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=546&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/317636/original/file-20200227-24676-9kgrm8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=546&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A resident digs a path from his house in St. John’s in January 2020 following a record-breaking blizzard. People in St. John’s don’t feel incomes are rising in their city.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Andrew Vaughan</span></span>
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<p>Clearly, people living in Atlantic Canadian cities are seeing economic growth and the benefits of newcomers and young people. </p>
<p>However, that positive sentiment is paired with concern over neighbourhood affordability in the region’s major cities, where a clear majority of people, 58 per cent, report that their neighbourhood is less affordable compared to five to 10 years ago.</p>
<p>The concerns are highest in Charlottetown and Halifax, with 75 per cent and 63 per cent of residents surveyed expressing this sentiment, respectively. </p>
<p>Both <a href="https://www.theglobeandmail.com/news/national/peis-big-immigration-boom/article4288057/">Charlottetown</a> and <a href="https://www.ctvnews.ca/canada/welcome-to-boomtown-halifax-the-anti-toronto-1.3486772">Halifax</a> have both seen significant growth as a result of newcomers arriving through the <a href="https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/atlantic-immigration-pilot.html">Atlantic Immigration Pilot program</a> and an increase in the <a href="https://www.canadavisa.com/provincial-nomination-program.html#gs.yas5i9">Provincial Nominee Programs</a>. They also have seen a rise in <a href="https://www.theloop.ca/ctvnews/report-shows-rental-prices-rising-in-canada-in-part-because-of-short-term-rentals/">short-term rentals</a> through services like Airbnb. </p>
<p>And in Halifax, there has been an increase <a href="https://www.thestar.com/halifax/2019/06/17/more-young-people-living-in-halifax-despite-dip-in-quality-of-life-report-shows.html">in young people</a> moving to the city.</p>
<h2>Young people most concerned</h2>
<p>When the concern is broken down by demographic characteristics, little difference is seen between women and men, across different relationship statuses, among those with and without immigrant status, among those who identify or who do not identify as visible minorities, and across income groups. </p>
<p>For each of these groups, a clear majority of people are concerned about affordability. Notable differences, however, are seen among those who are young and those who have higher levels of education.</p>
<p>The concern over affordability was most pronounced for those who are younger. Sixty-seven per cent of people age 18 to 34 years felt their neighbourhood was less affordable, compared to 54 per cent of those who are 65 years and older. Generally, the level of concern drops among older residents surveyed. </p>
<p>In Halifax and Charlottetown, this is evident as students <a href="https://atlantic.ctvnews.ca/students-scrambling-for-apartments-as-halifax-vacancy-rate-hits-all-time-low-1.4566346">scramble for apartments</a> amid concerns of a <a href="https://www.cbc.ca/news/canada/prince-edward-island/pei-upei-housing-shortage-1.5265652">housing shortage</a>. Policy-makers and communities should pay close attention to concerns expressed by young people because they represent the very demographic Atlantic Canadian cities are trying to attract because they drive economic growth.</p>
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<img alt="" src="https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=395&fit=crop&dpr=1 600w, https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=395&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=395&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/317644/original/file-20200227-24701-14gkapf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Dalhousie University building is seen in this May 2015 photo. Students have scrambled for housing in the city.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darren Pittman</span></span>
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<p>A greater share of people with higher levels of education also expressed concerns over affordability. </p>
<p>Twenty-six per cent of people with less than a high school education felt their neighbourhood was less affordable compared to 67 per cent of participants with a professional or postgraduate degree. </p>
<h2>Region needs professionals</h2>
<p>Like youth, professionals are the very type of people Atlantic Canadian cities are trying to attract. In fact, like other cities across North America, they are actively pursuing young professionals. However, both groups are concerned with affordability in Atlantic Canadian cities.</p>
<p>Although young people and professionals may be moving to the region’s cities and driving its economy, their concerns over affordability pose a challenge to sustaining recent positive momentum unless policy-makers and communities act to ensure that affordability is preserved.</p>
<p>It’s important for Atlantic Canadian leaders and cities to avoid the mistakes made in the country’s largest cities, where people are being pushed out due to high housing prices.</p>
<p>It is time for policy-makers, planners and developers in secondary cities to recognize the need to invest in affordable and social housing. They can no longer rely on selling quality of life alone if that lifestyle is changing quickly as more people move to the region.</p><img src="https://counter.theconversation.com/content/132583/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Howard Ramos receives funding from the Social Sciences and Humanities Research Council. </span></em></p><p class="fine-print"><em><span>Emma Kay receives funding from the Social Sciences and Humanities Research Council. </span></em></p>In Atlantic Canada, leaders must avoid the mistakes made in the country’s largest cities where people are being pushed out due to high housing prices.Howard Ramos, Professor of Sociology, Dalhousie UniversityEmma Kay, PhD Student, Department of Sociology and Social Anthropology, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1306962020-02-09T19:09:08Z2020-02-09T19:09:08Z‘I wouldn’t want to buy even if I had the money.’ The rise of renters by choice<figure><img src="https://images.theconversation.com/files/313882/original/file-20200206-149772-1j48w61.jpg?ixlib=rb-1.1.0&rect=580%2C0%2C4220%2C2976&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">fizkes/Shutterstock</span></span></figcaption></figure><p>The private rental sector has expanded at <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0024/53619/AHURI-Final-Report-323-The-supply-of-affordable-private-rental-housing-in-Australian-cities-short-term-and-longer-term-changes.pdf">more than twice the rate</a> of the increase in Australian households in the last two decades. This <a href="https://www.tandfonline.com/doi/abs/10.1080/14036096.2018.1467964">increasingly diverse form of tenure</a> now houses about <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4130.0%7E2017-18%7EMedia%20Release%7EMore%20households%20renting%20as%20home%20ownership%20falls%20(Media%20Release)%7E10">one in four of us</a>.</p>
<p>Australia’s <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0028/15895/AHURI_Final_Report_No_292_The_changing_institutions_of_private_rental_housing_an_international_review.pdf">lightly regulated private rental sector</a> means the <a href="https://journals.sagepub.com/doi/abs/10.1177/1440783317707833?journalCode=josb">insecurity of tenants</a> is a key factor in why most Australians <a href="https://www.abc.net.au/news/story-streams/federal-budget-2017/2017-05-07/housing-affordability-australia-statistics-federal-budget-2017/8502106">aspire to own their home</a>. However, despite this insecurity, our <a href="https://www.tandfonline.com/doi/abs/10.1080/14036096.2018.1467964">research</a> suggests an increase in people choosing to <a href="https://www.tandfonline.com/doi/full/10.1080/02673037.2017.1301400">rent for a long time</a> – ten years or more – accounts for a small part of the growth in private renters.</p>
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Read more:
<a href="https://theconversation.com/just-like-home-new-survey-finds-most-renters-enjoy-renting-although-for-many-its-expensive-103890">'Just like home'. New survey finds most renters enjoy renting, although for many it's expensive</a>
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<p>Much of this growth is attributable to <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0024/53619/AHURI-Final-Report-323-The-supply-of-affordable-private-rental-housing-in-Australian-cities-short-term-and-longer-term-changes.pdf">middle- and high-income tenants</a>. Especially in Melbourne and Sydney, <a href="https://localgovernmentandhousingproject.files.wordpress.com/2018/09/iuhf-journal-summer2018_alan_morris.pdf">high housing prices</a> mean saving for a deposit takes much <a href="https://neo.ubs.com/shared/d1ZatPa3iM8ech/">longer than in the 1990s</a>. In the meantime these households are renting <a href="https://www.tandfonline.com/doi/full/10.1080/02673037.2017.1301400">for a long time</a>.</p>
<h2>‘Who stays put, loses’</h2>
<p>In our survey of 600 private renters in different areas of Sydney and Melbourne, we asked: “Many people are renting privately for longer periods (10+ years). Do you think this is a positive trend?” </p>
<p>About a third responded in mainly positive terms. Their main reasons were:</p>
<ul>
<li><p>renting is more affordable than owning</p></li>
<li><p>there are fewer worries and liabilities</p></li>
<li><p>renting is more flexible than owning. </p></li>
</ul>
<p>Some questioned the <a href="https://www.tandfonline.com/doi/full/10.1080/14036096.2018.1467964">norm of home ownership in Australia</a>.</p>
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Read more:
<a href="https://theconversation.com/ideas-of-home-and-ownership-in-australia-might-explain-the-neglect-of-renters-rights-104849">Ideas of home and ownership in Australia might explain the neglect of renters’ rights</a>
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<p>For a more in-depth understanding, we interviewed 60 long-term private renters in low, medium and high-rent areas in Melbourne and Sydney. Almost all who chose to rent mentioned flexibility as a key advantage.</p>
<p>“Choosers” highly valued the freedom to move or travel at will. Zygmunt Bauman’s concept of <a href="https://www.wiley.com/en-us/Liquid+Modernity-p-9780745624099">liquid modernity</a> highlights the increasing desire for transience. As he <a href="https://books.google.com.au/books?id=zZwvv3tQ1UYC&pg=PT95&lpg=PT95&dq=Transience+has+replaced+durability&source=bl&ots=VbuUO62ZhV&sig=ACfU3U32LtxCmjxJfboinOrMwt706zkAVw&hl=en&sa=X&ved=2ahUKEwjP4_qby7vnAhXwwzgGHYJXDagQ6AEwAHoECAYQAQ#v=onepage&q=Transience%20has%20replaced%20durability&f=false">explains</a>:</p>
<blockquote>
<p>Transience has replaced durability at the top of the value table. What is valued today (by choice as much as by unchosen necessity) is the ability to be on the move, to travel light and at short notice. Power is measured by the speed with which responsibilities can be escaped. Who accelerates, wins; who stays put, loses.</p>
</blockquote>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/looking-to-rent-a-home-6-things-that-will-help-or-hinder-you-123753">Looking to rent a home? 6 things that will help or hinder you</a>
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<h2>Renters in their own words</h2>
<p>Patricia*, who lives in a high-rent part of Melbourne, has always rented.</p>
<blockquote>
<p>Well since I came to Australia in 1977, I rented. I didn’t want to buy. Got close [to buying] a couple of times, but changed my mind. </p>
<p>I just travel anywhere and everywhere. I thought […] if you’ve got a house you’re stuck there, and I thought, no. I work hard for my money, so that money that I work hard for is for me, not to have a [permanent] roof over my head. […] Renting has been good for me because I can still do what I want.</p>
</blockquote>
<p>Myra lives in a studio apartment in a high-rent area in Sydney and has no desire to own a home. She is single, in her mid- to late 30s, and earns well. The possibility of being asked to vacate did not bother her.</p>
<blockquote>
<p>Maybe I’ve been lucky, but every situation has always sorted itself out. You know a lot of people would have freaked out if they had to move out […] It didn’t concern me in the slightest, yeah. I mean not at all. There’s always somewhere to stay. So it suits my lifestyle. I wouldn’t want to buy [a property], even if I had the money.</p>
</blockquote>
<p>Leanne inherited a third of a house. Rather than using the proceeds to buy a property, she decided to move to Melbourne’s inner city (a high-rent area) and continue renting.</p>
<blockquote>
<p>So I thought rather than put money into a house […] I would invest it and I could travel and go to concerts and live the life I wanted to lead, so that’s basically what I did and I’m still renting.</p>
</blockquote>
<p>Pam was renting in a low-rent area in outer Sydney. She felt her situation required the flexibility of renting:</p>
<blockquote>
<p>The relationship was rocky and you can’t predict the future, but I knew it wasn’t going to end up in marriage and kids and all that kind of crap […] We were both working, both earning good money and we could have afforded to buy a house between us […] But for me it was like, no. I don’t know where this [her relationship] is going, so no way, I’m not going to put myself in that predicament [having a joint mortgage] and then have to go through court to go, “This is mine, this is yours”, all that crap. But so it was my choice to rent and to stick to it […] I’m not going to rely on anybody else for anything, no way.</p>
</blockquote>
<p>Her renter status allowed Pam to make a rapid, clean break.</p>
<blockquote>
<p>I just got up one day and walked cos I knew he was going to ask me to marry him the next day, so I said: “I’m just going to go to the shops to get a packet of cigarettes.” I left everything behind. I went for a walk, never went home.</p>
</blockquote>
<p>For the families with children who choose to rent long-term, the key reason is it allows them to live in highly desirable areas where they cannot afford to buy. Gabrielle and her partner earn well and live in a high-rent area in Sydney:</p>
<blockquote>
<p>Sure it [home ownership] provides you with security and you don’t have that stress of […] having to move. I get that, but at the same time, you know for us, for example, if we wanted to buy we’d be paying four times what we pay at the moment in a mortgage […] It doesn’t really make financial sense to go and do that […] You’d have to live somewhere. So I choose to live in a nice area where my children are [at school].</p>
</blockquote>
<p>They also did not want the burden of a large mortgage:</p>
<blockquote>
<p>[…] I have no desire to put myself in a position where I have a $2 million mortgage and have to work for the rest of my short life to pay for it […]</p>
</blockquote>
<p>Although probably only a small proportion of people choose to rent long-term, this option may be gaining ground. Young, well-paid professionals in particular see the flexibility of private renting as attractive. </p>
<p>Location also seems to be a critical factor. Most of the choosers rented in desirable inner suburbs of Sydney and Melbourne, which would otherwise be inaccessible. An estimated <a href="https://www.tandfonline.com/doi/full/10.1080/02673037.2014.925097">one-in-eight private renters</a> are “rentvestors” who rent where they want to live and buy elsewhere to get a foothold in the housing market.</p>
<p><em>*All names used are pseudonyms.</em></p><img src="https://counter.theconversation.com/content/130696/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Morris receives funding from the Australian Research Council</span></em></p><p class="fine-print"><em><span>Hal Pawson receives funding from the Australian Research Council, the Australian Housing and Urban Research Institute and Crisis UK</span></em></p><p class="fine-print"><em><span>Kath Hulse receives funding from the Australian Research Council (ARC) and the Australian Housing and Urban Research Institute (AHURI).
</span></em></p>One in four Australian households now rent their homes in the private rental market. Flexibility and lifestyle are key reasons some choose to rent even if they can afford to buy a home.Alan Morris, Research Professor, University of Technology SydneyHal Pawson, Associate Director - City Futures - Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW SydneyKath Hulse, Research Professor, Centre for Urban Transitions, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1206562019-07-21T19:59:45Z2019-07-21T19:59:45ZDangerous to human health: that’s a housing problem much bigger than a few high-profile apartment blocks<p>Australia’s biggest city is abuzz with news of yet another housing development declared unsafe for human habitation. This time it is apartments built on <a href="https://www.smh.com.au/national/it-s-a-joke-we-can-t-go-on-like-this-fourth-block-of-units-abandoned-in-sydney-20190718-p528l7.html">a toxic dump</a> the local council fears was not properly cleaned up. </p>
<p>In the past 12 months three other significant Sydney developments have all been evacuated due to major building defects. The plight of residents forced from their homes has focused national attention on issues to do with shoddy apartment construction, such as poor regulation and lax enforcement. </p>
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Read more:
<a href="https://theconversation.com/buck-passing-on-apartment-building-safety-leaves-residents-at-risk-119000">Buck-passing on apartment building safety leaves residents at risk</a>
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<p>What gets less media attention is a greater systemic problem: the fact that hundreds of thousands of Australians are forced into inadequate or unhealthy housing by high housing costs. Thousands are evicted by landlords wanting higher rents. Some end up homeless. </p>
<p>These problems are underlined by the latest data on <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4130.0Main+Features12017-18?OpenDocument">housing occupancy and costs</a> from the Australian Bureau of Statistics.</p>
<h2>Growing disparities</h2>
<p>The figures show Australia has an excess of housing on average, but not enough for those in the greatest need. </p>
<p>Across Australia, an estimated 116,000 people are homeless while more than 300,000 households would like a home with an extra bedroom. Yet there are about 12 million empty bedrooms. One-third of all Australian homes have one unused bedroom. Another third have two, and 13% have three or more. </p>
<p>As you might expect, home owners are more likely to have an excess of bedrooms, while renters are more likely to need more space – and we’re increasingly a nation of renters than owners. Now 32% of households rent, compared with 27% a decade ago.</p>
<p>The main reason for all of this, unsurprisingly, is escalating housing prices.</p>
<hr>
<p><iframe id="PrbJa" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/PrbJa/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>After taking account of inflation, housing costs over the past decade increased 40% for home owners with a mortgage, but more than 50% for renters (both public housing and private).</p>
<p>Over the years governments have hatched schemes to address the issue of affordability, but the ABS data indicates such policies have made no real difference. </p>
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<p><iframe id="Fu3iU" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/Fu3iU/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>Across the board, these rising housing costs have bitten hardest on those with low incomes, as shown below. This chart tells us renters fare worse than home buyers and owners – and the gap is getting greater. </p>
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<p><iframe id="blyC4" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/blyC4/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>It’s a catch-22. Because homes cost so much to buy, you need a bigger deposit to get a mortgage. Because rents are so high, you cannot save enough for a deposit. It’s condemning whole generations to remain as tenants.</p>
<h2>Unhealthy homes</h2>
<p>The impacts of high housing costs affect households in many ways – from long-term financial stability to health. </p>
<p>Our r<a href="https://doi.org/10.1111/1745-5871.12326">esearch</a>, using the <a href="https://melbourneinstitute.unimelb.edu.au/hilda">household, income and labour data</a> collected by the Melbourne Institute, for example, suggests 2.5 million Australians (about 10% of the population) live in homes harmful to their well-being and health.</p>
<p>Is a slowly accumulating impact. Usually there isn’t one part of housing that erodes health. It involves high housing costs hurting mental health as individuals struggle over years to pay their bills. It might be combined with living in, say, a damp and mouldy house that makes asthma or respiratory infections more likely. It includes living in a home that isn’t secure or distant to services such as a doctor. </p>
<p>Unhealthy housing doesn’t affect people at random: those most affected tend to be the sickest, poorest and most vulnerable. </p>
<p>As a nation we are right to sympathise with those forced out of their homes by circumstances beyond their control. But there’s something perverse if the attention only goes to cases affecting middle-class Australians, to affluent apartment developments and owners worried about their investments. </p>
<p>There’s a more fundamental housing problem in Australia. It is a problem of our own making, and we created it by thinking too much about rising house prices and the wealth they generated for owners. Booming housing markets have had a huge down side also. It has meant some people have gone without proper food or heating or medicines to keep a roof over their head.</p>
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Read more:
<a href="https://theconversation.com/how-the-housing-boom-has-driven-rising-inequality-102581">How the housing boom has driven rising inequality</a>
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<p>Here we have what economists call a market failure. It can only be fixed by acknowledging it. Earlier generations of policy makers – including the Productivity Commission’s predecessor, the Industry Commission – recognised government provision was the most effective way to provide low-cost housing. It’s time our current generation of politicians did the same. </p>
<p>It’s a case of not just individual developments being built on contaminated ground, but an entire system.</p><img src="https://counter.theconversation.com/content/120656/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Beer receives funding from the Australian Research Council, the Australian Housing and Urban Research Institute, the Regional Studies Association, the Regional Australia Institute and from industry partners on linkage grants, including local governments and state and Australian government agencies. He is a Board member for the Regional Studies Association and is on the Board of the SA Housing Trust. </span></em></p><p class="fine-print"><em><span>Emma Baker receives funding from the Australian Research Council (ARC), the Government of South Australia, and the Australian Housing and Urban Research Institute (AHURI). </span></em></p>Hundreds of thousands of Australians are forced into inadequate or unhealthy housing by high housing costs.Andrew Beer, Dean, Research and Innovation, University of South AustraliaEmma Baker, Professor of Housing Research, School of Architecture and Built Environment, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1190902019-07-15T19:41:49Z2019-07-15T19:41:49ZRegional cities beware – fast rail might lead to disadvantaged dormitories, not booming economies<figure><img src="https://images.theconversation.com/files/284022/original/file-20190715-173347-zfc02i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Many commuters already travel from regional cities to work in capital cities like Melbourne so what impacts will fast rail have?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/avlxyz/32874010797/in/photolist-S5XU6B-2dXeMwv-Sz1vqJ-23SPnYD-2cRrGGF-Thznko-ThzniE-2ehf35w-REp7D2-2e2V9hr-REp7Ck-2e2V9fn-ThznfJ-2e2V9g4-Thzneb-2fqPaKi-2e2V9dD-2fqPaKD-2fqPaJB-ThzneS-2fqPaJr-2fqPaHV-2fqPaHe-2fqPaFv-2fm9TJm-2fqPaFk-2fqPaFa-2e2UYsM-2fm9JDh-2fqNXyV-24Pfoox-24Pfope-2fm9JAG-24Pfomt-24Pfonv-24PfokM-24Pfoje-24Pfohv-2fqNXs2-24Pfomi-24Pfoi2-24PfoiH-24PfogP-24Pfogi-2fm9Jxq-24PfoeK-24Pfog8-24PfofB-24Pfod2-24Pfoe4">Alpha/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Governments are looking to fast rail services to regional cities to relieve population pressures in Sydney, Melbourne and Brisbane. The federal government is funding <a href="https://www.infrastructure.gov.au/rail/trains/faster_rail/index.aspx">nine business cases</a> for such schemes. But what economic effect might these fast links have on the regional cities?</p>
<p>The current fast rail schemes seem oriented at relieving population pressures in the major cities rather than a productive regional economic purpose. The minister for population, cities and urban infrastructure recently <a href="https://minister.infrastructure.gov.au/tudge/media-release/better-managing-australias-future-population-growth">stated</a>:</p>
<blockquote>
<p>… the National Faster Rail Agency begins operating from today [July 1]. The new Agency will oversee the government’s 20-year fast rail agenda, which will connect satellite regional cities to our big capitals. This will allow people to reside in regional centres with its [sic] cheaper housing and regional lifestyle but still access easily and daily the major employment centres.</p>
</blockquote>
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Read more:
<a href="https://theconversation.com/we-can-halve-train-travel-times-between-our-cities-by-moving-to-faster-rail-116512">We can halve train travel times between our cities by moving to faster rail</a>
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<p>The argument seems built on a pitch to city workers priced out of metropolitan housing markets. It treats regional towns as remote dormitories for metropolitan workers rather than as regional cities that serve as service hubs and employment centres. But will subsidising metropolitan workers to live in cheaper regional towns have a positive economic effect on those towns? </p>
<h2>An unequal relationship</h2>
<p>Concern is growing among international observers that <a href="https://www.51m.co.uk/wp-content/uploads/2013/08/ch51.pdf">fast rail connections between two cities benefit the larger of the pair</a>. Professor <a href="https://www.centreforcities.org/event/city-horizons-professor-michael-storper/">Michael Storper observed</a>: </p>
<blockquote>
<p>One of the biggest mistakes we’ve made was being naïve about connectivity – give infrastructure and it spreads. Well, often it concentrates. The high-speed train network in France, guess what it did. It advantaged Paris.</p>
</blockquote>
<p>While Paris is seen as benefiting the most from the national fast rail TGV service, the regional cities of <a href="http://www.greengauge21.net/wp-content/uploads/hsr-regneration-of-cities.pdf">Lyon and Lille have strengthened their economic positions</a>. The Lyon and Lille fast rail stations form the hub of their respective regional transport networks and have attracted new commercial activity. They also sit at intersections of major European fast rail networks. </p>
<p>It’s a pattern that cannot be easily achieved for Australia’s regional cities due to our widely dispersed settlements. So what does this mean for our regional cities? </p>
<p>Improving transport infrastructure doesn’t just improve regional business access to metropolitan markets. It decrease the costs of trade in both directions. And large cities are typically more productive economically. This is because they offer more specialised goods and services and can leverage the agglomeration effects of shared high-quality labour markets and infrastructure, plus a concentration of skills and knowledge.</p>
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<em>
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Read more:
<a href="https://theconversation.com/our-big-cities-are-engines-of-inequality-so-how-do-we-fix-that-69775">Our big cities are engines of inequality, so how do we fix that?</a>
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<p>Reduced travel times can mean regional businesses become less efficient than metropolitan competitors that can offer a wider range of specialist goods and services. This may lead to regional business closures, employment losses and wage decline. Unless a regional city is able to develop a specialised set of high-skill, high-wage industries that complement or outcompete the metropolis it risks being economically disadvantaged by faster rail. </p>
<p>New regional demand arising from commuter population growth might counter the loss of higher-order regional jobs due to improved transport links. But that will largely be in lower-value retail and personal service sectors. The result will still be a net economic gain for the metropolis.</p>
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Read more:
<a href="https://theconversation.com/the-growing-skills-gap-between-jobs-in-australian-cities-and-the-regions-88477">The growing skills gap between jobs in Australian cities and the regions</a>
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<p>An influx of commuters earning metropolitan wages might also <a href="https://www.news.com.au/finance/real-estate/melbourne-vic/geelong-prices-soften-as-buyers-await-outcome-of-federal-election/news-story/ea4cc61d089f669d26cf5b10b7ceab80">inflate regional housing markets</a>. This would disadvantage lower-paid regional workers. The beneficiaries of this scenario are likely to be local rentiers, such as landholders and developers who can profit from land-price inflation. </p>
<p>This interest group will likely vocally promote regional fast rail. But sustainable economic prosperity for regional cities requires more than population-driven land speculation. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/a-housing-affordability-crisis-in-regional-australia-yes-and-heres-why-71808">A housing affordability crisis in regional Australia? Yes, and here's why</a>
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<h2>The example of Geelong</h2>
<p>The most advanced of the current Australian proposals is the <a href="https://minister.infrastructure.gov.au/tudge/media-release/geelong-melbourne-travel-cut-half-part-20-year-fast-rail-plan">Geelong-Melbourne route</a>. It has received federal and state <a href="https://www.abc.net.au/news/2019-03-22/fast-rail-train-service-pledge-for-geelong/10927982">funding for planning</a> with an estimated total cost of <a href="https://www.theage.com.au/politics/victoria/andrews-in-about-face-on-building-geelong-fast-rail-with-morrison-20190531-p51tbz.html">at least A$10 billion</a>. But planners need to ask how this spending will provide a net economic benefit, and how the benefits will be distributed. </p>
<p>Growth in commuter population and the services this attracts may be seem like a resolution to metropolitan population problems, but could further concentrate higher-paid jobs in Melbourne. Faster commutes mean Melbourne-based firms will have a greater pick of Geelong-based workers, thus consolidating metropolitan competitive advantage. Fast rail thus risks placing Geelong at a competitive disadvantage, with jobs and workers being exported to Melbourne. </p>
<p>Meanwhile the pressure of housing another <a href="https://www.planning.vic.gov.au/land-use-and-population-research/victoria-in-future">145,000 residents in the next 20 years</a> already falls on Geelong, a <a href="https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/203?opendocument">city of 280,000 people</a>. The strain on infrastructure and services is proportionately greater than would be the case in Melbourne, which has <a href="https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/2GMEL?opendocument">nearly 5 million</a> residents. </p>
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Read more:
<a href="https://theconversation.com/this-is-how-regional-rail-can-help-ease-our-big-cities-commuter-crush-81902">This is how regional rail can help ease our big cities' commuter crush</a>
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</em>
</p>
<hr>
<h2>What can policymakers do about this?</h2>
<p>To resolve this conundrum, thought must be given to what specialised high-value jobs will be attracted to regional cities to accompany fast rail investments, so these cities remain competitive and productive, regionally, nationally and internationally. This might include policies such as relocating public agencies, regional targeting of university-based research and development spending, boosting services such as schools and hospitals, and providing incentives for innovative private companies to relocate to regional towns. </p>
<p>Policymakers should also consider positioning regional cities as rail network hubs in their own right. An example would be connecting Geelong, Ballarat and Bendigo by rail, along with better linkages to national and international airports. </p>
<p>We don’t yet know for sure what the effects of fast rail on regional cities will be. But the impact of this infrastructure needs to be assessed very carefully lest it turns Australia’s regional cities into dependent population dormitories rather than regional dynamos, at vast public expense.</p><img src="https://counter.theconversation.com/content/119090/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Todd Denham is a PhD candidate at RMIT University, investigating the relationships between regional-metropolitan commuting and regional development.</span></em></p><p class="fine-print"><em><span>RMIT University receives funding from AHURI and the EU H2020 Program to support Jago Dodson's research. </span></em></p>While governments focus on how to ease congestion and make affordable housing more accessible for workers in our biggest cities, fast rail could be a mixed blessing for regional cities.Todd Denham, PhD Candidate, School of Global, Urban & Social Studies, RMIT UniversityJago Dodson, Professor of Urban Policy and Director, Centre for Urban Research, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1190012019-06-27T20:41:24Z2019-06-27T20:41:24ZAustralian household wealth has taken its biggest dive since the GFC, but things are looking up<p>The latest data from the Australian Bureau of Statistics confirms household wealth has fallen, on the back of falling house prices, in the past year. </p>
<p>But it’s not all bad news. There are signs of hope in the portents for the next six months. </p>
<p>During the first quarter of this year, the net worth of all Australian households rose 0.2% to A$10.2 trillion. Total household net worth in March 2019 was 0.7% lower than in March 2018, largely because of steep falls over the final six months of 2018. </p>
<p>The per capita annual decline was larger, falling by about 2.4%, because of population growth. This means the average wealth of Australians dropped by about A$9,500, from A$414,400 to A$404,900.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/281542/original/file-20190627-76734-mgok7i.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS</span></span>
</figcaption>
</figure>
<hr>
<p>This household “balance sheet event” – defined as an annual decline in household sector net wealth – is the third in the past 30 years. The other two were through the Global Financial Crisis of 2008 and immediately after.</p>
<p>Housing (land and dwellings) comprises 52% of household-sector assets. Superannuation comprises 24%. Property values fluctuate with real estate prices, while superannuation is highly exposed to volatility within the financial markets. </p>
<h2>Consumer spending</h2>
<p>The next chart highlights the relationship between changes in household net worth and spending on discretionary items and durable goods.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=339&fit=crop&dpr=1 600w, https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=339&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=339&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=426&fit=crop&dpr=1 754w, https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=426&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/281543/original/file-20190627-76705-1x1u3cv.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=426&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS</span></span>
</figcaption>
</figure>
<hr>
<p>But what is interesting is that consumer sentiment has not been significantly affected. </p>
<p>The following chart shows household net worth vs Westpac’s consumer sentiment data. This is the first major downturn in household net wealth in 30 years that has not coincided with weaker consumer sentiment. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=320&fit=crop&dpr=1 600w, https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=320&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=320&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=402&fit=crop&dpr=1 754w, https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=402&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/281544/original/file-20190627-76743-j7e3bv.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=402&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS & Westpac</span></span>
</figcaption>
</figure>
<hr>
<p>It’s hard to know for certain why consumer confidence has remained relatively steady, but two things stand out. </p>
<p>First, the consumer financial adjustment has been orderly and deliberate as opposed to rapid and forced. It appears people have consciously adjusted spending and savings patterns to achieve long-term savings goals.</p>
<p>Second, there has been ongoing strength in the labour market. Despite falling wealth, people still have jobs and this reinforces confidence. </p>
<h2>Shares and housing stocks</h2>
<p>It is safe to say consumers will start spending more once they feel their asset position has stabilised. </p>
<p>Strong equity markets have played a big role in shoring up household wealth since the start of this year. As the next chart demonstrates, they could continue to do so over the period ahead.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=341&fit=crop&dpr=1 600w, https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=341&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=341&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=428&fit=crop&dpr=1 754w, https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=428&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/281545/original/file-20190627-76701-g5i77p.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=428&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS & Bllomberg</span></span>
</figcaption>
</figure>
<hr>
<p>But the big swing factor is house prices – specifically land values. The Reserve Bank’s interest rate cuts should help stabilise house prices over the second half of 2019.</p>
<p>Our last chart suggests this appears to have started, with auction clearance rates improving in recent months.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=352&fit=crop&dpr=1 600w, https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=352&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=352&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=443&fit=crop&dpr=1 754w, https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=443&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/281548/original/file-20190627-76722-ruuein.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=443&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS, CoreLogic & Bloomberg</span></span>
</figcaption>
</figure>
<hr>
<p>This all suggests household wealth could start growing again in the second half of the year. That should go a long way to stabilising the economy.</p><img src="https://counter.theconversation.com/content/119001/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Warren Hogan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Household wealth in Australia has taken its biggest dive since the global financial crisis. But it’s not all doom and gloom.Warren Hogan, Industry Professor, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1050502018-10-31T02:25:54Z2018-10-31T02:25:54ZTo make housing more affordable this is what state governments need to do<p><em>This week we’re exploring the state of nine different policy areas across Australia’s states, as detailed in Grattan Institute’s <a href="https://grattan.edu.au/?post_type=report&p=6974&preview=true">State Orange Book 2018</a>. Read the other articles in the series <a href="https://theconversation.com/au/topics/state-of-the-states-2018-61464">here</a>.</em></p>
<hr>
<p>House prices might now be falling, but Australians’ <a href="https://www.smh.com.au/business/the-economy/house-prices-might-be-falling-but-our-anxiety-isn-t-20181019-p50atj.html">anxiety over housing affordability is not</a>. Price falls of a few percentage points in Sydney and Melbourne are cold comfort to first home buyers. They are <a href="https://www.domain.com.au/news/domain-property-reports/">still paying</a> 50% more than they would have five years ago. </p>
<p><a href="https://www.afr.com/real-estate/house-prices-to-fall-15-per-cent-morgan-stanley-20181010-h16ha7">Further price falls</a> are likely, but even then housing will still be less affordable than it was two decades ago.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">Three charts on: poorer Australians bearing the brunt of rising housing costs</a>
</strong>
</em>
</p>
<hr>
<p>Home ownership rates are declining across Australia, <a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">especially among the young and the poor</a>. An increasing proportion of low-income earners are in rental stress in all states except Queensland and Tasmania.</p>
<h2>STATE HOUSING SCORECARD</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=550&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=550&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=550&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=692&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=692&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242877/original/file-20181030-76408-5p1un3.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=692&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://grattan.edu.au/report/state-orange-book-2018/">Grattan Institute State Orange Book 2018, Table 5.1</a></span>
</figcaption>
</figure>
<p>The required policy response remains the same. As Grattan Institute’s <a href="https://grattan.edu.au/report/state-orange-book-2018/">State Orange Book 2018</a> shows, state governments need to ensure a lot more housing is built. </p>
<h2>What has happened to housing?</h2>
<p>Australia’s population is growing rapidly. Our cities have not kept up, so there is less housing per person. The primary obstacle <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">appears to be planning rules</a> that delay or prevent development. </p>
<p><strong>All states except Tasmania have less housing per person than a decade ago</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=441&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=441&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=441&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=555&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=555&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242875/original/file-20181030-76408-j7fsag.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=555&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://grattan.edu.au/report/state-orange-book-2018/">Grattan Institute State Orange Book 2018, Figure 5.1</a></span>
</figcaption>
</figure>
<p>The New South Wales, Victorian and Queensland governments have all <a href="https://grattan.edu.au/report/housing-affordability-re-imagining-the-australian-dream/">changed</a> planning rules and processes over the past five years or so. This has resulted in new building finally catching up with population growth, even if a significant backlog remains. </p>
<p>The extra supply has already contributed to flattening rents and <a href="https://www.domain.com.au/product/house-price-report-september-2018/">falling apartment prices</a> in Brisbane. It will <a href="https://www.businessinsider.com.au/australian-house-price-falls-ubs-rba-negative-sentiment-2018-10">help push rents and prices lower</a> in Sydney and Melbourne as well.</p>
<p>But today’s record level of housing construction is the bare minimum needed to match <a href="https://theconversation.com/factcheck-is-australias-population-the-highest-growing-in-the-world-96523">rapid population growth</a> largely <a href="https://theconversation.com/how-migration-affects-housing-affordability-92502">driven by immigration</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-migration-affects-housing-affordability-92502">How migration affects housing affordability</a>
</strong>
</em>
</p>
<hr>
<p>And yet authorities in <a href="https://www.smh.com.au/national/nsw/terrace-housing-backflipcouncils-density-code-20180517-p4zfyj.html.">NSW</a> and <a href="https://www.brisbanetimes.com.au/national/queensland/backyardblitz-in-new-blueprint-for-brisbane-20180608-p4zk8z.html">Queensland</a> are <a href="https://www.abc.net.au/news/2011-12-01/hendrie-the-triumph-of-the-nimby-in-urban-planning/3704744">responding to NIMBY pressures</a> by making it harder to increase density. In the Victorian election campaign, Opposition Leader Matthew Guy is <a href="https://www.theage.com.au/politics/victoria/coalition-promises-to-rein-in-development-on-melbourne-s-leafy-streets-20180618-p4zm4t.html">promising to do the same</a>. </p>
<p><strong>Record housing construction will need to be maintained to meet city plan housing targets</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=558&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=558&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=558&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=701&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=701&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242873/original/file-20181030-76390-1vinopr.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=701&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://grattan.edu.au/report/state-orange-book-2018/">Grattan Institute State Orange Book 2018, Figure 5.2</a></span>
</figcaption>
</figure>
<h2>What should governments do?</h2>
<p>Resisting higher-density development is the wrong response. To enable more homes to be built in inner and middle-ring suburbs of our largest cities, state governments should:</p>
<ol>
<li><p>Introduce a new small redevelopment housing code. It would protect neighbours, reduce planning uncertainty and improve the quality of new developments. The code would include the things that worry neighbours the most, such as privacy, height and overshadowing. </p></li>
<li><p>Allow taller developments of four to eight storeys “<a href="https://www.irwinlaw.com/cold/as-of-right">as of right</a>” on major transport corridors and around train stations.</p></li>
<li><p>Set housing targets for each local council. The targets should be linked to plans for the growth of the city as a whole. Where councils fail to meet planning targets, independent planning panels should step in. </p></li>
</ol>
<p>The best evidence is that building an extra 50,000 homes a year for a decade could leave Australian house prices <a href="https://grattan.edu.au/news/supply-sceptics-beware-without-more-housing-it-wont-be-affordable/">5-20% lower</a> than what they would have been otherwise, stem rising public anxiety about housing affordability, and increase economic growth.</p>
<h2>Reform tenancy rules</h2>
<p>As well as boosting supply, state governments should make renting more attractive by changing residential tenancy laws to <a href="https://theconversation.com/the-insecurity-of-private-renters-how-do-they-manage-it-77324">increase the security of renters</a> and help renters make their property feel like their home. The Victorian government recently <a href="https://www.news.com.au/finance/real-estate/melbourne-vic/new-rental-laws-pass-victorian-parliament-strengthening-tenants-rights/news-story/164012c73122065d353885daed660999">tipped the balance</a> more towards tenants. Other state governments should follow suit.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/an-open-letter-on-rental-housing-reform-103825">An open letter on rental housing reform</a>
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</em>
</p>
<hr>
<p>Of course, changes in tenancy laws in favour of renters could reduce the supply of rental housing and increase rents, but any such effects are likely to be vanishingly small. More likely some investors will sell their properties to first home buyers, which means one less rental property and one less renter. </p>
<h2>Boost the public housing supply</h2>
<p>The housing affordability crisis has made life particularly hard for low-income earners. There is a powerful case for extra public support for the most vulnerable Australians. But not all policies will be equally effective.</p>
<p>Boosting social housing will be expensive. Increasing the stock by 100,000 dwellings – broadly sufficient to return social housing to its historical share of the total housing stock – would require extra public funding of <a href="https://insidestory.org.au/the-conventional-wisdom-is-wrong-building-more-housing-does-help-low-income-earners/">around A$900 million a year</a>, or an upfront capital cost of between A$10 billion and A$15 billion. </p>
<p>Even then social housing would house only one-third of the poorest 20% of Australians. Most low-income Australians would remain in the private rental market. </p>
<p>The big problem is that there is not enough “flow” of social housing available for people whose lives take a big turn for the worse. Tenants generally take a long time to leave social housing; most have <a href="https://www.aihw.gov.au/reports/housing-assistance/housing-assistance-in-australia-2017/contents/social-housing-tenants">stayed more than five years</a></p>
<p>To overcome these issues, governments should build more social housing, and tightly target it to people most at risk of becoming homeless for the long term. Extra support for the housing costs of low-income earners should otherwise be delivered primarily by <a href="https://theconversation.com/super-if-labor-really-wanted-to-help-women-in-retirement-it-would-do-something-else-103603">boosting Commonwealth Rent Assistance</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/super-if-labor-really-wanted-to-help-women-in-retirement-it-would-do-something-else-103603">Super. If Labor really wanted to help women in retirement, it would do something else</a>
</strong>
</em>
</p>
<hr>
<h2>Stop offering false hope</h2>
<p>State governments also need to stop offering false hope. Even though policies such as first home owners’ grants have proved ineffective time after time, they were the centrepieces of the <a href="https://grattan.edu.au/news/housing-affordability-package-gives-voters-what-they-want-but-not-what-they-need/">housing plans of NSW and Victoria</a> announced last year. Inevitably these are really second home sellers’ incentives: the biggest winners are people who own homes already, and property developers with new homes ready to sell.</p>
<p>Similarly, state governments shouldn’t claim that housing and business incentives and regional transport projects will divert a lot of population growth to the regions. Such policies <a href="https://theconversation.com/australias-dangerous-fantasy-diverting-population-growth-to-the-regions-105052">haven’t made much difference in the past</a>. And they provide excuses not to make the tough calls on planning.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-dangerous-fantasy-diverting-population-growth-to-the-regions-105052">Australia's dangerous fantasy: diverting population growth to the regions</a>
</strong>
</em>
</p>
<hr>
<p>None of the policies recommended in our <a href="https://grattan.edu.au/?post_type=report&p=6974&preview=true">State Orange Book 2018</a> are easy politically. But Australians need to face up to a harsh truth: either people accept greater density in their suburb, or their children will not be able to buy a home.</p><img src="https://counter.theconversation.com/content/105050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website.
The State Orange Book, from which this article is drawn, was supported by a grant from the Susan McKinnon Foundation</span></em></p><p class="fine-print"><em><span>Brendan Coates and Tony Chen do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Governments should stop offering false hopes and pandering to NIMBY pressures. As well as increased public and private housing supply, growing cities need well-designed higher-density development.John Daley, Chief Executive Officer, Grattan InstituteBrendan Coates, Fellow, Grattan InstituteTony Chen, Researcher, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1025812018-09-06T20:06:44Z2018-09-06T20:06:44ZHow the housing boom has driven rising inequality<p>The Productivity Commission – the Australian government’s highly influential economic advisory body – released a report titled <a href="https://www.pc.gov.au/research/completed/rising-inequality/rising-inequality.pdf">Rising Inequality?</a> last week. The question mark indicates its scepticism about other <a href="https://www.acoss.org.au/wp-content/uploads/2018/07/Inequality-in-Australia-2018.pdf">research findings</a> on rising inequality in Australia. The commission responded to its own question in the report’s very first heading: “Over nearly three decades, inequality has risen slightly in Australia”. </p>
<p>This conclusion has left commentators divided. Some have <a href="https://www.afr.com/opinion/editorials/productivity-commission-squashes-labors-inequality-myths-20180829-h14ofn">celebrated this finding</a>. Others, such as <a href="https://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Peter Whiteford</a> and <a href="https://www.smh.com.au/business/the-economy/inequality-nothing-to-see-here-is-not-the-true-picture-20180831-p500ww.html">Ross Gittins</a>, argued the true picture is more complex. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Don't believe what they say about inequality. Some of us are worse off</a>
</strong>
</em>
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<hr>
<p>We wish to point out one major flaw in the Productivity Commission’s conclusion. It ignores the deeply polarising impact of the housing boom on Australia in recent years. Our analysis shows that, once rent and mortgage costs are deducted, the rate of increase in average equivalised disposable income of the top 10% of households was 2.7 times faster than for the bottom 10% between 1988 and 2015.</p>
<p>On average, capital city house prices have <a href="https://www.pc.gov.au/research/completed/rising-inequality/rising-inequality.pdf#page=20">doubled since 2003</a>. This has benefited affluent homeowners and has disadvantaged lower-income households, <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0013/2227/AHURI_Final_Report_No209_Long-term-private-rental-in-a-changing-Australian-private-rental-sector.pdf">especially those in long-term private rental</a>. </p>
<h2>Housing costs undermine gains for low-income households</h2>
<p>We examined changes in income inequality using the same method and dataset that the Productivity Commission used, with only minimal technical differences. From 1988 to 2015, average <a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/A390E2529EC00DFECA25720A0076F6C6?opendocument">equivalised</a> incomes for households in the lowest 10% of incomes increased by 54%, compared with 85% in the highest decile. Such a difference is by no means “slight”.</p>
<p>However, to reveal the full extent of rising inequality, we conducted further analysis, deducting housing costs from income. This included both rent and mortgage repayments. The results were striking: from 1988 to 2015, average after-housing disposable incomes increased by only 30% in the lowest decile, compared with 81% in the highest decile. </p>
<p>This analysis shows that income inequality between the highest and lowest deciles nearly doubled once housing costs are taken into account. These costs hardly affected rising incomes for the top decile. For the bottom decile, housing costs nearly halved any gains in income over the same period. </p>
<p>Between these extremes, as the chart below shows, there is a very linear pattern across the spectrum. Housing cost impacts on disposable incomes decline as household incomes rise. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=395&fit=crop&dpr=1 600w, https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=395&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=395&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=496&fit=crop&dpr=1 754w, https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=496&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/234735/original/file-20180904-41717-1e1h69e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=496&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Rising gap in disposable income, before and after housing costs, 1988-2015.</span>
<span class="attribution"><span class="source">Authors' estimates using:ABS Microdata: Household Expenditure, Income and Housing, 2015-16 (Cat. no. 6540.0, as at 3/08/18) and ABS HES Basic confidentialised unit record file for 1988-89 (as at 3/08/18)</span></span>
</figcaption>
</figure>
<p>Housing costs account for a much higher share of lower-income households’ income. Furthermore, at the bottom end of the distribution, renters have seen their rental costs increase. This has been <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0011/2081/AHURI_Final_Report_No241_Supply-shortages-and-affordability-outcomes-in-the-private-rental-sector-short-and-longer-term-trends.pdf">fuelled by low vacancy rates and the absolute supply shortage of affordable rental housing</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">Three charts on: poorer Australians bearing the brunt of rising housing costs</a>
</strong>
</em>
</p>
<hr>
<p>In contrast, at the upper end of the distribution, home buyers have seen their mortgage repayments decline. This is thanks to lower interest rates and the slow but typically steady reduction in housing costs across the life course as owners pay out mortgage debt. Outright owners have not been impacted by housing costs either way.</p>
<h2>House price growth boosts gains for wealthier households</h2>
<p>The housing boom also played a key role in the rise of wealth inequalities, which are more extreme than income inequalities. </p>
<p>The Productivity Commission’s report shows that, since the early 2000s, the wealth of households in the top 50% grew faster than the bottom half. The upper deciles experienced average annual growth close to 3%. In contrast, the bottom decile experienced negative growth. </p>
<p>By 2015-16, those in the top 10% owned 45% of wealth. The bottom half of the distribution owned just 11%.</p>
<p>Property ownership rates are higher in the middle and upper deciles. For these households, house price growth made a major contribution to rising wealth. </p>
<p>In contrast, property ownership rates are relatively low in the bottom deciles. These households saw little or no wealth gains from the housing boom. </p>
<p>The report’s headline claiming only a “slight” rise in inequality over three decades seems to ignore this widening wealth gap as a crucial aspect of the story.</p>
<h2>A national affordable housing plan is needed</h2>
<p>Over nearly three decades of economic growth, living standards have improved for Australians across the board. This is good news. </p>
<p>But inequality has also risen <em>significantly</em>, which is bad news. Inequality creates unfair advantage for wealthier households and is deeply damaging for the social fabric, democratic stability and economic drive of our society. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-rising-inequality-is-stalling-economies-by-crippling-demand-99075">How rising inequality is stalling economies by crippling demand</a>
</strong>
</em>
</p>
<hr>
<p>Our analysis highlights the polarising impact of the housing boom, in two primary ways. Firstly, increasing housing costs undermined income gains for less affluent households. Secondly, house price growth increased wealth gains for more affluent households. </p>
<p>This analysis shows that rising inequality cannot be redressed without some redistribution of housing wealth and costs. </p>
<p>The Productivity Commission report commended the “equalising effect” of Australia’s progressive income tax. Including housing in our analysis, however, points to the polarising effect of taxation on wealth and housing. The tax system disproportionately benefits more affluent home owners and property owners. </p>
<p>An increased supply of affordable rental housing is crucial to reduce the gap in after-housing disposable income. Low-income private renters also need greater security of tenure, including more stringent controls on rent increases. </p>
<p>A renewed focus on affordable home purchase schemes for people on moderate incomes can help reduce the wealth gap. In addition, housing tax levers, used well, can help reduce both wealth and income inequalities over time.</p><img src="https://counter.theconversation.com/content/102581/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ilan Wiesel receives funding from the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Liss Ralston receives funding from the Australian Housing and Urban Research Institute (AHURI), the Department of Health and Human Services Victoria. </span></em></p><p class="fine-print"><em><span>Wendy Stone receives funding from the Australian Research Council and the Australian Housing and Urban Research Institute (AHURI).</span></em></p>The Productivity Commission neglected the impact of housing costs. After allowing for these costs, the top 10% of households’ average disposable income grew at 2.7 times the rate of the bottom 10%.Ilan Wiesel, Senior Lecturer in Urban Geography, The University of MelbourneLiss Ralston, Urban Statistician, Centre for Urban Transitions, Swinburne University of TechnologyWendy Stone, Associate Professor, Centre for Urban Transitions, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1002462018-07-23T20:06:52Z2018-07-23T20:06:52ZMigrants are still buying into the dream of home ownership, but it’s becoming more elusive<p>Recent Australian migrants are buying into the Great Australian Dream of home ownership. But rates of home ownership among recent migrants are falling, as they are among all Australians. Unless we build enough housing to match Australia’s growing population, all Australians, including migrants, will pay the price.</p>
<p>A recent <a href="https://protect-au.mimecast.com/s/K0-kCZYMPyCj9XM7SyxRBY?domain=abs.gov.au">data</a> release by the Australian Bureau of Statistics (ABS) shows 54% of permanent migrants aged 15 and over own their home, compared to 67% of Australians overall. Since migrants tend to be <a href="https://www.pc.gov.au/inquiries/completed/migrant-intake/report">younger than native-born Australians</a>, and younger people are less likely to own their home, migrants have broadly similar rates of home ownership to native-born Australians of the same age.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-migration-affects-housing-affordability-92502">How migration affects housing affordability</a>
</strong>
</em>
</p>
<hr>
<p>And the facts do not support the idea that substantial numbers of migrants to Australia are relying upon on public housing. <a href="https://twitter.com/BrendanCoates/status/1019468015019016192">Just 2% of all permanent migrants arriving since 2000 are living in public housing</a>, compared to around 4% of the overall Australian population.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/228732/original/file-20180723-142420-vp84e5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Home ownership is highest among migrants granted permanent residency under the skilled (57%) and family (58%) visa streams, compared to just 31% among those on humanitarian visas. Comparatively high rates of home ownership among permanent migrants is unsurprising: skilled migrants in particular tend to earn higher incomes than native-born Australians.</p>
<p>Permanent migrants also appear to be relatively well housed. <a href="https://twitter.com/BrendanCoates/status/1019459049081880578">Just 13% of permanent migrants have too few bedrooms</a> in their home, compared to 22% of all Australians. But one-third of humanitarian migrants granted permanent residency need more bedrooms.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1019459049081880578"}"></div></p>
<p>But recent migrants are becoming less likely to own their homes. Only one-third of arrivals over the past five years own their home today. That’s down from <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/3417.02011?OpenDocument">41% in the period before the 2011 Census</a>. </p>
<p>The fall in home ownership has been highest among skilled migrants: just 31% of recent skilled migrants owned their homes, compared to 41% of recent skilled migrants at the time of the 2011 Census. In part this may be because migrants over the past ten years have been younger than migrants in the past. But it also shows that migrants are not immune to the <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">housing affordability woes affecting all Australians</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/228733/original/file-20180723-142408-18jfbnu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Newly arrived migrants have always been less likely to own their own homes. <a href="https://www.domain.com.au/news/homeownership-rates-decline-among-new-migrants-in-australia-20180718-h12u65-752955/">Only one-third of migrants arriving since 2012 own their home</a>, compared to almost two-thirds of permanent migrants who arrived in Australia before 2012.</p>
<p>But it’s clear that worsening affordability is a major culprit. <a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">The prices of cheaper homes have grown much faster than for more expensive homes</a> over the past decade. This has made it much harder for first home buyers to buy a home. </p>
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Read more:
<a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">Three charts on: poorer Australians bearing the brunt of rising housing costs</a>
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<p>While record low interest rates make mortgage repayments affordable today, <a href="http://insidestory.org.au/why-should-we-care-about-housing-affordability/">these are likely to rise</a>. And it now takes around ten years to save a 20% deposit for an average dwelling, up from around six years in the early 1990s.</p>
<h2>We haven’t built enough homes</h2>
<p>While interest rates are the largest driver of rising house prices in recent years, a lack of new homes hasn’t helped. Over the last decade, home building did not keep pace with increases in demand from rising population, let alone rising incomes.</p>
<p>Migration increased substantially from about 2006. Australia’s population started to grow by around 350,000 per year, rather than the 220,000 per year that was typical in the preceding decade. </p>
<p><a href="https://www.rba.gov.au/publications/bulletin/2015/sep/pdf/bu-0915-3.pdf">Dwelling construction fell behind population growth</a>, only picking up from 2013. According to Census data, population growth outstripped growth in the number of homes across Australia between 2006 and 2016, and especially in New South Wales, Victoria and Queensland.</p>
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<p><a href="https://theconversation.com/why-australias-homelessness-problem-is-getting-worse-despite-a-rise-in-housing-stock-95926">Recent analysis</a> claiming that housing construction outstripped population growth over the period 2005-06 to 2014-15 uses building approvals without accounting for the demolition of existing homes. It also <a href="https://grattan.edu.au/news/making-housing-more-affordable-requires-answers-that-address-supply-and-demand/">ignores</a> how rising prices and worsening affordability have <a href="https://grattan.edu.au/news/supply-sceptics-beware-without-more-housing-it-wont-be-affordable/">prevented many younger Australians from moving out</a> of the family home to form households of their own.</p>
<p>The imbalance between demand and supply has consequences. <a href="https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003">Younger and poorer households are paying more</a> for housing. Owning a home <a href="https://theconversation.com/not-everyone-wins-from-the-bank-of-mum-and-dad-73842">depends more on who your parents are</a>, a big change from the early 1980s.</p>
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Read more:
<a href="https://theconversation.com/not-everyone-wins-from-the-bank-of-mum-and-dad-73842">Not everyone wins from the bank of mum and dad</a>
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<p>Only in the past couple of years has housing construction got close to matching population growth; the backlog of a decade of undersupply remains. Development at today’s record rates is the bare minimum needed to meet record population growth built into <a href="https://www.greater.sydney/draft-greater-sydney-region-plan">Sydney’s</a> and <a href="http://www.planmelbourne.vic.gov.au/">Melbourne’s</a> housing supply targets over the next 40 years.</p>
<h2>What should we do?</h2>
<p>In post-war Australia, <a href="https://www.prosper.org.au/2013/09/03/saul-eslake-50-years-of-housing-failure/">record rates of home building</a> matched rapid population growth. House prices barely moved.</p>
<p>Building more housing will improve affordability the most – but slowly. Even at current record construction rates, new housing increases the stock of dwellings by only <a href="https://www.smh.com.au/opinion/making-housing-more-affordable-requires-effort-at-both-ends-of-the-supply-chain-20171121-gzpw63.html">2% each year</a>. But building an extra 50,000 homes a year nationwide for a decade would lead to <a href="https://grattan.edu.au/news/supply-sceptics-beware-without-more-housing-it-wont-be-affordable/">national house prices being around 10-15% lower than otherwise</a>, and by more if most homes were built in our major cities.</p>
<p>State governments need to fix planning rules to allow more housing to be built in inner and middle-ring suburbs. More small-scale urban infill projects should be allowed without council planning approval. And state governments should allow denser development “as of right” along key transport corridors – that is, without requiring approval in designated zones. </p>
<p>The Commonwealth can help by providing financial incentives for these reforms.</p>
<p>Migrants are often blamed for Australia’s housing woes, and there’s a <a href="https://theconversation.com/how-migration-affects-housing-affordability-92502">clear link</a> between strong migration, constrained housing supply and rising prices. But the new data show that recent migrants are also suffering from worsening housing affordability. And housing demand from immigration shouldn’t lead to higher prices if enough dwellings are built to match Australia’s growing population.</p><img src="https://counter.theconversation.com/content/100246/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brendan Coates does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Migrants have similar home ownership rates to the overall population and rely less on public housing. But housing supply shortfalls and higher prices have reduced ownership among recent migrants.Brendan Coates, Fellow, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.