THE HOUSING CRISIS

BY LORENZO CAVALLARO

WHAT IS IT?

The housing affordability crisis facing Australia is one that has silently culminated over more than two decades, with ineffective housing policy at its centre. Housing policy is a delicate, yet complex issue as it has far-reaching consequences on areas such as housing affordability, homelessness, the rental market, the cost of living, investment property and urban planning. Therefore it is imperative that key stakeholders such as legal experts, economists, policy experts and legislators cooperate on this issue to ensure long-term solutions. By observing successful examples of housing policy overseas and extensive research on the topic, the Australian government has the potential to revolutionise the state of housing in Australia, and improve people’s livelihoods on a large scale.

WHERE ARE WE NOW?

The lack of housing affordability has disproportionately affected younger generations Homeownership has decreased considerably in the 25-34 year demographic in the last two decades, from 52.2% in 1996 to 29.2% in 2014. A major contributing factor to the decline in home ownership is that the price of housing has ballooned, especially in the last decade.

From March 2015 to March 2022, the average price of private housing nationwide has increased by over 60%.

Although the increase in housing prices has slowed in the last two quarters, home ownership remains exceedingly expensive, rendering the prospect of home ownership a distant dream.

In addition to the cost of owning a home, the rental market has also become difficult to navigate. This is often blamed on the oversaturation of renters in the market and the limited number of properties available. It Market saturation is exemplified by the queues of property inspections, which limit the number of people able to view the property. . Further, wages in Australia have, failed to keep up with nationwide increases in rent. Wages have increased by 3.6% in the last year, but the average rent has increased at more than double the rate of wage growth, causing rent to be comprised as tenant’s biggest living expense. For a significant proportion of single-income adults, a stable job is insufficient to secure a rental property.

The social housing system today has been subsumed into welfare, and is struggling due to significant underfunding. The system makes up a smaller proportion of government spending and the government portfolio than it did in the 1900s. Therefore, eligibility has been subject to more stringent conditions and extremely long waitlists to prioritise housing for the most vulnerable and disadvantaged. Hence, waitlist data does not capture the full picture, and likely underrepresents the number of individuals in need of social housing. Ultimately, insufficient funding only makes it harder to build and maintain adequate and affordable non-profit dwellings.

Homeownership, an affordable rental market, and an efficient and well-funded social housing programs are vital pieces to solving the issue of homelessness. Although the government has not collected exact figures for the number of homeless Australians since 2016, it is almost certain that the recent housing crisis and the failure to mitigate homelessness have further exacerbated the issue, and that homelessness is an issue facing far more Australians than ever before.

WHERE TO FROM HERE?

With the election of a majority (Labor) Federal Government, and a sitting Labor government in almost every Australian state and territory (barring Tasmania), there is ample opportunity for coordinated, progressive housing policy to be enacted on both the federal and state level.

On the Federal level, the Government has set a goal of 30,000 social and affordable houses over 5 years. It intends to achieve this through the Housing Australia Future Fund Bill 2023, a $10 billion housing fund put forward by the Albanese government. According to section 2A of the bill, its purpose is to ‘provide a funding mechanism … to address acute housing needs … and to enable support to be provided to increase the availability of social housing and affordable housing.’ This scheme forms part of its 10-year ‘National Housing and Homelessness Plan’ for affordable housing, which will foster collaboration between important stakeholders such as the federal and state governments, the construction industry, and experienced investors. Whilst there arehere are concerns that the 30,000 affordable homes target is insufficient to keep up with demand, this is the largest investment in social housing in decades, opening the door to greater investment in public housing in the future.

At the state level, the newly appointed NSW government is introducing a shared-home equity scheme, being the last Australian state to do so. It will be approved for 3,000 applicants in the 2023-2024 period, allowing buyers to jointly purchase a home with the government, subject to eligibility criteria. The program will allow eligible buyers to live in the property and have the flexibility to make voluntary payments to lower the government’s equitable interest in the property and allowing owners to retain the ability to make the decision to sell.

The NSW scheme is focused on increasing housing affordability by targeting single-income households such as single adults under 50, single parents with dependent children, and frontline ‘essential workers’ seeking to buy their first home. The success of the program in other states provides that shared-equity schemes such as these have some role to play in promoting housing affordability.

Furthermore,the Federal Government made a recommendation to the Fair Work Commission in 2022 to increase the minimum wage by 5.1%, proportional to inflation. . If adopted, the new minimum wage will be in force from July 2023. It would likely ease the burden for homeowners seeking to rent or save for a mortgage down payment.

The Main Takeaway

The housing sector is complex, pervasive and can only truly be resolved through long-term planning and investment. How will future generations judge our response to the crisis, three, four decades from now? Predict as we may, only time will tell. The only certainty is that charting through uncharted legal territory and considering bold ideas is a necessity in reaching effective and comprehensive solutions to complex legal issues.