Why Are Homes So Expensive?
Our housing system is broken. Homelessness is rising, and Australia’s property market looks increasingly unsustainable.
Here in the Gabba Ward, the majority of us are renters. Every time our lease is up for renewal, we stress about whether we’ll have to move out or cop a sharp rent increase. But precarious employment conditions and sky-high property prices mean actually buying a place is completely out of reach for most residents.
Many of those who have bought a home are burdened by massive mortgages, and live in fear of interest rate rises or losing our jobs, which in turn makes us less likely to speak up and advocate against injustice in our workplaces.
It’s not as simple as ‘increasing supply’
Some argue that we should rezone land and relax planning regulations to allow more development. They claim this improves affordability by increasing the supply of private housing, but this isn’t true in practice…
Whenever property values stop rising as fast, most developers tend to slow down construction, withhold new apartments from sale, and artificially restrict supply, so they can keep values high and maximise profits.
Many investors who are primarily interested in capital gains choose to leave homes empty rather than renting them out cheaply. Increasingly, we’re also seeing more residential houses and apartments converted into short-term accommodation and rented out to visitors rather than local residents.
On top of this, rezoning land for more private development raises its value, which in turn makes it costlier for governments to deliver genuinely affordable public housing where it’s most needed.
Positive change is possible
Sadly, I’m hearing more and more stories of young renters drowning in rejection emails from real estate agents, and long-term residents being forced out of their communities due to rapidly rising rents and house prices. The unbalanced property market means landlords are under less pressure to maintain properties. Tenants worry that if they request repairs or make complaints, their landlord will punish them by not renewing the lease.
The cost of housing is rising rapidly across Australia - not just in major cities, and not just in areas experiencing rapid population growth.
Rising prices result from an unbalanced policy landscape at all levels of government which rewards speculative property investment, and encourages the treatment of housing as a commodity, rather than a basic human right.
Federal incentives for property investors, such as capital gains tax discounts and negative gearing, are a big part of the problem, as are weak renters’ rights.
When housing is treated as a commodity, supply will never meet demand, because the demand for profit is insatiable.
The following government policy approaches have already been successfully implemented in other jurisdictions around the world, and could help cool our overheated property market and reduce homelessness, without triggering a destabilising collapse in the value of existing owner-occupied homes...
- Strengthen renters’ rights
- Introduce a vacancy tax or levy on long-term vacant homes, shops and empty land (this short write-up explains that identifying vacant homes is not as difficult as some people might assume)
- Scrap federal tax incentives for property investment
- Restrict the proliferation of short-term AirBnB-style accommodation in areas that are supposed to house long-term residents
- Build more public housing (and make it mandatory to include some in all new private developments)
A Fair Go for Renters
Strengthening renters rights is one of the cheapest, quickest, most effective policy responses to rising homelessness and housing insecurity, but our State Government has failed to meet its own deadlines for reforming out-of-date laws. Other states have recently introduced stronger protections for renters, but Queensland is lagging behind.
We need to strengthen renters’ rights with a range of changes, including:
- rules against ending a tenancy for no reason (this helps protect tenants from retribution evictions) - a valid reason for ending a tenancy would include if the landlord wants to move in themselves
- Limits against excessive rent increases - if a landlord wants to put the rent up, they should have to prove that they’ve made home improvements which justify the increase
- Basic minimum standards - in Victoria, recently-introduced legislation included rules requiring that all external doors should be lockable, that electrical wiring is safe, and that all rentals have access to working toilets and bathrooms (it’s wild that such rules don’t already exist in Queensland; sadly it’s not uncommon to find rental properties that don’t meet these standards)
While I’ve met several good-hearted landlords who try to treat their tenants fairly, there are also plenty of jerks out there who are motivated only by profit. Improving renters rights will protect renters against price-gouging and unjustified evictions. This in turn will help stop people becoming homeless, particularly if stronger protections for renters are accompanied by a vacancy levy that discourages investors from leaving homes empty.
If you agree we need stronger government action to address rising homelessness, please email Queensland’s Housing Minister at [email protected]...
Mention your support for reforming tenancy laws and introducing vacancy levies, but also for building more public housing on existing government-owned sites like the new Cross River Rail station at Woolloongabba.
Please also make sure you’re signed up via www.jonathansri.com/updates to receive info about this important issue.
Increasing Private Housing Supply vs Public Housing and More Efficient Use of Existing Stock
Property developers often argue that approving the construction of more private housing will improve affordability, but this isn't necessarily true in the Brisbane context. This short article explains why leaving housing provision up to the private sector won't work, while this article unpacks some of the growth projections for Brisbane, and questions the 'tall vs sprawl' false dichotomy that has unfortunately become accepted dogma within the property industry and many parts of government.
Rental Law Reforms
This page on the Brisbane Renters Alliance website outlines some of the main policy demands in terms of reforming tenancy legislation here in Queensland.
Note that the Brisbane Renters Alliance calls for a 'soft limit' on rental increases, suggesting that rents should only be allowed to increase by 1% per annum unless major improvements are made to a property. Other groups, such as the Queensland Greens, have called for rent limits to be capped at CPI (the Consumer Price Index) which is a measure of inflation that's currently sitting at around 1.1% per year. There are good arguments for and against connecting rent increases to CPI, but some would argue that a more consistent limit of 1% per annum offers better protection to tenants in the event that a major market shock leads to an unexpected period of rapid inflation.
The Town of Nowhere
An alliance of Queensland service providers and advocacy groups has launched a new campaign called 'The Town of Nowhere,' highlighting that over 47 000 Queenslanders are experiencing severe housing insecurity. The primary demand is for a massive increase in public housing construction. I think it's important to distinguish between genuinely affordable public housing, where rent is usually capped at 25% or 30% of a tenant's income, as opposed to public-private 'affordable housing' partnership projects where rent is capped at 75% of market rent, which is still prohibitively expensive for many people on lower incomes.
The Everybody's Home campaign is a national push by a nationwide alliance of non-government organisations pushing for a raft of changes to housing policy, including a major increase in the construction of public housing, winding back negative gearing and capital gains tax exemptions, stronger renters' rights and better homelessness/crisis support services. You can learn more about the campaign via this link.