a "barbecue stopper"

mood: a little anxious, not sure why.
state i'm in: just starting to come to the 'back-to-school' realisation, a week late.
tune: rae & christian "a distant invitation"


for the first time today, the potent issue of addressing housing affordability has been floated in an academic way by anyone other than an academic (usually from some melburnian think tank). kevin rudd placed the issue on the political table by announcing the ALP would hold a national housing affordability summit this month.

so far, the ideas have ranged from introducing mandatory, low-interest savings accounts, in the style of superannuation, only able to be accessed when one buys a home, to the involvement in the government or banks in shared equity agreements, or NGOs (in particular, our cash-flooded superannuation funds) investing in affordable social housing.

the reply of john howard was that it is the state governments that are to blame for the problem, accusing them of "holding back land" when they ought to be releasing more onto the market.

with my rudimentary knowledge of economics, mr howard appears to be running far closer to the mark with his idea of increasing supply, leading to a drop in price. i think this issue falls down in australia primarily on the issue of the environment. now i am not even talking about the loss of habitat for our cuddly koalas, but a more influential concern that the water infrastructure of almost every urban australian area is severely strained. in an argument not for here, i cannot stress enough just how unsustainable the 'great australian dream', with it's row after row of cookie cutter lots stretching into the horizon, really is. in the end, the dream of our aging generations will likely become the nightmare of the generations still to age.

mr rudd's first suggestion fails badly in my opinion. to quarantine funds into an account with the express purpose of buying a house is not only highly interventionist in an area that warrants no such intervention, but simply pours more money into the housing market. prices will simply rise to absorb the new available funds, like a fire consuming dry grass.

shared equity schemes aren't a bad idea, but run a great deal of risk for silent parties, be they banks, the government, or the lender's parents, and do not get to the issue of affordability itself.

it seems like the most obvious option, and the only one not discussed, is to reduce demand, thereby letting the balloon down slowly. how to reduce demand in such a market? reduce the purchasing ability of consumers. reducing wages is not exactly an option, so that leaves nothing other than increasing interest rates. they simply must go up in order to stave off a burst of the balloon at a later date, and prevent people getting themselves in more and more debt, with both houses and personal loans and credit cards. it's not an attractive option, and certainly not something for a political party to build its election platform on. (fortunately however, the reserve bank is independent from government influence, so can do as it sees fit.)

in response to this, a healthy welfare system is necessary to catch those that fall from the ladder as it wobbles. more importantly though, is there needs to exist a trend that people move into more affordable housing arrangements, denser housing, reliant more on sound design than "the australian ugliness" (i.e. cheap veneers and tack-ons) to maintain a healthy optimism about ones living conditions, and avoid the development of ghettos. it has been suggested by many academics, and today alluded to my mr rudd that many such developments could be subsidised by NGOs, in particular superannuation funds, in order to keep the rent or purchase price low.

australia's housing expectations are long overdue for a fall from grace.

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image: public