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Saul EslakeMelbourne
2nd September 2013
Australian housing policy: Fifty years of failure
Address to the 122nd Annual Henry Georgecommemorative dinner
Note: the opinions expressed in this talk are solely the authors, and should not be attributed or imputed to any other organization withwhich he is connected or associated.
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Up until the past decade, the housing stock grew at afaster rate than the population
Sources: Australian Bureau of Statistics, Census results; authors calculations.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1947-
1954
1954-
1961
1961-
1966
1966-
1971
1971-
1976
1976-
1981
1981-
1986
1986-
1991
1991-
1996
1996-
2001
2001-
2006
2006-
2011
Occupied private dwellingsPopulation
% pa
Inter-censal periods
Inter-censal growth in population and the housing stock
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Home ownership rates rose substantially between 1947and 1961
Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.
Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B4.
50
55
60
65
70
75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
%
Census
Home ownership rates at Censuses
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The average number of people per dwelling increasedbetween 2006 and 2011 for the first time in 100 years
Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B3; Australian Bureau of Statistics, 2011 Census Quickstats and earlier Census reports.
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
4.50
4.75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
Number
Census
Average number of people per occupied private dwelling at Censuses
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Home ownership rates havent increased at all since 1961
Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.
Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B4; Tony Kryger, Home Ownership in Australia Data and Trends, Parliamentary LibraryResearch Paper No, 21 (February 2009), Table 1; Australian Bureau of Statistics, 2011 Census Quickstats.
50
55
60
65
70
75
1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
%
Census
Home ownership rates at Censuses
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Despite substantially lower interest rates since 1991 homeownership rates have fallen in almost every age bracket
Sources: Judith Yates, Hal Kendig & Ben Phillips, Sustaining Fair Shares: the Australian Housing System and IntergenerationalSustainability, AHURI Final Report No. 2011 (February 2008); updated for 2011 Census Results by Judith Yates, communication toauthor.
25
61
7579
70
25
7881
67
7979
7364
47
0
10
20
30
40
50
60
70
80
90
15-24 25-34 35-44 45-54 55-64 65+ All
Age of household head
1961 1971 1981 1991 2001 2011
%
Home ownership rates by age of household head, 1961-2011
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be married or engaged
be under the age of 36
have saved up to $1500 in an approvedform (generally, with a financialinstitution whose major business waslending for housing) in three years
be buying a new, or newly-built home
valued at less than $14,000
and have not previously owned a home
The First Home Owner Grant was really just the first of the2000s explosion in status-based welfare
To get a grant under the 1960s Home SavingsGrant Scheme you had to :
have a family income of less than 155% ofaverage weekly earnings
and have not previously have owned ahome
To get a grant under the 1980s First HomeOwners Scheme you had to :
have saved up to $2500 in an acceptableform
have a family income of less than 155% ofaverage weekly earnings
and have not previously have owned ahome
To get a grant under the 1970s Home DepositAssistance Scheme you had to :
have not previously have owned a home
To get a grant under the 2000s First HomeOwners Grants Scheme you have to :
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Governments have spent at least $22bn on cash grants tofirst home buyers over the past fifty years
Note: expenditures shown are calculated as nominal values deflated by All Groups CPI.Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix G, Tables G5 & G6; Australian Government, Budget Paper No. 1, Budget Statements, 1983-84 through1994-95; Commonwealth Grants Commission, 2008 Update Report (Attachment D) and Report on GST Revenue Sharing Relativities,2010 ReviewVolume 2; CoAG Reform Council, National Affordable Housing Agreement: Performance Reports 2009-10 and 201011.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
$bn in 2010-11 prices
Financial years ended 30 June
Expenditure on assistance to first home buyers
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Negative gearing became much more attractive afterthe 1999 decision to halve the rate of capital gains tax
Sources: Australian Taxation Office, Taxation Statistics 2010-11 (latest available); authors calculations.
Taxpayers with rental income
Taxpaying property investors
0
5
1015
20
25
94 9596 979899 0001 0203 0405 060708 0910 11
$bn
Financial years ended 30 June
Interest paid by property investors
-10
-5
0
5
10
94959697 989900010203040506 0708091011
$bn
Financial years ended 30 June
Net rental income
45
50
5560
65
70
94 9596 979899 0001 0203 0405 060708 0910 11
% of total
Financial years ended 30 June
na
Loss-making landlords as pc of total
8
10
12
14
16
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
% of total taxpaying individuals
Financial years ended 30 June
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0
5
10
15
20
85 86 87 88 89
% ch from year earlier
Sydney
Melbourne
Brisbane
Adelaide
The assertion that the abolition of negative gearing in themid-80s caused a landlords strike is an urban myth
Note: Shaded area denotes the period (from July 1985 until September 1987) in which negative gearing was not availablefor property investments. Sources: ABS; Real Estate Institute of Australia.
Rents
0
5
10
15
20
85 86 87 88 89
% ch from year earlier
Hobart
Darwin
PerthCanberra
Vacancy rates
0
1
2
3
4
5
85 86 87 88 89
% (moving annual median)
Melbourne
Brisbane
Sydney
Adelaide
0
1
23
4
5
6
85 86 87 88 89
% (moving annual median) Hobart
Perth
Canberra
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Negative gearing hasnt done anything to improve thesupply of rental housing compared with other countries
Sources: Real Estate Institute of Australia; US National Association of Realtors.
Rental vacancy rates
0
2
4
6
8
10
12
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
%
US
Australia
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Housing policies that would work
Abolish grants to and stamp duty exemptions for first home owners andnegative gearing for investors (in all assets)
Redirect funds thereby saved (or revenue no longer foregone) to programs that
increase housing supply, directly or indirectly Expand or replicate programs which actually work and are ultimately self-
funding, like Western Australias Keystart shared equity scheme
Replace State and Territory Government stamp duties on land transfers with a
more broadly-based land tax (with no-exemption for owner-occupiers) Take a more holistic view of urban infrastructure investment, recognizing
that investments in transport infrastructure can expand the supply of housing and fund such infrastructure in part by betterment levies on increases in landvalues
Reduce the extent to which infrastructure and services in new housing estatesare funded by upfront charges (and if necessary allow local authorities toincur more debt, and service it through rates)
Reduce the cost, complexity and regulatory uncertainty associated withbrownfields and infill developments in established areas
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Important Notes
This document has been prepared by Saul Eslake (the author), to accompany his talk to the 122nd Annual HenryGeorge Commemorative Dinner, organized by Prosper Australia and Earthsharing Australia (the organizers) on 2nd .No part of the document is to be reproduced, made available online, circulated or otherwise distributed withoutpermission of the author, or of the organizers of the event.
This document does not purport to constitute investment or business strategy advice. It should not be used orinterpreted as an invitation or offer to engage in any kind of financial or other transaction, nor relied upon in orderto undertake, or in the course of undertaking, any such transaction. No representations of any kind are made, norare to be inferred, about any securities or financial instruments whatsoever based on anything in or inferred fromthis document.
The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable.
The views expressed in this document are those of the author. Neither the author, nor any entity by which he isemployed, nor any body of which he is a member or with which he is in any other way associated or affiliated, norany of their affiliates or subsidiary or related entities however makes any representation as to their accuracy orcompleteness and the information should not be relied upon as such.
All views, opinions and estimates herein reflect the author's judgement on the date of this document and aresubject to change without notice. The author, each and every entity by which he is employed, and each and everybody or entity of which he is a member or with which he is otherwise associated, their affiliated and subsidiaryentities expressly disclaims any responsibility, and none of them shall be liable for any loss, damage, claim,liability, proceedings, cost or expense (Liability) arising directly or indirectly (and whether in tort (includingnegligence), contract, equity or otherwise) out of or in connection with the views, opinions and contents of and/orany omissions from this document except to the extent that a Liability is made non-excludable by legislation.