Housing affordability and the empty homes scandal

housing-affordability-empty-houses
Housing affordability in world capitals. Photo of Melbourne’s Southbank by Ashley Rambukwella flickr CC https://flic.kr/p/KfdUMR

The inspiration to start writing (again) about housing affordability came from left field. I was sitting back enjoying an American roots band, The Brothers Comatose, at the Blue Mountains Music Festival in Katoomba. Lead singer and front man Ben Morrison introduced the band, saying they were from San Francisco but maybe not for long. “The price of houses is crazy there (man) and most of the musicians I know are moving out because they can’t afford to live in the area.”

“Maybe we could move here,” he suggested, and the audience groaned, knowing that housing affordability is just as big a problem in Sydney and surrounds as in San Francisco, Vancouver, New York or Paris.

“Can we sleep on your couch?’’ he jested, before doing what musicians do to avoid thinking about the cost of living. Great band, by the way (check out this bluegrass old-style tune around one microphone).

Morrison’s complaint rang true – I did a modicum of housing affordability research which quickly showed that the median price of a house in San Francisco’s Bay area clipped $US1.5 million in the fourth quarter of 2017. The California Association of Realtors Housing Affordability Index shows that it would cost $US7, 580 a month to service the mortgage. The average monthly rent for a two-bedroom apartment is $US3, 441.

Housing affordability is a myth in Vancouver, Canada’s biggest West coast city. The 14th annual Demographia affordability study ranked Vancouver the least affordable among 50 American and Canadian cities. Internationally, it is ranked the third least affordable city among 293 locations around the world (Sydney was 2nd). The British Columbia Provincial Government has made several attempts to rein in the city’s galloping real estate prices, including a 15% tax on foreign nationals purchasing metropolitan real estate. Another new measure attempts to tackle a problem that plagues Sydney and Melbourne, Australia’s housing affordability problem cities.

The BC government conducted a survey which found that 8,481 houses in Vancouver were unoccupied during a six-month period. That’s 4.6% of the housing stock. Now the government is going to levy a tax on people who own houses and don’t occupy or rent them. The tax will be calculated at 1% of the assessed value. So the owner of a two-bedroom condo in Vancouver valued at $900,000 and deemed to be unoccupied will pay the BC government $9,000 a year.

Meanwhile, the housing boom in Vancouver is on the downturn, according to the Vancouver Courier, and they should know. Still, with a median house price around $3 million (Dec 2017) and condos going at $1 million apiece, it’s maybe time for that bubble to lose some air.

Meanwhile Down Under, house prices keep rising

Melbourne and Sydney made into Demographia’s top 10 list of the least affordable cities in the world. Sydney’s median house price of $1.11 million assured it of that invidious claim. Demographia ranks middle income affordability using a price-to-income ratio. Anything over 3 is rated unaffordable. On this basis, some of the world’s most affordable towns included Youngston, Ohio (1.9), Moncton, New Brunswick (2.1) and Limerick, Ireland (2.2). There are no affordable Australian cities on Demographia’s watch.

The least affordable city is Hong Kong (19.4) then a gap to Sydney (12.9) and Vancouver (12.6). Melbourne (9.9) is slightly more unaffordable than the aforementioned San Francisco (9.1).

Studies have shown that Melbourne is one of the big culprits in hiding empty houses among its residential property stock.

Australia’s 2016 Census showed that 11.2% of Australia’s housing stock was described as unoccupied on Census night. Empty property numbers were up 19% in Melbourne and 15% in Sydney compared with the 2011 Census. This growing anomaly is a global trend in the world’s biggest cities which have allowed rapid apartment developments.

Just why 1.089 million houses and units were unoccupied on Census night is hard to explain. But it probably suggests the owner/s were not in need of rental income and would rather keep the place in mothballs for use when the wealthy owners or friends and relatives visit (for the Australian Open, Melbourne Cup or the Grand Prix) or are relying on capital gain without the need to bother with tenants.

Hal Pawson of the University of NSW wrote in The Conversation that the spectre of unlit apartments in Melbourne’s night sky prompted the Victorian government to introduce an empty homes tax. Like Vancouver, this is levied at 1% of the property’s value. Similar taxes have been introduced in Paris and Ontario. Mr Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW, (try getting an acronym out of that. Ed.)  says the Melbourne tax only applies to inner city and middle suburbs and, there are ‘curious’ exemptions for foreign nationals with under-used second homes.

The flaw in the scheme is that it relies on self-reporting. Pawson says the lack of reliable data on empty homes is a major problem in Australia.

Census figures substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes).

Prosper Australia uses Victorian water records to estimate that about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes. A similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies.

Labor Opposition shadow Treasurer Chris Bowen has proposed a national tax on homes left empty for six months or more.

Pawson says these “cruel and immoral revelations” come at a time when 400 people sleep rough in Sydney every night and hundreds of thousands more face overcrowded homes or unaffordable rents.

He says Australia has a bigger problem in terms of under-utilised occupied housing. Australian Bureau of Statistics survey data shows that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare (read unused) bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-2008 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.

While authorities are grappling with the issue and how to perhaps tighten foreign ownership laws, the ANZ Bank did its own survey. Foreign buyers were playing an increasing role in spurring demand for new houses and apartments, it found. The ANZ analysed Reserve Bank data to conclude that in 2015-2016, foreign investors bought between 30,000 and 60,000 dwellings in Australia. This equates to 15% to 25% of all new dwellings, 80% of which were apartments, which can be bought ‘off-the-plan’.

There is good reason to suspect that the new apartment markets in Hong Kong, Vancouver, London, Paris and other desirable world capitals are underwritten to some extent by foreign nationals (including Australians).

The problem which could arise, say in the case of a global recession, is what happens in cities like Melbourne and Brisbane where foreign investors have bought up to 35% of new stock, if these owners are forced to sell.

Not to worry, most big box discount stores will give you a large cardboard box in which to live. The dumpster bins behind shopping centres have perfectly good food that’s just been chucked out because it has passed the use-by date.

Trust me.

FOMM back pages

Travel safe this weekend, people

King decrees universal basic income

king-basic-income
King decrees universal basic income Image by Jason Train, Flickr https://flic.kr/p/f1BBQu

The question for the week is, what, apart from introducing a universal basic income, would you do if you were King, President or Prime Minister for a day? The term ‘King for a Day,’ which has inspired more than a dozen pop songs and an obscure opera by Verdi, implies that for 24 hours you get to be loved by the masses. You can loll about in a high-backed chair, gold orb and sceptre in hand, and be fawned over – mint juleps and the like.

In the Silly Season, media outlets tend to ask people questions like this, for a news slot or an inconveniently empty news hole next to a couple of ads. The ABC North Queensland asked a bunch of 11-year-old kids and some senior citizens what they’d do if they were Prime Minister for the day. Some of the answers were predictable enough. Sophie, 11 said, “Give everyone a day off so adults can take their kids out (and make theme parks free).” James (10) said he’d employ more scientists so Australia can get its research skills up (reserve that kid a cabinet post, circa 2030). Keira (11) wanted more national parks; Charlotte (11) wanted a program for kids to do work experience and be taught something they want to do.

If I could be King for a Day, I’d single out the dysfunctional tax and welfare systems and propose the following reforms:

Introduction of a universal basic income for all adults: $25k a year, indexed, no strings attached. Adults are free to earn money over and above the $25k, but it will be taxed on a sliding scale to the maximum rate for anyone earning more than, say, $150k.

Hypothetically, a previously unemployed or under-employed couple could, with a tax-free household income of $50,000, find jobs, start a business, renovate the spare bedroom, and join Airbnb and ramp up their annual income in a myriad of ways. Their only duty would be to the Tax Office.

Treasury boffins would be responsible for reforming the tax system to ensure the universal basic income could be funded and that as few people as possible are disadvantaged. Treasury could find ways to encourage business to work with this new system, for example offering generous tax rebates for research and development.

In my Kingdom, all forms of social welfare would be replaced by a new regime, overseen by the Office of Financial and Social Opportunity and Incentivisation (NOOFASOI). The office would oversee payment of the UBI and iron out the inevitable wrinkles in a new and untested system.

This is not just a FOMM flight of fancy

Countries as diverse as Finland, France, Ireland, Norway, the US, Canada, New Zealand, Holland, Iceland, India and Brazil are either talking about universal basic income or trialling it in one form or another. Switzerland had a referendum, and while the people said no, it shows how front of mind this issue has become. Indeed, Australia has a university-sponsored programme to research income security.

And the Parliament of Australia published this comprehensive yet concise policy paper by Don Henry, for those who want to find out more.

The media went on a feeding frenzy recently after the end of the first year of Finland’s two-year trial to dole out a subsistence amount (no strings attached) to 2,000 unemployed Finns. The Finnish government (wisely) is letting the experiment run and will only look at it the results when the trial ends.

I would not pretend to understand the complexities of financing a universal basic income and the social engineering required to make it work.

An OECD report in 2017 said that despite well-publicised campaigns for a Basic Income, no country has put a BI in place as a pillar of income support for the working age population.

“The recent upsurge in attention to BI proposals in OECD countries, including those with long-standing traditions of providing comprehensive social protection, is therefore remarkable,” the report says.

It’s not so remarkable when one looks into the growing inequality that is being spawned by job losses as a result of automation and digital disruption. As Oxfam said last week, 42 people hold as much wealth as the 3.7 billion people in the poorest half of the world’s population.

This is clearly not sustainable. 

From where I sit, the domination of the contract or ‘gig economy’ and a part-time, casual workforce has left the welfare system behind. Moreover, the welfare bureaucracy is unrealistically punitive, in that it forces the unemployed to prove they are pursuing fast-disappearing jobs to qualify for support.

Mainstream conservative publications including The Economist and the Financial Times have canvassed the UBI debate. As the FT said, it “strengthens a sense that the traditional welfare state is no longer fit for purpose”.

The advances in artificial intelligence (AI) are threatening many jobs around the world, the FT said, adding that most workers have come to accept that the job for life has gone for good.

But if the intent of a UBI is to lift people out of poverty and ensure wealthier people pay their fair share of tax, it’s not that simple.

The OECD report concludes that introducing a UBI in countries with strong social support systems would not solve poverty and would lead to higher taxes. Others warn against dismantling welfare systems, which, however flawed, are at least a safety net for the poor and disadvantaged.

George Zarkadakis, an AI engineer and writer, outlined some of the flaws in an article for Huffington Post. Zarkadakis dismissed talk of taxing the cash reserves of fully automated companies, saying this would affect their ability to invest and innovate; they would lose their competitive position to low-tax or zero tax regimes. Likewise, he was sceptical about the hi-tech and energy companies that are lobbying for (and prepared to help fund) a UBI, arguing that this would give them undue political influence.

The ancient ideal of a UBI (Thomas More’s social satire, Utopia, published in 1516), frees creative people and artisans around the fringes of the commercial world to develop their skills without financial pressure. The ‘shall we tell Centrelink?’ poser goes into the dustbin of history, along with the often inaccurate stereotype of the ‘goddamn, long-haired hippy dole bludger’. People on disability pensions would no longer have to get stressed about the fluctuating cycles of their illnesses. For example, a person receiving the blind pension (which is not means tested), can lose it if they recover some sight. There is also the travesty where workers made redundant find out that 30 years of paying tax counts for nothing. Unless their payout is locked up in super, they’ll have to spend every cent of it before dipping into the public purse.

Even a theoretical discussion about a UBI should alert us to many of the anomalies in our welfare system, which arise from outdated legislation and an institutionalised idea that people are out to rort the system.

As for my Kingly privileges for a day (you can tell how far along we are with ‘The Crown’), I was so busy hunting grouse, inspecting broodmares, dallying with ladies-in-waiting and whatnot, I never got around to doing anything. Terribly sorry.

More reading: Hardship in Australia

Homelessness and affordable housing

homeless-housing-affordable
Homelessness and affordable housing, photo by Giulio Saggin

Last week I was walking from Roma Street Station to the top end of George Street, the hub of State Government. I was meeting friends for lunch and on the way passed a few apparently homeless young men on park benches, one tucked inside a doorway, others hovering around intersections, nervously smoking.

One young person was sitting on the footpath with a cardboard sign that read “homeless – please help”. I was too preoccupied on my mission so I ignored the hat, not even dropping a few coins on the return journey.

So now I’m hunting around the house for a decent sleeping bag and a beanie, hoping to make amends for my lapse in empathy by participating in a fund-raising community sleep-out on June 29. (If I chicken out I promise to donate money to the cause.)

Our local member Andrew Powell (Member for Glass House) has agreed to participate in the annual sleep-out.

Mr Powell wrote about this in his regular Glasshouse Country and Maleny News column. He will be among local dignitaries, business people and community members sleeping rough outside the Maroochydore Surf Club on June 29. Participants will be given a sheet of cardboard to sleep on and fed a simple meal of soup and bread rolls. Mr Powell says there are 1,500 homeless men, women and children on the Sunshine Coast.

The St Vincent de Paul northern diocese (which is organising the sleep-out), has provided support over the eight months to March 2017 to 450 homeless people, including 250 children.

The gesture by the Member for Glass House is admirable, but this is a problem that has, at best, been patched up by successive Queensland governments. The Sunshine Coast, which has a paucity of affordable and public housing, is named as one of the regional areas to be targeted by the new housing strategy.

The Rental Tenancies Authority published median rents for the Sunshine Coast region in December 2016. Tenants pay between $315 and $400 a week for a three-bedroom home or a two-bedroom unit. Rents are cheaper in the Hinterland areas like Beerwah, Peachester, Mooloolah, Palmwoods, Hunchy and Woombye, but public transport is limited and one needs a reliable car to live in these areas.

Meanwhile, Queensland has a plan

As the debate continues about the lack of affordable housing and how to find beds for homeless people, the Queensland Government has a 10-year plan.

The Government had some fairly positive (and uncritical), press about its plan to provide more than 5000 social and affordable houses. The $1.8 billion Housing Strategy announced in this week’s State Budget aims to get the private sector involved and utilise State government-owned land.

Treasurer Curtis Pitt said it was the biggest commitment to housing in Queensland’s recent history. The strategy will see more than 5,500 social and affordable homes built over the next decade. Eight hundred homes are to be built each year for the first five years. This is about double the number of social and affordable homes built in 2016-2017.

The Minister said the housing strategy includes $1.2 billion to renew the existing social housing property portfolio. A $420 million housing construction program aims to boost the supply of social and affordable housing. This includes $3.5 million to build two refuges for women and children escaping domestic and family violence.

The Government is also allocating $75 million to advance home ownership in ‘discrete’ Aboriginal and Torres Strait Islander communities.

At first glance this sounds like a bold plan, made with some compassion for those struggling to survive in a competitive housing market. On second glance, it is unlikely to make a dent in Queensland’s 25,000+ public housing waiting list.

Too little, too late?

Public and social housing comprised 4.8% of the total national housing stock, according to the Australian Housing and Urban Research Institute (2011 Census data). AHURI’s research showed that at a minimum, the social housing system would have to have been around 43% larger (on 2011 figures) to accommodate all those who met public housing eligibility criteria and who pay more than 50% rent.

Nevertheless the Queensland strategy has been welcomed by the construction industry and the housing sector, as it is said to provide 450 jobs. One of the more positive aspects of the plan is that 5% to 25% of the land used for these purposes will be land already owned by State Government. This implies vacant or under-utilised land near public buildings like hospitals and schools. So maybe at last the under-privileged will get to live in the middle-ring suburbs of Brisbane rather than 49 km away in fast-growing Logan City.

In December 2016, the State Government announced a $1 billion investment plan to build 3000 new houses in Logan City over 20 years. Minister for Housing and Public Works Mick de Brenni said the Better Neighbourhoods Logan initiative would deliver a range of economic and social benefits, including 410 new social and affordable dwellings over the next five years and over 3,000 new homes by 2036. A spokesman confirmed that the 3000 social and affordable homes are part of the Budget housing strategy. That leads me to surmise that another 4000 homes will be built in other regions over 10 years, on average, 40 new houses per year for each of the 10 regions identified by State Development.

The strategy shows some progressive thinking in that new social or affordable housing strategy should incorporate:

  • Rental bond loans to help tenants meet the private market;
  • Provision for public housing tenants to own their own home through shared equity loans or rent-to-buy schemes;
  • A new Housing Partnerships Office to streamline processes and lower costs and time frames;
  • Private sector involvement through expressions of interest to develop small, medium and large developments in regional centres;
  • $29.4 million to provide front line services for victims of domestic violence and young people at risk of homelessness. This includes a $20 million boost for ‘youth foyers’ – supported accommodation for young people aged 16-25 who are either homeless or at risk of becoming homeless.

Looking after property investors

The State Budget announcement follows a plan revealed in the 2017 Federal Budget to allow a tax break to invest in social housing.

Retail and institutional investors are being offered a 10% increase in capital gains discount (from 50% to 60%). The Australian Financial Review reported that the scheme, aimed at Management Investment Trusts, would allow the discount to MITs and their investors, provided they offer the properties at an affordable rent for at least 10 years. The AFR said the Government also planned to issue bonds backed by rental income from social housing, replacing bank debt issued to approved social housing developers.

While governments play ‘catch up’ with affordable housing, the onset of winter should turn our thoughts to the homeless.

As Andrew Powell observed, it is not a matter of choice.

“In many cases homelessness comes about through factors out of a person’s control – whether this is mental or physical illness, financial instability, lack of education, domestic violence or something else entirely,” he wrote in the GCMN.

Yes, and sometimes all of the above.

 

 

Australia’s hardship index

hardship-poverty-potato
“The Potato Index” Photo by Pat Joyce https://flic.kr/p/asBkcN

There’s an Aussie saying – ‘they’re doing it tough’, which can mean any variation on the theme of hardship, be it financial, emotional, physical or all three at once.

When the word ‘hardship’ is employed, it typically means financial struggle: in other words, privation, destitution, poverty, austerity, penury, impecuniousness and so on.

If you search the word ‘hardship’ online you will find a range of links purporting to explain (if you are doing it tough), how to apply for an early release of superannuation.

Continue reading “Australia’s hardship index”