Public policy – housing

Why, in this big land, do so many of us live in crowded cities?

Germany has a national population of 83 million but it has only four cities larger than one million: Berlin is smaller than Sydney. Netherlands, with a population of 17 million, has no cities larger than one million: Amsterdam is smaller than Adelaide.

Yet with our national population of 26 million and a large land area, we have managed to concentrate our population into five cities larger than a million, including two of five million.

Regional policy in Australia and in some other countries has tended to be driven by a belief in the benefits of scale economies, including the benefits to business of concentrated markets. Urbanists such as Richard Florida see cities as incubators of creativity and entrepreneurship – the bigger, the more dynamic.

Such economic models, however, tend to overlook the diseconomies of large cities, including congestion, air and water pollution and access to recreation spaces. With good transport links, intelligent land-use planning and high-speed telecommunications, it is possible for a more dispersed population to enjoy the economies claimed for urbanization without the associated diseconomies.

In line with such thinking the Regional Australia Institute has produced a report Rebalance the Nation, urging governments to adopt policies that allow for a more dispersed population, and that encourage cities and towns outside our big capitals to develop to their full potential. Almost every aspect of public policy has a role to play – housing, primary, secondary and post-secondary education, health, digital inclusion, the arts, transport, childcare, community participation, migration, climate, and innovation.

Does the Institute’s report go far enough, however? It has a strong focus on transport, but only within cities and towns outside our main capitals. There also needs to be sound links between population centres. Canberra, for example, has been a successful inland development, but it has no rail connection to Melbourne, a two-lane road connection with the Hume Highway, and a five-hour infrequent rail service to Sydney. Many people may want to move out of our crowded cities, but few people, particularly those in their peak productive years, want to be isolated from those cities. If we want a dispersed settlement pattern like Germany’s we need a network of transport links like Germany’s.

The Institute’s push is not new. For many years successive Australian politicians, particularly National Party ministers, used to talk about the virtues of “decentralization”, and there were many initiatives designed to get key industries to establish in or relocate to growth centres. Because “decentralization” had a certain patronizing implication the talk is now about developing our “regions”, a term that assigns everything from Geelong through to Oodnadatta to one category, while ignoring regions within our large conurbations.

Rather than a framework that perpetuates the old city-bush division, we need a settlement policy that recognizes the complexity of the way people choose to work and live together and that gets all regions physically and virtually connected.

Why do we have a housing crisis when there are a million unoccupied homes?

Unoccupied, wrong location

It’s partly because they’re in the wrong places. That’s one explanation provided by three housing experts in a Conversation article: Look where Australia’s ‘1 million empty homes’ are and why they’re vacant. Many are holiday houses, many others are between owners, some are uninhabitable, some are undergoing renovation, and some belong to people living and working in two places.

It is notable, however, that the number of unoccupied homes has risen from 830 000 in 2006 to 1 044 000 in 2021, which is a faster rate of growth than the growth of the overall housing stock.

The article has a number of clickable maps allowing you to check on the number of unoccupied homes in your area: chances are you won’t find many if you live in a capital city.

Housing choices for older Australians

Housing unaffordability is not some recent phenomenon. After decades of comparative stability, from the turn of this century the real (inflation-adjusted) price of housing has been rising. That means more and more people are finding themselves in rented accommodation as they age.

As Anglicare explains in its report Ageing in place: home and housing for Australia’s older renters “More older Australians are lifelong renters or returning to renting after a relationship breakup or job loss. Renting is no longer a temporary situation, only for students or young people”.

While the vast majority of older Australians want to live in their own houses as long as possible – a preference confirmed by a survey Anglicare conducted for this project – those who don’t own their homes generally lack the capital to buy into specialized retirement accommodation.

These difficulties are on top of problems faced by all renters in a market dominated by speculators with short-term financial interests and with little concern for people renting their property. The relationship is more a “landlord/tenant” one than a “supplier/customer” one.

One figure that stands out in the report is that 400 000 women over 45 are presently at risk of homelessness.

Anglicare seeks more investment in social and affordable housing, more options such as rental properties in retirement villages, and different models such as housing cooperatives.

The case for housing tax reform

All states and territories, except for the Northern Territory, apply a land tax based on the unimproved value of property, with one’s main residence generally exempted. And all, apart from the ACT, have value thresholds, below which no tax is payable. That threshold applies to the total value of properties held in the relevant state.

So for a property speculator the easiest way to avoid land tax is to spread one’s property investments among the states, keeping the total below each state’s threshold.

Crispin Hull, in an article that’s generally critical of our tax mix – Tax system off the rails – notes that the Queensland government has just changed the threshold arrangements so that they apply to the total value of properties in all states. Such is the nature of state tax competition that other states are sure to follow.

Hull, in common with many economists, is much more in favour of land tax, which is a form of wealth tax, than property transfer taxes, that fall heavily on those buying and selling houses.

The philosophy of housing

The ABC’s Philosopher’s Zone is running a three-part series on housing. The first 30-minute program is about “care ethics”, or how housing has become a financial commodity. The second is about rent in its general economic sense (as the return to the owner of assets that is not accounted for by a labour theory of value), but not specifically about housing.