WEBVTT - Why Albanese won't solve the housing crisis 0:00:01.320 --> 0:00:09.160 I'm Daniel James and you're listening to seven AM. The 0:00:09.200 --> 0:00:12.080 Government says it wants to make it easier for Australians 0:00:12.080 --> 0:00:14.840 to buy a home. Its latest expansion of the five 0:00:14.840 --> 0:00:19.200 percent deposit scheme means almost anyone, regardless of income, can 0:00:19.239 --> 0:00:21.480 now buy a home with a fraction of the usual 0:00:21.480 --> 0:00:25.080 savings required for a deposit. It's the boldest version yet 0:00:25.239 --> 0:00:29.200 of a policy first introduced under the Morrison government. But 0:00:29.320 --> 0:00:33.839 behind the promise of affordability is a political calculation. There 0:00:33.840 --> 0:00:36.320 are far more votes to be won from rising house 0:00:36.360 --> 0:00:41.480 prices than from cheaper homes. Today, leading economists solely slake 0:00:41.800 --> 0:00:45.440 on Labour's home buying scheme while similar policies have failed 0:00:45.440 --> 0:00:47.879 in the past, and what it would really take to 0:00:47.880 --> 0:00:55.480 fix the housing crisis. It's Wednesday, October eighth. 0:01:01.040 --> 0:01:04.520 From today, more young Australians will be able to get 0:01:04.560 --> 0:01:07.720 the keys to their first home quicker, and instead of 0:01:07.760 --> 0:01:11.600 paying off someone else's mortgage, they'll be paying off a 0:01:11.680 --> 0:01:12.920 home of their own. 0:01:13.080 --> 0:01:16.680 Sol Labor's expanding Scott Morrison's five percent deposit scheme where 0:01:16.680 --> 0:01:18.600 the government backs you to buy a house with a 0:01:18.640 --> 0:01:22.440 smaller deposit than you would usually need. So how are 0:01:22.480 --> 0:01:25.200 they actually broadening who can get it. Well, what the 0:01:25.240 --> 0:01:30.679 government's proposing is that there be no income test. 0:01:31.760 --> 0:01:38.120 Second, that the price caps that set maximum values of 0:01:38.240 --> 0:01:42.360 homes that can be purchased using the scheme will be 0:01:42.760 --> 0:01:47.080 significantly increased to for example, one point five million in 0:01:47.120 --> 0:01:51.920 Sydney and one million in Brisbane down to say six 0:01:52.000 --> 0:01:56.800 hundred thousand dollars in Hobart. And thirdly, that there will 0:01:56.800 --> 0:01:59.880 be no cap on the number of people who can 0:02:01.040 --> 0:02:04.480 take up the scheme. So the government's intention is that 0:02:04.680 --> 0:02:09.160 a significantly larger proportion of first home buyers will be 0:02:09.280 --> 0:02:12.160 able to buy homes with deposits of as little as 0:02:12.200 --> 0:02:13.560 five percent months. 0:02:13.560 --> 0:02:17.160 Because we're absolutely determined to do everything we can to 0:02:17.400 --> 0:02:22.400 fast track home ownership, fast track improved number of rentals, 0:02:22.440 --> 0:02:24.840 fast track social ownership. 0:02:24.919 --> 0:02:27.480 And obviously this plan is all about getting more Australians 0:02:27.480 --> 0:02:30.480 into the housing market. Given you'll need less money to 0:02:30.520 --> 0:02:33.119 get in, it will make it easier. So if that's 0:02:33.160 --> 0:02:35.800 the goal, then will it be a success? 0:02:36.440 --> 0:02:40.160 Well, if it actually happens, then the answer would be yes. 0:02:40.720 --> 0:02:45.240 But while people will be able to access mortgage finance 0:02:45.320 --> 0:02:50.040 with smaller deposits than previously, the criteria that banks apply 0:02:50.720 --> 0:02:54.280 in determining to whom they lend and how much they 0:02:54.280 --> 0:02:58.079 are willing to lend still apply, and those rules are 0:02:58.160 --> 0:03:03.119 typically something like a maximum on the value of the 0:03:04.040 --> 0:03:08.320 loan as a multiple of the borrower's income, and secondly 0:03:08.960 --> 0:03:12.560 a ceiling on the proportion of the borrower's income that 0:03:12.919 --> 0:03:16.680 can be applied to debt service payments, that is, interest 0:03:16.720 --> 0:03:19.959 and repayments of principle, and the banks are also required 0:03:20.000 --> 0:03:24.800 by OPRA, the bank regulator, to stress test their customer's 0:03:24.919 --> 0:03:28.520 capacity to absorb an increase in interest rates of three 0:03:28.560 --> 0:03:32.440 percentage points. Now those will still apply. What their scheme 0:03:32.480 --> 0:03:37.080 will therefore do, I think is help those who arguably 0:03:37.160 --> 0:03:42.120 have the capacity to borrow anyway, to borrow more than 0:03:42.160 --> 0:03:46.040 they'd otherwise be able to, sooner than they might otherwise 0:03:46.080 --> 0:03:49.880 be able to, and thus get into home ownership quicker 0:03:49.920 --> 0:03:52.800 than they might otherwise have been able to do. That's 0:03:52.840 --> 0:03:56.440 why the government says that although on paper it might 0:03:56.480 --> 0:04:00.720 seem this is open to all commers, in practice the 0:04:00.840 --> 0:04:03.240 number of people who will be able to take it 0:04:03.320 --> 0:04:06.720 up is likely to be somewhere between about thirty and 0:04:06.720 --> 0:04:08.280 fifty thousand a year, so. 0:04:08.240 --> 0:04:11.320 It's basically fast tracking people that would eventually be in 0:04:11.360 --> 0:04:12.560 a position to buy house. 0:04:13.120 --> 0:04:17.599 That's my interpretation office, and what that means is that, 0:04:18.680 --> 0:04:22.440 like almost every other scheme that governments have come up 0:04:22.480 --> 0:04:27.039 with ostensibly to assist first home buyers get into the 0:04:27.120 --> 0:04:32.120 property market, it has as its core enabling people to 0:04:32.160 --> 0:04:36.920 spend more on housing. Whilst the supply of housing remains, 0:04:36.960 --> 0:04:41.160 as economists say, relatively inelastic, that is, underresponsive to changes 0:04:41.160 --> 0:04:44.159 in demand in the short term, then the inevitable result 0:04:44.240 --> 0:04:47.400 is going to be higher prices. Now, the government concedes 0:04:47.680 --> 0:04:50.640 that it will result in higher prices, but says, based 0:04:50.640 --> 0:04:54.320 on Treasury modeling, that the increase will be just zero 0:04:54.320 --> 0:04:56.960 point five percent over a five year period. 0:04:57.480 --> 0:05:01.480 But already one hundred and eighty five one thousand Australians 0:05:01.480 --> 0:05:06.040 have benefited from this scheme with minimal impact on prices. 0:05:06.040 --> 0:05:10.520 Treasury did modeling. They suggest a very small increase. 0:05:10.680 --> 0:05:13.440 Do you trust that number that that modeling the suggests 0:05:13.440 --> 0:05:14.920 it's one point five percent increase. 0:05:15.400 --> 0:05:19.240 That's a good question. It's important to note that Treasury's 0:05:19.360 --> 0:05:25.320 modeling is referring to the median priced house across Australia's 0:05:25.320 --> 0:05:29.359 capital cities, whereas, of course the typical first home buyer 0:05:29.400 --> 0:05:32.400 does not buy the medium price house, he or she 0:05:32.640 --> 0:05:36.160 They typically buy a property that is less than the 0:05:36.200 --> 0:05:40.279 median priced house because the median price includes the houses 0:05:40.400 --> 0:05:43.480 bought by people who are trading up and investors and 0:05:43.520 --> 0:05:49.640 so on. So other analysis, including work done by Nick 0:05:49.680 --> 0:05:53.000 Grohman and Gene Tunney for the Insurance Council of Australia, 0:05:53.040 --> 0:05:57.160 who obviously aren't particularly happy about this scheme because it 0:05:57.200 --> 0:06:00.400 in effect is pushing them out of what has been 0:06:00.400 --> 0:06:03.720 an important business for some of their members. They argue 0:06:03.720 --> 0:06:06.159 that this scheme will push up the price of houses 0:06:06.279 --> 0:06:09.600 or apartments that typical first home buyers buy by between 0:06:09.640 --> 0:06:11.640 three and a half and six and a half percent 0:06:12.040 --> 0:06:19.200 over a somewhat shorter period, and history would suggest, going 0:06:19.279 --> 0:06:23.040 back to the first first Homeowners Grant scheme introduced by 0:06:23.040 --> 0:06:27.080 the Menzies government in nineteen sixty four, that anything that 0:06:27.200 --> 0:06:30.080 allows Australians to spend more on housing than they'd be 0:06:30.120 --> 0:06:33.800 able to otherwise, as this scheme will enable some Australians 0:06:33.839 --> 0:06:37.080 to do, results in more expensive housing, and the result 0:06:37.120 --> 0:06:40.200 of more expensive housing is that fewer people can afford 0:06:40.400 --> 0:06:40.920 to own it. 0:06:44.040 --> 0:06:58.280 Coming up, why house prices will just keep rising? As 0:06:58.279 --> 0:07:00.640 you've alluded to. So there have been many schemes in 0:07:00.680 --> 0:07:03.360 the past to assist first home buiers. Can you walk 0:07:03.440 --> 0:07:06.200 me through what we've seen in the past and what 0:07:06.279 --> 0:07:08.240 impact have had on the housing market. 0:07:08.600 --> 0:07:12.560 Yeah, I mean, it's not a coincidence that Australia's home 0:07:12.600 --> 0:07:16.800 ownership rate peaked at the first census that of nineteen 0:07:16.880 --> 0:07:20.720 sixty six after the introduction of the First home Owners 0:07:20.720 --> 0:07:23.520 Grant Scheme or Home Savings Grant Scheme as it was 0:07:23.560 --> 0:07:26.560 called by the Menzies government in nineteen sixty four, and 0:07:27.040 --> 0:07:31.600 perhaps as an interesting footnote to history, Bob Menzies promised 0:07:31.640 --> 0:07:34.880 that scheme at the nineteen sixty three election at the 0:07:35.120 --> 0:07:37.800 urging of the New South Wales Young Liberals, who's president 0:07:37.800 --> 0:07:40.280 at the time as John Howard and of course later 0:07:40.360 --> 0:07:44.560 on as Prime Minister. John Howard insisted when the GST 0:07:44.800 --> 0:07:50.240 was introduced that state governments give first home owners grants 0:07:50.280 --> 0:07:55.440 of seven thousand dollars, initially including to purchases of established homes, 0:07:55.440 --> 0:07:58.600 even though established homes were subject to the GST. So 0:07:58.800 --> 0:08:02.239 John Howard threw out his career, was always a believer 0:08:02.800 --> 0:08:06.000 in schemes that have at their heart giving cash that 0:08:06.160 --> 0:08:08.560 would be first home buyers so that they can spend 0:08:08.560 --> 0:08:10.720 more buying the home that they're going to buy. And 0:08:11.160 --> 0:08:13.840 the result of all of this has been that the 0:08:13.880 --> 0:08:17.080 overall home ownership rate has declined by about six percent 0:08:17.080 --> 0:08:20.360 each points between the nine and sixty six census, when 0:08:20.400 --> 0:08:23.560 it peaked at seventy two percent and the twenty twenty 0:08:23.600 --> 0:08:27.400 one census, taken during the middle of COVID. That decline 0:08:27.440 --> 0:08:32.880 doesn't sound very much, but it concealed some enormous divergences 0:08:32.880 --> 0:08:36.880 in home ownership rates among age groups. And that's because 0:08:37.200 --> 0:08:40.000 the home ownership rate among people aged sixty five and 0:08:40.040 --> 0:08:43.959 over hasn't changed very much over the last fifty five years, 0:08:44.440 --> 0:08:47.439 but the proportion of the population who was sixty five 0:08:47.480 --> 0:08:51.400 and over has increased enormous. The home ownership rate among 0:08:51.520 --> 0:08:57.960 people aged under thirty has fallen to where it was 0:08:58.000 --> 0:09:02.120 in nineteen forty seven, the home ownership rate among people 0:09:02.360 --> 0:09:05.680 in their forties has fallen back to where it was 0:09:05.720 --> 0:09:08.680 at the census of nineteen fifty four, and the home 0:09:08.720 --> 0:09:12.120 ownership rate among people aged between forty five and fifty four, 0:09:12.160 --> 0:09:16.040 who were not exactly young by conventional standards, is back 0:09:16.080 --> 0:09:19.040 to where it was in the early nineteen sixties, and 0:09:19.600 --> 0:09:25.000 overwhelmingly the cause of this huge decline in home ownership 0:09:25.120 --> 0:09:28.880 rates among people under the age of say, fifty, is 0:09:28.960 --> 0:09:32.080 the result of a culmination of policies that all three 0:09:32.160 --> 0:09:35.520 levels of government have pursued over the last sixty years, 0:09:35.760 --> 0:09:39.320 which have had the effect of restraining growth in the 0:09:39.360 --> 0:09:43.640 supply of housing and inflating the price of housing. 0:09:44.280 --> 0:09:46.760 So why is that so? Why did politicians ultimately want 0:09:46.840 --> 0:09:48.439 house prices to keep rising. 0:09:48.600 --> 0:09:51.880 Politicians of all stripes know that in any given year, 0:09:52.040 --> 0:09:55.240 there's only about one hundred and ten thousand people who 0:09:55.240 --> 0:09:58.680 become first home buyers each year, and even if you 0:09:58.760 --> 0:10:02.520 assume that forever one who succeeds, there's five or six 0:10:02.520 --> 0:10:05.440 who'd like to but can't, that's still fewer than a 0:10:05.600 --> 0:10:11.400 million votes for policies that would restrain or halt escalating 0:10:11.440 --> 0:10:16.280 house prices. Whereas politicians also known that at any point 0:10:16.360 --> 0:10:18.800 in time, there are eleven million Australians who own their 0:10:18.840 --> 0:10:22.040 own home. There are more than two million who own 0:10:22.200 --> 0:10:25.160 at least one investment property, And even though those two 0:10:25.160 --> 0:10:28.920 groups overlap a fair bit, that means probably twelve million 0:10:29.000 --> 0:10:32.319 votes for policies that would keep house prices going up. 0:10:32.360 --> 0:10:35.440 Preferably at a faster rate than incomes or inflation, which 0:10:35.480 --> 0:10:38.120 is what's been happening over at least the last thirty years. 0:10:38.280 --> 0:10:40.920 So you know, on the one hand, fewer than in 0:10:40.960 --> 0:10:44.080 a million votes for policies that might actually stop house 0:10:44.080 --> 0:10:47.959 prices going up, as opposed to eleven or twelve million 0:10:48.000 --> 0:10:50.400 for policies that would keep house prices going up. Even 0:10:50.440 --> 0:10:52.880 the dumbest of our politicians can, as the Americans say, 0:10:52.920 --> 0:10:55.440 do that math, and they do at every election and 0:10:55.520 --> 0:10:58.920 between every election, which is why you see politicians keep 0:10:58.960 --> 0:11:01.839 coming up with schemes whose ultimate effect is to keep 0:11:01.880 --> 0:11:05.240 house prices going up. And I'll give both mister Albanezi 0:11:05.559 --> 0:11:09.120 and mister Dutton, the previous opposition lader, credit for being 0:11:09.240 --> 0:11:12.400 honest enough to admit that during the recent election campaign 0:11:12.440 --> 0:11:14.920 they both set in different ways that they want house 0:11:14.960 --> 0:11:18.240 prices to keep going up. Even though the election was 0:11:18.280 --> 0:11:21.479 ostensibly about the cost of living, and the biggest component 0:11:21.640 --> 0:11:23.840 of the cost of living is the cost of housing. 0:11:24.080 --> 0:11:27.040 They didn't actually want to solve the problem because they 0:11:27.080 --> 0:11:30.760 know that a very large majority of Australians don't want 0:11:30.800 --> 0:11:32.160 the problem to be solved. 0:11:32.480 --> 0:11:35.080 The government does say it's working on supply. They have 0:11:35.160 --> 0:11:38.320 a target of one point two million new homes by 0:11:38.400 --> 0:11:41.319 twenty twenty nine. So how far do you think that 0:11:41.400 --> 0:11:43.840 will go to addressing the supply side of the equation. 0:11:44.280 --> 0:11:47.440 Well, I certainly want to give the government credit for 0:11:47.679 --> 0:11:51.480 the attention it's paying to the importance of boosting supply, 0:11:52.000 --> 0:11:55.840 and they're certainly trying hard to meet the targets that 0:11:55.880 --> 0:12:00.240 they have set, including by giving the states more money 0:12:00.480 --> 0:12:03.760 for the construction of social and affordable housing. One of 0:12:03.800 --> 0:12:08.240 their election promises was to finance the construction of one 0:12:08.320 --> 0:12:11.480 hundred thousand new homes over I think it was five 0:12:11.600 --> 0:12:16.440 years for sale to first home buyers using, among other things, 0:12:16.840 --> 0:12:21.800 under or disutilized government land. And they're also offering the 0:12:21.840 --> 0:12:26.080 state's what are in effect bribes to encourage them to 0:12:26.600 --> 0:12:29.440 reform their zoning and planning laws with a view to 0:12:29.480 --> 0:12:32.760 speeding up the construction of housing. So that's all helpful 0:12:32.880 --> 0:12:36.880 to boosting the supply of housing. But it's difficult, and 0:12:37.200 --> 0:12:41.400 it would appear that the increase in housing supply is 0:12:41.440 --> 0:12:44.200 going to fall short of the government's targets. The Governor 0:12:44.240 --> 0:12:47.920 of the Reserve back made that ont specifically, so you know, 0:12:48.000 --> 0:12:50.360 as I say, I give the government credit for the 0:12:50.400 --> 0:12:53.960 efforts it's making to try and boost housing supply, but 0:12:54.120 --> 0:12:57.800 it is hard, and in the meantime, what they're doing 0:12:57.840 --> 0:13:00.880 is boosting the demand for housing. And the result of 0:13:00.920 --> 0:13:03.400 more expensive housing is that the people who already own 0:13:03.440 --> 0:13:05.920 it get richer, and the people who don't own it 0:13:06.160 --> 0:13:08.520 find it increasingly difficult to join that club. 0:13:09.200 --> 0:13:12.079 So you said, most people don't want to house prices 0:13:12.120 --> 0:13:14.960 to go down. So is it possible to solve the 0:13:15.000 --> 0:13:19.320 housing crisis without housing prizes being impacted in some way? 0:13:19.559 --> 0:13:22.880 Well, I don't think it is, and that's why ultimately 0:13:22.960 --> 0:13:26.640 I'm very pessimistic that the problem will ever be solved. 0:13:26.760 --> 0:13:30.040 You know, it's not going to be solved until one 0:13:30.559 --> 0:13:35.240 or more of three groups of people my age become 0:13:35.280 --> 0:13:38.200 a majority of voters. And that is first of all, 0:13:38.320 --> 0:13:41.560 people you know, baby boomers and the like, who are 0:13:41.840 --> 0:13:46.760 altruistically concerned at the diminishing chances of their own children 0:13:46.800 --> 0:13:53.480 or grandchildren becoming homeowners. Second again, people around my age 0:13:53.480 --> 0:13:57.920 and older who are annoyed at having to be the 0:13:57.960 --> 0:14:00.880 bank of mom and dad or to go garran tore 0:14:01.000 --> 0:14:03.920 on their children's or grandchildren's loans when they'd rather use 0:14:03.920 --> 0:14:07.480 the money they have to fund their own retirement. Or thirdly, 0:14:07.559 --> 0:14:10.400 again people my age who are seek and tired of 0:14:10.440 --> 0:14:14.559 their late twenty and thirty year old kids still living 0:14:14.559 --> 0:14:17.000 at home, expecting their laundry done, their meals cooked, and 0:14:17.040 --> 0:14:19.000 a blind eye turned to whoever they bring to the 0:14:19.000 --> 0:14:22.160 breakfast table of a morning. And all of those groups 0:14:22.240 --> 0:14:25.600 are increasing, and I think, to be fair the proportion 0:14:25.680 --> 0:14:28.800 of baby boomers who are genuinely concerned and is made 0:14:29.280 --> 0:14:32.520 at the difficulties their own children and their peers are 0:14:32.520 --> 0:14:35.880 facing becoming home otters. But nonetheless they're clearly a minority. 0:14:36.480 --> 0:14:40.480 So politicians keep saying that they want house prices to 0:14:40.640 --> 0:14:44.160 keep going up because they know that that's what a 0:14:44.240 --> 0:14:47.880 majority of voters want. And you don't get yourself altnan 0:14:48.160 --> 0:14:51.880 to government by telling a very large majority of voters 0:14:52.000 --> 0:14:53.280 that they can't have what they want. 0:14:55.880 --> 0:14:57.800 So it's like, thank you so much for your time. 0:14:58.560 --> 0:15:06.040 That's a pleasure. 0:15:06.080 --> 0:15:09.720 Also in the news, Australian politicians stopped in question time 0:15:09.800 --> 0:15:13.160 yesterday to mark the two year anniversary of the October 0:15:13.200 --> 0:15:17.160 seven attacks on Israel. Prime Minister Anthony Alberici said it 0:15:17.240 --> 0:15:19.640 was a day of pain and terror for Jewish people 0:15:19.800 --> 0:15:23.200 around the world. Adding that Australia has consistently been part 0:15:23.200 --> 0:15:26.240 of the international pressure for a ceasefire in Gaza, the 0:15:26.320 --> 0:15:29.680 return of hostages, and for aid to flow to Palestinians. 0:15:31.400 --> 0:15:34.440 And new details have emerged of allegations made by Australian 0:15:34.480 --> 0:15:38.480 activists detained by Israel after attempting to bridge its naval 0:15:38.480 --> 0:15:42.880 blockade of Gaza. Hundreds of activists, including seven Australians and 0:15:42.920 --> 0:15:46.760 Swedish climate campaign at Greteth Thumburg, were arrested and detained 0:15:46.800 --> 0:15:49.920 after they were intercepted by Israel's navy off the coast 0:15:49.960 --> 0:15:53.160 of Gaza late last week. Australian members of the Global 0:15:53.200 --> 0:15:57.880 Seward Flotilla have reportedly complained to diplomatic officials of serious 0:15:57.880 --> 0:16:02.280 mistreatment by Israeli authorities, including physical beatings in a quote 0:16:02.560 --> 0:16:06.640 dystopian prison environment. Thanks for listening to seven AM. We'll 0:16:06.640 --> 0:16:07.360 be back tomorrow.