Unfortunately, when it comes to housing prices, we are in a double bind in this regard. Not only is supply relatively inelastic (it takes a while to build up new stock), but so is demand (everyone needs a place to live).
Of course, for policymakers looking to stabilize prices, neither side of the equation is completely inelastic. We can facilitate the construction of properties and we can influence the amount of money people want to spend on housing.
We can do both. We just aren’t – at least not currently.
The good news is, the first step to fixing a problem is admitting you have it. And more and more, it’s something that both parties agree on.
In an article titled Housing: taming the elephant in the economy, Released last month, six housing academics who largely fall into the ‘demand’ camp point to the alarming statistic that homeownership rates for Australians under 35 have halved since 1995. “A system that increases housing costs for all Australians, which increases instability and decreases productivity, does not serve the nation well, ”they say.
Their document contains a list of high-level demands, including a royal commission on housing, the restoration of a ministerial-level housing minister, a standing housing committee to sit in the national cabinet, a national housing strategy. Commonwealth Council, a housing agency, a shift in stimulus funds to social housing, and an expansion of the Reserve Bank’s mandate to include “maintaining a more stable and functioning housing market.”
I would support all of this, including the royal commission. But Falinski balks at the idea, telling me, “The last thing Australia needs is another royal commission.”
But, again, he also vehemently agrees that more action is needed. “I think the problem has now become so acute that it needs to be addressed. There is now a core of people saying, “Look, we can’t just ignore the facts anymore. “”
What appears to be progress, only the facts – as always – are far from settled, Falinski insisting: “Everyone’s focusing on negative debt and capital gains tax, but the 800 gorilla books in the room is an offer.
OK, says one of the demand-side academics, Hal Pawson, of the City Futures Research Center. It may not be a royal commission, after all, but a high level Treasury review, like the Ken Henry tax review. “It needs to be reviewed by a body at arm’s length from government,” Pawson says.
So I texted Henry to see if he was up for it. He replied, “Jess. Sure. I would chair such a review. The question is whether we have a government that has the courage to command it. Ken. “
Call it an elephant, or call it a gorilla, what is crystal clear is that Australia’s growing housing affordability crisis is wreaking havoc on the quality of life of all Australians and it needs to be. stopped.