Here's why there is not any real progress being made on housing affordability.
Every Australian who owns a home or flat, which is the majority of us, earned an additional $82,648, on average, from the appreciation of their property over the last 12 months. Since only half of that amount is subject to taxes, this amount exceeds the average wage.
According to the ABS, there are 11.1 million residences and the total value of the residential stock at the end of March was $10.7 trillion, which is $917.4 billion more than it was a year earlier.
Since there is a total of $2.3 trillion in mortgage debt, the equity of Australian home owners went from $7.5 trillion to $8.4 trillion, resulting in a 12-month capital gain of 12%.
The value of Australian real estate has increased by 10% over the past five years, which is significantly more than the sharemarket's yearly return of 7.4%.
As secure as homes
Any politician foolish enough to expose that gravy train would be damned.
They are not foolish, either, so if you own a home, do not worry: housing will not be made more inexpensive. Anything that costs anyone money, much less the vast majority of population, is not politically feasible.
Since the median house price in Australia has doubled over the last 25 years as a multiple of average weekly earnings, from four to eight times, it means that the drawbridge to the castle of home ownership, in which the majority of voters are contentedly ensconced, has been pulled up: Only those with a boat to cross the moat can gain access to it.
Australian society has deteriorated due to a catastrophic failure of government policy at all levels.
The actual problem
In the metaphor, the "boat" refers to both a deposit and a wage that is significantly more than normal, as well as access to the parents' house equity.
A person with an average weekly income would still have $500 left over each week even if they were able to obtain the $150,000 down payment and then borrow $625,791 (80% of the purchase price) to purchase the median-priced home. With two children, a full-time job, and average weekly incomes, a couple would have $867 a week left over for groceries, clothing, utilities, and health care. Insufficient.
Renting is not much better these days. The average couple with two children living in the median rental in Australia now earns about $1000 per week after rent and child care, as the median rent has reached a record high of $627 per week.
Due to the insufficient and disorganized housing supply, the expense of housing is generating a generation of insecure renters and working poor.
Possible remedy
For housing, there must be some sort of counterpart to the Australian Energy Market Operator (AEMO).
That is, a more robust National Housing Supply and Affordability Council that employs its own personnel rather than the Treasury secretariat it currently uses.
The National Electricity Market is, of course, managed by AEMO, which is not possible with the national housing market. However, a major issue with housing is that supply decisions are scattered and unrelated to demand.
The task of studying the national housing market and making sure it is balanced, as AEMO does with energy, falls to no one. AEMO "worked with more than 1300 stakeholders, produced 60 presentations and studies, and examined more than 110 submissions from business, consumer, and community leaders and governments" in order to prepare the 2024 Integrated System Plan.
If the cost of the house itself is prohibitive, what good is it to go to such lengths and make sure that every household has adequate reasonably priced gas and electricity?
Temporary rentals
First, the rise in short-term rentals (STRs), particularly Airbnb, at the expense of long-term leases would present a challenge for a new Australian Housing Market Operator (AHMO).
Grounded, a group that promotes community land trusts, has conducted a thorough analysis of STRs in 13 areas and discovered that their profits are 80.9% higher than those of long-term rentals.
It makes sense that investors are moving their properties from long-term rental services to Airbnb.
According to Karl Fitzgerald of Grounded, short-term rentals accounted for 74.2% of the new housing supply in the markets he examined, and Airbnb currently makes up roughly 35% of the rental supply pool.
Fitzgerald proposes the implementation of a "Locals First Airbnb Cap 'n Trade" system, which would limit the number of licenses granted and cut it by 5% every two years until the ratio of short-term to long-term rentals was restored.
As the supply of licenses decreased, their value would rise and they might be traded. Karl Fitzgerald wants the income to go toward shared equity projects led by local communities, such as community land trusts.
Complex equilibrium
However, it is obvious that the government needs to control the balance between short-term and long-term rents more forcefully, regardless of how it does it.
A 7.5% fee on short-stay properties has been proposed by Victoria, but it appears to be uncertain and would only slightly alter the situation nevertheless.
The transition from long-term to short-term rental homes is a national issue that requires national attention.
Legislation to provide tax incentives for "build to rent," or when institutions construct housing to own and rent for a long time, is one measure the federal government has announced to increase the supply of rental properties.
This kind of housing makes up 5% of the housing supply in the UK and 12% in the US; in Australia, it makes up 0.2% since developers may sell the plan to people for a higher price thanks to negative gearing and the capital gains tax reduction.
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