Renters & Housing Union

Written by RAHU member Matt Bolin

As I write this article, I must confess I am myself a victim of our housing crisis, unable to secure a rental in our private rental market successfully and deemed not disadvantaged enough for our social and public housing sector. It’s a difficult crevasse I’ve fallen into and despite not being close enough to the mouth out of it yet I am determined to climb out of it no matter how uphill the climb.

The current housing crisis we are facing is one of the biggest we’ve seen in generations. Homelessness is almost at great depression era heights and no doubt will continue to spike before it reduces, It would be a fair comment to say this government and successive governments have failed to foresee this potential recipe for disaster as a subsequent result of short-sighted policies and excess indulgence on the whole concept of investment property wealth in Australia. Whilst we can easily blame whoever inherits the office and the mess in front of them it’s important that we also understand the history of Australia’s
obsession with property to prosperity and how this situation of misfortune occurred through more than simply chance before we have any hope of being able to fix it.

Australia as we know it currently (although disputed) started in 1788 with Governor Arthur Phillip
arriving with the first fleet of convicts, bringing with them the idea of British colonisation. The land was
unlike many Brits were used to, it was hot, sometimes dry and rigid in terrain, Work was intense labour
designed to break even the most strong-willed convict, if you would like to see the remains of this early
existence for yourself visit Port Arthur penal colony in Tasmania.

As more people from the United Kingdom were sent to Australia as a convict or decided to make the voyage as a free settler in the early 19th century it wasn’t too long before pastoral land was granted and dwellings were carved up (without any genuine consideration for the Indigenous population who were already residing on the land or their concerns ) then sold to settlers. Australia was one of the last remaining frontiers for Europe. It provided many people with an opportunity to start a new life and build a society. The gold rush accelerated this trend, attracting many people not just from Europe but also from China in the hope of achieving prosperity. With the Gold Rush Boom changing the landscape and global  impression of Australia shortly afterwards then came access to credit from European banks and financial organization’s leading to investment based on speculation, overseas banks and building societies commenced pouring money into infrastructure. This is partly the reason places like Sydney and  Melbourne have some of the more grandiose and elegant buildings in the central business districts remaining today. Many of the inner-city houses and workmen’s cottages owe their beautiful existence to this financial scheme which shaped the 1870’s 1880’s era of the colony. To bulldoze or vandalise these iconic landmarks would not only be a crime in a court of law but also a crime culturally.

In these early days of the colony three types of ways to build wealth were certain, mining, agriculture and property. All of which required land trade to flourish. Many politicians and premiers in Victoria of the day had a mutual agreement with the financial sector which was the government had no business interfering in this business. This attitude is what would go on to inspire the neoliberalist movement in the 1980’s, however that’s another article within itself.

It was a period of decadence particularly in Victoria during the 1870’s and 1880’s. This all came to a sharp halt though in the early 1890’s when foreign banks felt they were not seeing a return on their investment and began pulling out of investing in Australia. We faced a market crash; the gold began to dry up and we were thrown into a decade-long depression lasting until federation. We experienced a banking crisis in 1893 with many prominent banks announcing a holiday then subsequently collapsing. Victorian premier at the time James Munro had building societies of his own based on speculation which he also invested in personally. In 1893 when the collapse was in one of its worst peaks a heavily in debt Munro resigned and asked his cabinet ministers to appoint him to the post of agent general in London. As soon as he left the mess which he helped to create there was wide protest by investors who placed their faith in his company to deliver a return which subsequently lost everything. He was convinced to return to Victoria from London to face the music, declaring bankruptcy and even being knocked unconscious one evening by an angry member of the community who was in financial ruin thanks to Munro’s building society outside Parliament House

The 20th Century arrived, federation was established and so did a fundamental shift in culture and policy. Australia became a society committed to Protectionism, Regulation plus Tariffs were put in place and the free market decadence of the 19th Century was mostly hosed down. Mutual societies were created and State-Owned Banks appeared along with private banking. All these State banks and Mutual societies were progressively privatised and demutualised in the 1990’s. Both Successive State, Federal Labor and Liberal governments were the culprits.

One might ask how we developed such controversial schemes to attach to our housing market like negative gearing and the whole ‘mum and pop’ property investor. This leads me to my next section of the article, negative gearing.

Negative Gearing is a practice of enabling property investors to offset their losses on their property against their income taxes effectively reducing the amount needed to pay. Negative Gearing was first introduced in Australia in the 1930’s to help mitigate a housing shortage and provide incentive for property investors to in simple terms build more houses. Over the course of generations that followed it gained popularity within Australian culture as a tax minimisation strategy. The subsequent result though was an imminent increase in property prices. Investors subsequently minimising their tax were prepared to pay more for property thus driving prices up.

Whilst in the final quarter of the 20th century there were attempts to restrict and cap negative gearing by governments, this was met with strong opposition from investors. It caused the government to retract these initiatives and reinstate negative gearing to its original form. The neoliberal era starting from 1983 in Australia remaining to present day allowed for the expansion of much of these practices including the removal of ceilings on how much banks were allowed to loan out which helped avoid asset bubbles with the same philosophy as Victoria prided itself on in the 1870’s and 1880’s. The government has no business interfering in this business, it creates investment, wealth, jobs and encourages building of housing .That might be a valid argument except for the fact what many economists fail to consider is the toll on the well-being of society, the integrity of a nation, the subsequent feudal like set-up where people inherit positions of power based on which family they were born into enabling a different head start to others, the sky-rocketing house prices and uphill battle many new home-buyers plus renters face entering the market.

A method introduced in the 1930’s to remedy a housing crisis in turn has been a strong creator of another housing crisis within itself. Capping negative gearing is no easy task as history has shown whilst craved for by many of us including myself it is often met with strong opposition and stridently opposed by the Australian public when attempted to implement; just ask Bill Shorten who pledged to address the issue at the 2019 federal election. Whilst personally I remain hopeful, eventually some politician will be successful in reforming this in my opinion flawed setup, it would be naive of me to think that this can simply be solved by somebody I like being elected to office who will then create the equality we all deserve smoothly, because of capping or abolishing the scheme. To fix this issue and our current housing crisis is going to require thinking outside the box, imagination, politicians who are prepared to stick their neck out put their position on the line for their people, not self-interest. Above all else though, the most important tool required is patience. These are long term complex strategic problems government must create a plan for beyond the next election, policies that are crafted to gain refinement with time like a South Australian wine, not short-sighted decisions which crash and burn after being
voted in again.

Why Australians are so obsessed with property is something for the readers to ponder, could it be we would prefer to make an income by charging rent so we can spend our time on doing the things we love?

Is it that we make it so easy in Australia to take advantage of this scheme whilst making it an uphill battle to secure investment and stability in other sectors like our manufacturing industry (what’s left of it at least) which provides employment to millions of Australians, job stability and bolsters our national security to ensure we remain self-sufficient and less vulnerable to supply shocks?

Or is it simply because investing in property is what many of our parents and grandparents and theirs have been doing since colonisation?

The bottom line is that with 236 years of Australia (since the first fleet) and an obsession with placing stock into property this infusion doesn’t unentwine itself because of one abhorrent housing crisis. If we don’t learn from these reckless tragedies though then we won’t get any closer to one day preventing them happening.

References

• https://searchpartyproperty.com.au/how-property-investing-has-evolved-in-australia/
• https://en.wikipedia.org/wiki/Australian_property_market
• https://www.capitl.com.au/a-brief-history-of-property-gearing-in-australia
• https://en.wikipedia.org/wiki/James_Munro_(Australian_politician)
• https://en.wikipedia.org/wiki/Federal_Bank_of_Australia