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Denying Young Australians A Stake

Fred PawleJuly 6, 2022

Our schools teach children that their country has been a hotbed of racism, misogyny, homophobia and environmental destruction ever since it was founded by colonial tyrants 244 years ago.

Whether this is a fair assessments of our nation’s history is debatable. But there is one society-wide crime, which is beyond debate, that the teaching fraternity conveniently overlooks.

Why? Because they are, on average, among the perpetrators of it, and their students are among the victims.

The crime is housing affordability.

If I was a young renter, this would be the injustice on whose hill I’d die, not those feeble mounds based on false outrage about largely fictional past atrocities. Nothing else would matter because home ownership is, for most ordinary people, a central requirement to a good life.

I single out teachers because, in their haste to indoctrinate children with confected moral outrage in lieu of a traditional education, they are misinforming younger generations about false injustices and not informing them about an actual one. But, in fact, teachers are only a tiny subset of the people who perpetuate this intergenerational theft.

Australian households divide neatly into three almost equal categories: those who own their home (32 percent), those who are paying off a home (35 percent) and those who rent (32 percent).

It’s only a slight generalisation to say that those groups correlate with age, the older demographics owning outright, middle ages having a mortgage, and the final, youngest group paying rent to those among the other two groups who are lucky or smart enough to also own an investment property.

You don’t need to attend suburban dinner parties to know that the first two groups are often preoccupied with how much passive profit they have made from their investments lately, and how equity in the home has financed their latest new car or holiday. All you need to do is read the front pages of newspapers whenever mortgage rates are raised by a fraction of a percent, reducing the already-narrow margins many property owners live on from month to month.

This is the result of arguably the most profound social shift in Australia since World War II, which has significant consequences for our culture and our national security.

It was only a few generations ago that Australians saw their homes as predominantly sacred places, not investments. In his famous ‘Forgotten People’ speech of 1942, Robert Menzies, Australia’s longest serving prime minister, described it this way: “My home is where my wife and children are. The instinct to be with them is the great instinct of civilised man; the instinct to give them a chance in life – to make them not leaners but lifters – is a noble instinct.”

There was a consensus then, among both ordinary people and their elected representatives, about the communal benefits of as many people as possible owning the home in which they raised their children. According to a 2020 report by the Australian Housing and Urban Research Institute, homes in the 1950s and 60s were “purchased cheaply from rising real incomes earned in a stable and secure labour market and financed with regulated, low interest loans.”

British academic David Donnison said enviously in his book ‘The Government of Housing’ in 1967, “Australians are among the best housed people in the world and they are perhaps the most equally housed.”

That started to change in the early 1980s, when the economic reforms of the Hawke-Keating governments enabled foreign banks to eventually make home mortgages more competitive and flexible. People started to use equity in their homes for other purposes, like cars and holidays. And the houses themselves became indicative of status and lifestyle. For better or worse, they stopped being primarily the sacred place Menzies described where married couples raised children.

People who bought houses in Melbourne in 1982, the year before Bob Hawke became prime minister, and still own them now, have effectively quadrupled their money (in real terms) for little or no effort. In Sydney, the same people have seen the value of their asset triple.

This increase in personal wealth might not be earned, but it is fiercely defended.

Labor found this out at the 2019 federal election when it quite reasonably proposed reducing the ever-increasing number of investors from the market, thereby lowering house values to a level that young people and families might afford.

The response from the Real Estate Industry of Australia rang alarm bells that Labor had naively not foreseen: “Economists say that if the planned changes to negative gearing do go ahead, property prices will fall.” That phrase, “property prices will fall”, is electoral kryptonite, which is one of the reasons why Labor lost in 2019 and why at the last election both major parties proposed policies that pretended to address the issue while carefully avoiding any prospect of a dreaded decline in property values.

Labor’s was the most unwieldy, essentially offering to pay for up to 40 percent of a young person’s new house and recouping it upon sale. It was the sort of policy that makes a great campaign soundbite, but quickly becomes a bureaucratic nightmare when the vicissitudes of life are applied. What happens in the case of the owners divorcing, and one keeps the house? How do you compensate for renovations? What if the place burns down?

This, and other state government programs, which offer marginal relief from onerous stamp duty provide employment for public servants but do little to improve the lives of voters, let alone encourage them to buy a home and start a family.

The solution is simple: increase supply.

This is how it worked in the 1960s and 70s, as Australians aged over 50 will fondly recall. Governments did not obstruct the development of new suburbs back then because there was a consensus that widespread home ownership benefited everyone.

But increasing supply to match demand will reduce prices, and the majority who own or have a mortgage now will not tolerate that. We are less of a nation as a result.

This has one other consequence that affects us all. In March, the Institute of Public Affairs asked 1,000 Australians if they would defend the country in the event of an invasion like the one Russia had just made on Ukraine. Overall, 28 percent said they would rather flee, which is startling enough. But the younger the respondent, the more likely they were to choose to flee: 38 percent of those aged 25-34, increasing to 40 percent of those aged 18-24. You can see why.

Menzies called owning a home having “a stake in the country”. Would you fight to defend a nation that seemed to block you having a stake in it?

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