HOUSING UNAFFORDABILITY - CITY AND COUNTRY

I just recently heard a story on ABC radio about housing affordability (or lack thereof) in mining towns. We have all heard about the housing affordability problem in our major cities, and most of us have grown to accept it, although there's no justification for it. Similarly sized cities in the US have much lower land prices, and always have, even before the burst in the "real estate bubble" there. If we heard what prices were in the US at the height of this bubble, we'd be laughing or dumbfounded at what's considered expensive there. In Nevada, which was among the states most affected by the boom and subsequent bust, median home prices went from $150,000 in 2000 to $300,000 in 2007, before dropping (http://www.usatoday.com/money/economy/housing/2011-03-26-nevada-real-estate.htm). Yet, over the long term, home prices in the US have remained remarkably stable, according to the graphs on this page (bearing in mind that the peak in 2005-2006 was corrected by the subssequent bust). Median house sale prices now sit at arount $200,000 in the US.

Yet in Australia, it's a very different story. In the land with "boundless plains to share", people are struggling to afford a tiny block on the outskirts of one of our major cities. Median house prices in Australia's capital cities range from around $300,000 in Hobart to around $500,000 in Sydney. Yet, even in remote mining towns, where these boundless plains are most accessible, we have seen prices rise to the point where residents of those towns were quoted as saying, "I just don't understand how anyone can afford to live here if they don't work in [the mining] industry". While some resort to desperate measures such as sleeping in caravans, others take the fly-in, fly-out option, choosing to spend days away from their families rather than fork out the money to live close to their workplace.

While it's easy to blame these prices on the mining boom, price is always determined by supply and demand, not purely by demand. The problems these towns have is the same problem that our cities have - the supply just isn't keeping up with the demand. So what is stopping someone subdividing the relatively cheap land around these towns, selling the blocks for slightly less than the going land prices in the town, and making handsome profits from their enterprise? Such a process, if allowed to continue, will quickly bring prices back to more realistic and affordable levels.

There is only one plausible explanation for the current situation - and that is excessive government regulation of land release. Whether it be in a small mining community or in a large city, it's the government (usually state or territory government) that manages the release of land for housing. As the monopoly supplier of land, the state governments of Australia have abused their monopoly power for their own profit - through land tax, stamp duties, and the sale of land for housing.

This "tax by stealth" is doing immeasurably more harm to the Australian people, economy, and family life, than any other tax a government has brought in (or considered bringing in) in recent times (carbon taxes included). Most of this harm is dead-weight loss, the states see relatively little of it come into their coffers. The loss comes in the form of high household debt levels (leading to high national debt levels, higher interest rates, and lower levels of business investment) and mortgate stress and its associated pressure on family life (especially when both parents have to work to make ends meet). The current generation of young Australians may get very disillusioned with this system, facing a far harder climb to home ownership than the one their parents faced. This is one of the most serious problems our generation faces, and one that we, as young Australians, must stand up and do something about.

I'd say that governments in Australia can't be trusted to supply affordable land anymore. Not in the city, and not in the country. While they should be trying to encourage development and growth of remote communities, governments are once again sitting on their hands, content to do nothing substantial to fix this problem. I'm beginning to think that we need to start pushing for deregulation of land release, giving all landowners the right to subdivide their land. The government should ensure subdivision is properly planned, but should not stop it outright. It's time to break the government monopoly over land release. How else are we going to improve and maintain housing affordability for future generations of Australians, and keep the Australian dream of home ownership alive?