Housing is not working. Time for a big rethink

An eviction notice taped to a door.

The coronavirus pandemic has revealed big problems in how our private rental housing market works and focused a spotlight on homelessness. But it could also help reshape our approach to housing.


The Australian private rental market is characterised by some of the shortest leases in the world, and populated with often-petty, small-time landlords and private letting agents, says Professor of Urban Policy and Director of the Centre for Urban Research at RMIT University, Jago Dodson.

That combination means that many of our most vulnerable citizens, such as low income and insecure workers, are at great risk of homelessness at times like this.

With landlords now being forced to re-negotiate loans with their bank, and in the face of potentially widespread rental and mortgage defaults, a delicate conversation has begun between banks, governments, real estate agents, landlords and tenants.

But our overly complex housing system is proving “very fragile” in the face of an unexpected and hugely disruptive force such as COVID-19.

Dodson says that jurisdictions with larger social housing sectors, such as those in Singapore and parts of Europe, are proving more resilient.

This is because it’s easier for governments to enforce action on public health measures by mandating rent holidays.

Dodson says the pandemic might, in fact, trigger a rethink in how the housing market is structured, and perhaps lead to a more robust public housing sector.

“One pay check away from arrears”

The virus has exposed the stark reality that many renters are “one missed pay check away from rental arrears”, says Joel Dignam, executive director of renter’s advocacy group Better Renting.

His organisation’s coronavirus response so far has been split between the immediate and medium-term problems facing renters, as well as the longer-term issues and what this pandemic has revealed about the housing market.

The Australian eviction process is “more flippant” compared to other jurisdictions, with evictions possible “a lot faster in Australia than elsewhere” says Dignam.

The pandemic has also highlighted landlords’ lack of resilience; many of them are  “absolutely dependant” on every rental payment coming through…just one missed rental payment away from defaulting

The pandemic has also highlighted landlords’ lack of resilience; many of them are  “absolutely dependant” on every rental payment coming through.

“They are one missed rental payment away from defaulting,” he says.

Dignam hopes these conditions might be enough to spark change in the housing market, starting with tax reform that removes negative gearing and other settings that tend to disproportionately advantage wealthy investors.

“These tax settings push up [property] prices for everyone, including the property investors at the lower end, with most of the benefits going to the wealthiest people.”

We need to start talking about better and more public housing, he says, but adds that it is “very hard for governments to intervene in a market that is so atomised, with each landlord typically responsible for one unit of housing”.

When more people are housed by the state it’s much easier to adapt to a crisis or changing conditions, he says.

Private rental market not all bad

Dignam says the pandemic will not necessarily signal the end of the private rental model, and says too that it’s not impossible to create a fair and workable private rental system.

Landlord registers, which are used in other countries to help monitor private landlords and ensure they can responsibly let property, is one initiative that could improve the model.

“I think [the existing private rental model] could be made to work better and be more resilient.”

The COVID-19 crisis also raises questions about the quality of existing housing stock and its impact on health.

“Overcrowding is a real risk, homeless people are really at risk,” he says.

  • Read more about Australia’s approach to affordable housing here

And better quality affordable housing will make a “huge difference” to preserving the health of the population, he adds.

The risk of underinvesting in affordable housing  

Robert Pradolin, founder of Melbourne based not-for-profit Housing All Australians, was advocating for the elimination of homelessness and housing affordability issues well before COVID-19 hit.

The former general manager of Frasers Property Australia says that shelter is a fundamental human need and if it is not provided there will be unintended social and economic consequences.

But he notes that there has been minimal growth in the supply of Australia’s public housing compared with the rate of increase in private housing stock.

“The homelessness we see in our streets today is the direct result of a lack of investment in public, social and affordable housing by successive governments over several decades,” he says.

Why don’t we build more affordable housing and stimulate the economy at the same time?

The coronavirus pandemic has made homelessness an issue that can’t be ignored, says Pradolin, but he sees an opportunity to use cleverly formulated housing policy to stimulate the economy while increasing the supply of high quality, sustainable affordable housing.

“It would be great to activate the construction sector using housing as infrastructure and at the same time create housing that’s effective for all Australians.”  He adds that there’s a huge opportunity to change development to favour more equitable outcomes, such as growing the build-to-rent asset class.

One novel option at the fingertips of the Commonwealth government is leasing out Crown land to super funds and other developers for build-to-rent projects at a rate that allows the economics to stack up.

He says build-to-rent has failed to take off in Australia because government settings make it unattractive to developers, which typically need to get a return on the land they’ve built on.

One novel option at the fingertips of the Commonwealth government is leasing out Crown land to super funds and other developers for build-to-rent projects at a rate that allows the economics to stack up.

The advantage of using Crown land, Pradolin explains, is that the federal government doesn’t need state government approval, allowing for rapid deployment once Australia emerges from the pandemic.

Such a program would need tight design and construction parameters based on best practice.

He envisions a rolling pipeline of build-to-rent projects built by the private sector along best-practice sustainability principles, and via engagement with the community and local councils, to get the best outcomes.

Land would be returned to the government after 40 years (the lease length recommended by Treasury), with improved assets.

Pradolin argues this type of housing scheme is a “no-brainer” as a way of boosting the economy and creating meaningful jobs post-COVID.

“If you do that, the private sector will see a pipeline, a definitive timeline they can plan around.”

He says super funds are likely to jump on such an opportunity.

“You don’t need developers for build-to-rent – as soon as you do one, all the super funds will follow.”

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Comments

5 Responses to “Housing is not working. Time for a big rethink”

  • Borisovna says:

    The budget office estimates that $14.5bn in tax breaks are given to landlords each year. The government has skewed a fundamental human right (shelter) to be an investment asset and locked out a whole generation from being able to purchase a home and have security and community.
    The oldies who bleat about hard working mum and dad investors are ignorant at best and greedy and self serving at worst.

  • Vickie Edwards says:

    Sorry, Rob but have to disagree with you, many landlords are not wealthy but are trying to invest their money to help them have a reasonable retirement without the support of the government. Under supply and demand [people chose where they can live and how affordable it is to them. Social housing is available – while there is a waiting list I think a review of how affordable housing is provided is badly needed. Building ‘blocks’ of social housing on crown land – interesting thought but this well-used model of affordable housing areas can be detrimental to society and also the tenants .

  • Susan McRae says:

    Building traditional 3 bed houses or units are not suitable for many. Too expensive and over engineered for many tenants to maintain.They want simple maintainable housing, access to services and social contact. Time to consider large blocks like aged care units with small bedrooms sitting rooms bathrooms and kitchens but block to have canteen nursing station recreation area and a management care team to support tenants. Cheaper to build per occupant but provides social support and medical oversight if required. Many homeless do not take meds or eat properly. Time to be honest with public about their needs. Lets build a trial block. Community would love it.

  • Fred Pakon says:

    Always more calls for more social housing despite it working nowhere in the western world. The problem with housing costs is supply and demand. Allow more house to be built at a low cost (which would require not complying with all the sustainability and accessibility requirements currently put on buildings) and prices will fall in some areas. When people want to live in specific areas they will pay to do so. If travel is long, people wont do it, they will vote with your feet and not take nursing or teaching jobs miles away unless it is paid to be worth it.

    Also, please get over the myth that negative gearing increases housing prices. Negative gearing is a subsidy for tenants who currently give landlords a ridiculously low return on the capital cost of housing. Get rid of it and rents will rise and supply will fall.

  • Margaret says:

    Completely agree with Rob Pradolin. If essential employees like nurses and teachers can’t afford to live less than 1 hour to 90mins each way from their work (as my son does – ICU nurse), they won’t stay in that job long. The balance is all wrong – and employers are paying the price in higher than necessary turnover of employees. It’s the old mantra of socialising loss and privatising profit, which is not sustainable at either an economic or societal level.

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