A very readable essay as to Australia's current housing issues ('crises' in some people's views), its origins, characteristics and possible solutions.

Some interesting facts: Australia is both the world's fifth sparsest (3 people per square km) country whilst being the fifth most urbanised country with 91.9% of people being urbanites. And our urban areas, having grown mostly in the 1900s (later than Europe and the USA), have sprawled, particularly with the take up of cars, rather than relying on more densely populated cities and public transport (think London's Underground; New York' subway and Paris' Metro).

Kohler laments PM Howard's championing of home ownership, ignoring of government building public housing and support of private (mum and dad) investment in housing via allowing (Kohler believes) one of the world's more generous negative gearing schemes with significant tax benefits.

The rise of the bank of mum and dad (BMD) whereby baby boomers have financially assist their adult children to acquire their own homes leads, Kohler cogently argues, to 'the great divide' between those whose parents are able to assist in that way and those who cannot.

Kohler cannot see that abolishing or even winding back negative gearing is realistic any time soon, as being akin to political suicide for any government which tried.

Spends 70 pages describing the problem and then devotes at most 16 pages on solutions (though even some of those pages are less about solutions and more about why some of the solutions are unlikely to be politically viable.

Without going into detail as to specific aspects of the solutions, Kohler advocates:
- changing capital gains tax concessions so it was available only to new builds, reducing the discount to 25% (from the current 50%)
- linking net immigration per year to the capacity of Australia's construction industry eg by limiting net immigration to say 2.5 times the number of new housing approval per year for ever
- motivating local governments to approve denser residential development, particularly in major cities middle circles
- investing in fast trains to widen the housing catchment for commuters

One of the good aspects of Quarterly Essays is that the following issue includes commentary from a range of people and the authors reply. Having read those already, it is clear that there remains a divergent range of views as to whether Kohler is on the right track and as to the viability of those (and other) mooted solutions.

We remain some way from seeing the end of this. But Kohler's essay and the following commentary is a useful starting point for anyone wanting to think more about the issues.

Big Ship

9 April 2024 ( )