• Millennials and the Australian housing market: How to understand the complexities of both. (iStockphoto/Getty Images)Source: iStockphoto/Getty Images
"Perhaps it’s time, if we want to do more than sling avocado at each other, to ignore these mainstream accounts and consider the two hotly debated and related topics—young people and housing prices—with a little more patience and care."
By
Helen Razer

19 Jul 2017 - 4:06 PM  UPDATED 19 Jul 2017 - 4:40 PM

If you want to understand the generation known as “Millennial”, the first thing you must do is avoid most news accounts. As popular press largely has it, this age-range is, but for a few entrepreneurial exceptions, full of selfie-taking, avo-smashing kidults who wouldn’t know a hard day’s work if the words “A Hard Day’s Work” appeared as latte art on the vegan drinks they order for days on end, in preference to finding a job.

If you want to understand the force known as “the housing market”, the first thing you must do is avoid most news accounts. As popular press largely has it, there’s not a whole lot to understand. Property is a good investment and one that all hard-working people will eventually be able to make if they quit ordering avocado lattes from their smartphones in an Uber. The price of houses just “naturally” goes up and this market, like all markets, will find its equilibrium. Stop complaining. Things will sort themselves out.

The proportion of people who rent and do not, and cannot, buy is higher than it has been in decades. Homelessness, which now afflicts younger people sharply, is on the rise

But Millennials, like all humans, are complex and defy the easy descriptions applied to them in nonsense headlines. And the housing market is, unlike some other markets, really, really difficult to explain and understand. So, perhaps it’s time, if we want to do more than sling avocado at each other, to ignore these mainstream accounts and consider the two hotly debated and related topics—young people and housing prices—with a little more patience and care. Especially if we want societies that afford the right to young people, and all people, to secure housing.

Insecure housing in Australia is a problem. The proportion of people who rent and do not, and cannot, buy is higher than it has been in decades. Homelessness, which now afflicts younger people sharply, is on the rise. Also increasing is the wealth of the small investor class, the power of lending institutions to affect our economy and housing prices themselves. If you want, you can say that these facts are unrelated and the ascent in both widespread poverty and concentrated wealth are all down to certain kinds of people being lazy and entitled.  Australian commentators have said, and still do say, the same sort of thing about migrants, asylum seekers, students and Aboriginal and Torres Strait Islander peoples before, so why not say it about everyone who can’t afford secure housing?

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You can say that. You can say that the market is a naturally balanced force that gives everyone opportunity if only they work hard enough. But, then, you might find it hard to explain this strange lack of equilibrium: on Census night, more than one million Australian homes were vacant.

There are one million houses without residents. It’s difficult to argue that the housing market can deliver balance when things are so lopsided.

This is a trend in national economies organised similarly to our own. The US, a great innovator in the field of economic inequality, has many more vacant homes than it has homeless people. Both house price and housing insecurity continue to rise in the UK, and never was there such a stark illustration of the divide between the investor class and the growing class of insecure people, now more likely to be young, than the Grenfell Tower fire.

There are one million houses without residents. It’s difficult to argue that the housing market can deliver balance when things are so lopsided.

This atrocity, which a resident’s action group had been warning of for years, struck a building of low-income people who happened to be living in their nation’s richest postcode. The UK Labour Opposition leader Jeremy Corbyn suggested the use of the many vacant investment properties in the area to accommodate the newly homeless poor. A majority of British people were found to support this emergency solution. Still, the survivors, many of whom are young, angry and intelligent, remain in budget hotels, often far away from the neighbourhood in which they had lived. And they’re the lucky ones. Others have been kicked out.

To say that such a horrific thing could not occur in Australia is naïve. To deny that a slower, less visible kind of horror is not already happening is to ignore the fact of one million vacant homes, and a growing class of people who cannot secure what should be a right: certain, safe and secure housing.

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“What is to be done?” becomes an inevitable question not only for anyone with a beating human heart, but anyone who doesn’t fancy the idea of stepping over bodies on the way to the shop. The answer, unfortunately, demands that we ask many questions.

Chief among these is “why the high cost of housing?”. This has been asked, especially by many young people, and answered in part. Negative gearing and capital gains tax concessions are a part of the price rise—and, gee, it makes me happy that young people are reading about such boring stuff in an effort to bring about change. But another big and often unexamined reason for the rise in investment property owners and the inevitable downturn in home ownership—not everyone can be a landlord, right?—is the power of our lending institutions.

Goodness, I know there are way more fun things to read about than banks and shadow banking. But if we want to understand the one million vacant houses, and how to fill them with life, we need this diagnosis.

You can read a complex, but still very readable, account by the economist Ann Pettifor in her book The Production of Money. But here’s the simple version: lending institutions have extraordinary influence in determining the value of houses. They say, “Yes. We have decided we can get away with lending you this amount” and they do this in Australia, although not in all nations, with very little oversight.

...if we want to understand the one million vacant houses, and how to fill them with life, we need this diagnosis.

So it’s not a matter, over time, of the house price being determined by what people are prepared to pay. It’s what banks are prepared to lend. Which, as we saw in the Global Financial Crisis of 2007-08, can be one heck of a lot.

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Just as traditional economists are reluctant to describe Millennials as anything more than lazy avocados, they are reluctant to explain how leverage determines the price of an asset. And, yes, I am aware that the sentence “leverage determines the price of an asset” is probably the most tedious you are going to read all week.

But, hey. Think about how truly tedious it will be if our policymakers continue to ignore the influence of banks and other lending institutions and just keep saying “the house price is determined by what people are prepared to pay!” Few things are more tedious than widespread poverty.

And few things, in my view, provide greater evidence of a market in shutdown than one million houses built with human skill that are not filled with human life. These “assets”, which may not even be worth the bother to investors of renting out, are our right. And, darn it, it’s our duty to keep on asking the big and boring questions until we can demand that right for all. 

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