Affordable Housing: a fresh lens

 

Speech: ‘Affordable Housing: a fresh lens’

Tim Wilson

Human Rights Commissioner

Australian Human Rights Commission

University of NSW

10 June 2015

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Thank you.

I’d like to extend a special thanks to Tim Horton for organising this discussion. If I am not mistaken this discussion commenced after my address to the National Press Club in February of this year.

In my Press Club address I raised the importance of property rights as part of the human rights dialogue. By property rights I mean a form of title over an asset (physical or intellectual) that gives the owner the opportunity to exploit its’ value.

When we talk about property rights we are not talking about a right to property. I’ve no doubt it will be unpopular, but Joe Hockey is fundamentally right. Owning your own home is a consequence of employment and hard work. Banks will be able to tell you that the biggest risk to people repaying their mortgage is not interest rates, but people losing their jobs.

A lot of people struggle with the idea that property rights are part of the human rights discussion. The easiest way to demonstrate the importance of property rights to human rights and human progress is to see where they are denied: Aboriginal and Torres Strait Islander peoples.

For over 200 years Aboriginal and Torres Strait Islander peoples have been denied their lands. Half finally secured them and found the legal title afforded under native title is not useful for driving the economic development they need to enjoy the social and welfare gains that can only be achieved through prosperity, including the basic human necessity of housing.

Two weeks ago my colleague, the Aboriginal and Torres Strait Islander Social Justice Commissioner, Mick Gooda, and I hosted a major meeting of Aboriginal and Torres Strait Islander leaders to discuss the importance of their freedom to exercise property rights.

The meeting was historic for two reasons: it was the first time that the Indigenous leadership had met for about 15 years; and there was a clear agreement that the freedom to exercise property rights is central to their future economic development.

That meeting consented to the development of a work program, led by the Commissioner Gooda and myself, to target areas that will improve the capacity of Indigenous communities to exercise their property rights.

What we are seeking to do with Aboriginal communities is give them the freedom that has underpinned the economic opportunities that we enjoy, and underpins our standing of living; but we take for granted.

While the problems of property rights denied in Aboriginal communities are acute, the comparable legacy for the rest of Australia is expansive and less direct through issues such as housing affordability.

Understanding the importance of economic freedom is essential for any discussion on addressing the challenges of housing affordability.

The issue is relatively straightforward. We have an ever increasing population through birth rates and migration, and nowhere near the supply of housing on the type and location that is in demand. When demand exceeds supply, prices rise.

Of course it is more complex than that. The cost of housing is affected by numerous factors:

1. Environmental and safety standards, among other forms of regulation.

2. The price of land in capital cities.

3. Land supply and release.

4. Tax that stops transactions.

5. Foreign investment into the property market.

6. Planning restrictions that undermine development.

Property rights are central to addressing these issues. For the most part land is in short supply precisely where we need it. While some is publicly owned, most is privately owned. If people want to live near established capital cities we need people to do more with their land. That means the freedom to utilise their property rights and develop land that meets the demands of the marketplace.

One of my great bug bears is that the solutions proposed, particularly by developers, is more high-rise housing. But also the concurrent objections of many people who live in low-rise housing in areas that equally support high-rise, without any recognition that if you protect existing suburbs from sensible staggered development it means that growth will be affected.

That is not a one-size fits all option:

• In some suburbs where there is no existing development near CBDs, high-rise is viable and cost effective for new housing developments, say Sydney’s Pyrmont.
• In other areas it is churning low-density housing into medium-density housing that can increase the volume of housing in geographically tight spaces, especially near major infrastructure, say Melbourne’s South Yarra.
• And in other areas there may be no land supply issues, but housing affordability is difficult because of limited skills, the high costs of labour and geographic isolation, as well as connections, say Halls Creek in Western Australia.
• We also need property that accommodates different times of people’s life cycle. The reality is that people only need large homes at certain stages of life, predominantly when they are raising children. A particular challenge is accommodating changing needs that reflect intergenerational challenges such as converting existing facilities, such as garages into flexible home spaces, or the addition of granny flats that mean a family across generations can live in the same space to reduce overall demand.

No one of these problems can be easily addressed. But all involve increasing the freedom to exercise property rights by allowing the market to respond to demand. The alternative is the market cannot adapt and housing supply remains inflexible to changing conditions.

So what are the barriers? Some of the barriers are already driven by the market, such as access to capital. I am not a great believer in trying to fiddle with the market. When you do people always find a way around regulations, or at least the rich do because they’ll be able to afford it. Equally, it is almost impossible to fight the market.

My focus is predominantly on the artificial barriers we create that stop the development of housing: such as planning regulation and zoning.

Despite my strong belief in private property and a market economy I am not a let-it-rip person. The reality is that Australians expect others to operate in a fair and just way. You can’t just build high-rises in an existing low-density suburb.

But equally we need to be much more reasonable about the binding nature of planning regulation and how it can lead to NIMBYism.

Many years ago I ran for Melbourne City Council. At the time there was a real rental crisis. And when I mean rental crisis I’ll put it to you this way: I was 28, I was earning around $100,000 a year and I was sleeping on friends’ couches because I couldn’t rent anything.

I doorknocked the Melbourne City Council area and spoke to people in East Melbourne and Jolimont. If you know those areas they are very low density, but beautiful suburbs. At the time I heard two complaints, normally from the same people: housing affordability and development. I often explained that the two go hand-in-hand and that if you strongly oppose development you’ll get a reduction in supply and an increase in prices. Let’s just say I lost the election (though not by much).

We also have to let people utilise the potential of their assets everywhere. The idea that we are stopping people using new electronic media, such as Air BnB, to enable them to increase the occupancy and use of their homes is absurd and foolish.

Whether it is the rental market or short stays, technology is the only way we are going to efficiently fill the gap to utilise existing assets and match supply to demand. Equally, it is an important way to provide the opportunity for people to create revenue streams to address rising prices.

What we need is a fresh, multi-disciplinary approach to achieve housing affordability, guided by:

1. Respect for private property owners to develop their land.

2. Utilising the potential of existing land to improve the volume of housing stock.

3. Efficient regulation that shifts the burden back toward development.

4. Restrictions on the use of private property to be proportionate to the harm it causes others.

5. More entry points into the property market that allow for a graduated mix of the type and tenure suited for different stages of people’s lives.

6. Renewed building codes and regulations based on contemporary need that allow for the flexible use of structures over time.

7. Development of housing structures that reduce cost and can adapt to an existing built environment.

8. Taxation regimes that reflect transaction costs rather than a form of government revenue stream, especially for a principal residence; and do not stop transactions.

9. Financial products that match potentially innovative housing options to improve ownership and investment in supply, including gateways for people to take easier first steps into the market.

10. Taking a risk-management, rather than a risk avoidance, approach to the role of technology to help increase the use of existing assets.

11. Increasing the volume and quality of stock on the private market to address housing affordability for all.

And I think that last point is extremely important.

A few years ago a group called Australians for Affordable Housing were formed to lobby and campaign on the issue. But in practice they were only looking at the issue from a narrow lens: social housing.

There are problems with homelessness and the underprivileged being able to access housing in Australia. That is not in question. But our preference should always be to improve the volume on the private market.

The problems at the bottom end of the market are broadly best resolved by addressing the needs of people who can afford housing in its different forms. The more people that can move into the housing they want, whether rented or owned, the more it reduces the cost and burden for those who are less well-off.

Housing affordability has been topical for many years. To be frank, I think many Australians who own homes are only coming to grips with how significant the challenge is through the lived experience of their children. 

You all play a part in finding a solution:

• Planning officials have a role in modernising planning regulations to streamline decision making and improve efficiency to stop the expensive cost of delay.
• Architects have a role in thinking about how to design housing that can meet different spaces and sections of the housing market.
• Developers have a role in working with architects and the design community to develop affordable housing options that are also liveable.
• We all have a role in improving understanding amongst the public on the relationship between one form of housing policy and the impact it has on the marketplace.
  
   

More importantly, we all have a role in working together to develop an approach that governments can defend against the vested interests that plague discussion.

Thank you.