House on Fire
‘The strength of a nation depends on the integrity of the home’ (Confucius)
If the state of the housing sector was being ranked by our fire risk rating, it would be pointing to ‘catastrophic’.
The hopes and dreams of young aspirant first-home buyers are up in smoke, and stressed-out mortgagees are feeling the intense heat of RBA’s twelve rate hikes, the fastest tightening cycle on record. The majority of these mortgagees are families living on the suburban fringe, further widening the gap between the haves and the have nots.
This current housing crisis has been a generation or two in the making, and is now a large, complex and system-wide problem that has stymied all levels of politics to find, and coordinate between them, an appropriate response. The solution will be decades in the making, requiring sacrifices and policy reform well beyond what the current 3-year election cycle and political bargaining is able to bear. Meantime, the implied contract between generations to leave the world a better place for our kids, and their grandkids, continues to break down. Add in climate change targets being missed and the compounding costs associated with the energy transition and you get a very angry and disillusioned younger population that threatens to sap the nation’s strength and belief in itself.
In the pre-war era, we learned from one of our mutual clients, Futurity, that around 50% of Australians were associated with building societies, mutuals and credit unions to get a leg up into the housing market, or to protect themselves through mutual insurance products that collectivised risk and investment between members. As mutuals or credit unions, profits were loaned out to new members, or passed on in the form of cheaper premiums. These co-operative and mutual financing options have since been eclipsed by the gradual individualisation of products (e.g. Super) and the steady demutualisation and privatisation of assets for over the last century, and to our detriment it would seem.
According to a recent UNSW paper, co-operative housing models popular in Scandinavian countries, as an example, are obvious options once we value housing as a human right, and not an investment class. No surprise then that the peak for cooperatives and mutuals, the BCCM, believes its members rank finding a solution to the housing crisis as their number one priority, and getting access to more impact capital is key. It is interesting to note that several of the Australian ‘demutualised’ entities (e.g Colonial, AMP) spun off philanthropic Foundations and that the very large Community Trusts sector in New Zealand evolved from the demutualisation of its regional banking model. Philanthropy, including some of these Foundations, is leaning into the problem and leading or catalysing various initiatives to address homelessness and housing, putting both granting and investment capital to work and looking out for specific communities at risk like women escaping domestic violence.
But the supply side problem is way bigger than the relatively niche solutions philanthropy can fund, even if they collectively set aside 10% of total investible assets to social housing investments which would only amount to $5bn of a +$200bn problem. And to put those figures in context, spare a(nother) thought for the +100,000 homeless people in Australia at any one time, and the $17bn price tag it would cost to address their plight (as reported in one of the last editions of the much-loved, and much-missed, ProBono bi-weekly newsletters).
On the demand side, first home grants schemes seem to have been largely ineffective while new arrangements regarding land tax are being rolled out in Victoria increasing the cost of ownership. A client of GoodWolf is looking at the special case of housing ‘essential workers’, and the ever-longer distances they have to commute as teachers, nurses, emergency workers from the remaining homes they can afford. HOPE Housing has piloted a shared equity scheme in NSW to co-invest alongside qualifying essential workers into a home situated closer to where they work, and previously beyond their financial means, and is now planning to roll this model out more widely with the support of impact capital. Shared equity schemes, and other initiatives that allow cooperatives and other forms of pooled investment and risk are critical to countervail the implications of the ‘Bank of Mum & Dad’, a genetic lottery further distancing Australian society from one of its founding values: ‘equality of opportunity’.
State governments are scrambling to assemble plans and pull ‘every possible lever’, but building homes with a construction industry that is self-immolating will push out delivery timetables by years, and we’re already 400,000 units behind in aggregate supply already before the anticipated spike in net migration to 400,000 people and the gradual return of an estimated 600,000 international students. As the Federal Government’s Social Housing Fund legislation stalls in The Senate and threatens a potential double-dissolution election, The Greens are piling on the pressure to get capital flowing into social housing construction as ‘the party of the renters’.
The Feds found another $2bn allocation for a social housing accelerator fund, and the Victorian State Labor Party passed a motion at its recent conference to recognise housing as a human right. Protecting and strengthening renters’ rights has (finally) arrived as an issue of national importance. With 30% of Australians now living in some form of rented accommodation, this proportion is expected to rachet up slowly over time as the Australian dream of ‘the ¼ acre block, a Hills Hoist and a Tarago in the driveway’ fades away into sepia tones. In the next generation or so, we could feasibly see 50% of Australians renting as the ‘new normal’ in some of our major cities.
We have learnt what protecting these renters’ rights entails through our recent work with TenantsVic, a specialist community legal centre that has fervently protected the rights and interests of renters for over 50 years. Like its namesake in NSW, TenantsVic is experiencing unprecedented demand for its specialist legal services and support for renters, further stoked by the pandemic and its aftermath, and most requests for support and advice are going unanswered. TenantsVic has put their service model and delivery platform under the spotlight to examine how best to innovate and grow into this overwhelming responsibility, and to assist the growing phalanx of desperate renters out there in the market. They recently launched their Winter Appeal, and we urge you to give it your due consideration and support.
This rights-based approach will be critical to remind us on what’s most important here, and what is at stake for us all. Aligning and coordinating the many initiatives required to unwind the concentration housing ownership on one hand while incentivising greater investment in affordable housing on the other requires our common commitment to fairness and equality. Housing remains at the bedrock of our social economy.
And as Confucius reminds us, “the strength of a nation derives from the integrity of the home”.
We’re interested in your thoughts on who you see leading and coordinating efforts to design for social and environmental good when it comes to this housing challenge. And what role can philanthropies and the for-purpose sector play in this design process?
Please get in touch. Simon@goodwolf.com.au