The Cost of This Housing Crisis
Alan Kohler's Quarterly Essay, 'The Great Divide'
News & Reviews Magazine
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The piece you’re reading now is by Astrid Edwards. Astrid is the host of The Garret: Writers on Writing and has interviewed more than 200 of Australia’s most prominent writers and publishers. She is a teacher in the Associate Degree of Professional Writing and Editing at RMIT University and sometimes judges literary prizes, including the 2023 Stella Prize. In 2023 she began a PhD at the University of Melbourne exploring potential and perceived barriers to publishing and selling climate fiction in Australia. In 2021 Astrid contributed to the anthology Growing Up Disabled in Australia and made her debut appearance on Q+A in 2021.
Astrid writes for News & Reviews Magazine every month. These are her last pieces, from the August, September, October, November, and December editions:
We all need a place to call home and we don’t all have it. Nor will we, given the state of policy and politics.
I moved from inner city Melbourne to regional Victoria in February 2022. The experience of lockdowns, the possibility of hybrid work, and the impossibility of buying a home in the city pushed my partner and I to bring forward a previously long-term dream—to move to the country.
We sold the tiny inner-city apartment that we bought seven years prior because the agent who sold our neighbour’s unit knocked on our door and offered to get us a great price. He did. It was enough for us to secure a deposit for a house, albeit not a house in a metropolitan area. I’m writing this to illustrate the vagaries of the property market. It benefited us but it no doubt hurt someone else in the process.
We are part of the problem.
We now have a mortgage in a gorgeous town one hour out of Melbourne with three (inside) cats and a dog on the way. We shop in the fancy bakery with the handmade blueberry tarts. We line up at 6am for our first caffeine hit of the day at the cafe catering to city folk. And we buy organic produce from the fancy shop when the vegetables I am learning to grow fail miserably.
With our city incomes, this is cheaper than living in Melbourne. But who lived in the house before us and where are they now? People like us have pushed up regional rents and mortgages, as well as the day-to-day cost of regional living.
How did Australia get to this point?
I turned to Alan Kohler for answers.
The Great Divide: Australia’s housing mess and how to fix it is Alan Kohler’s explanation of how we got here and how we might fix it. Kohler has been on TV for what feels like my entire life, and I heard his voice in my head as I read. I’m not known for recommending old white guys to read, but this essay is worth your time.
‘Education and hard work are no longer the main determinants of how wealthy you are; now it comes down to where you live and what sort of house you inherit from your parents.’
Kohler positions himself in the essay, explicitly stating what he, the child of working-class parents, was able to do in the 1980s that younger generations without inherited wealth cannot do. That difference is stark, and it adds emotional heft to what you may assume would read like a boring, no blame economic analysis.
Kohler’s point is that we can apportion blame. The banks don’t come out of this well. Nor does government, whether it be Federal, state or local. Kohler, armed with facts and a smidgen of humour, takes swipes at them all. The entire essay reads like this:
‘…local government planning decisions, which are, by definition, haphazard and unquantifiable but mostly aimed at keeping local councillors in a job by keeping the existing residents happy by making sure they don’t let in too many new ones.’
It is Kohler’s honesty (and that newsreader voice I heard in my head) that kept my attention. If you want a reminder of what Kohler sounds like, here he is looking ever the respectable money guy while dissing the RBA and Productivity Commission, as well as the idiocy of email and meeting culture.
What went wrong?
‘The politics of it is both simple and difficult: housing is a cartel of the majority, with banks and developers helping them maintain high house prices with the political class actively supporting them. Everybody involved in this game—home owners, banks, property developers and state and federal politicians—wants house prices to rise for their own reasons. Renters don’t stand a chance.’
It is way worse than high interest rates and inflation. It is decades of wrongfooted policies combined with decades of political failure. This is an entrenched disaster, with a few obvious missteps that are hard to unwind.
1. We stopped building public housing
Would you believe the specifications outlined in a 1944 report—that is not a typo, that reads nineteen-forty-four—required a better standard of housing than is bult today? Yes, the report was hopelessly gendered and required the kitchens to be ‘arranged in logical sequence in regard to their functions to minimise movements by the housewife’, but it also required every dwelling to be 4500 square feet (which is about 418 square metres). Kitchens big enough to cook in and personal space are not features of most rentals.
So, what happened? According to Kohler, ‘by 1978 the idea that public housing was a right for all had been fully dismantled. It had become nothing more than a form of welfare for the neediest’. No more (highly gendered) reports requiring public housing with liveable space, and instead whatever housing was built was poor quality and not maintained.
2. We built ‘crowded sprawl’
‘Berlin is one of Europe’s largest cities, with 3.9 million people in 892 square kilometres. Melbourne has five million people spread over nearly 10,000 square kilometres!’
Despite being one of the most sparsely populated countries on the planet, Australia managed to create a situation where most of us live in cities but don’t have access to the city centres. To make matters worse, we forgot to build enough trains, and by that Kohler means trains connecting the major cities, but more importantly for liveability and housing equity, trains connecting the regions to the cities efficiently. Why can’t the train from Bendigo to Melbourne take an hour (unlike the two and half it currently takes?) That technology has been around for decades.
3. We kept negative gearing and the first home-owner grant
I did not understand the mechanics of negative gearing until I read pages 54 and 55 of Kohler’s essay. I understand now, and damn selfish politicians looking to feather their own nests while stuffing the housing market up for the rest of us for decades.
Former Prime Minster Howard shoulders much of the blame here, but no politician comes out of this well. As Kohler states, no politician ever lost a vote for helping the value of a voter’s property go up, and that’s exactly what these policies do. Most politicians are unlikely to do anything to tackle housing affordability if that means doing so means bringing housing prices down.
4. And then there is immigration
The section on immigration is short but wild. Essentially, between 1948 and 2003 net overseas migration to Australia averaged 91,000 people per year. Due to changes put in place by Howard (yes, him again) net overseas migration averaged around 214,000 people per year between 2005 and 2020. According to Kohler, this was part of Howard’s ‘industrial relations strategy to crush unions and suppress wage growth, and the crackdown on refuges was deliberately designed to cover it—to make it look like the opposite was happening’.
Honestly, does that man’s legacy of bigoted ineptitude ever end? Not only did he implement racists policies, he failed on a practical level to plan for where this influx of migrants would live while also suppressing average wages.
The figures have only worsened over time. Australia’s population was 19.5 million in 2005 and 26.7 million in 2023, which represents an increase of 7.2 million people. But only 3 million new dwellings were built in that time. Assuming two people live in each dwelling, that is a shortfall of 1.2 million houses.
This background is horrendous. Am I the only one who didn’t know? We all need to know, as it is a significant contribution to the stressors on the housing market and it is not determined by housing policies or bank decisions. But I am uncomfortable about this section because immigration coexists with so many politicised areas of public life. Just look at what Howard did with it! It is easy to see how the pure facts as laid out by Kohler could be used by politicians of a certain stripe to dog whistle. You can imagine the headlines, all riffs off ‘go back to where you came from’ and ‘not in my backyard’.
The ‘Bank of Mum and Dad’ and other perverse outcomes
‘Australian homes have simply become too expensive for society to work normally.’
We all know it, but Kohler put a number on it. Within the last two years the ‘Bank of Mum and Dad’ lent $35 billion to their children. $35 billion. That makes parents with wealth the ninth largest ‘lending service’ in the country, with $35 billion presumably to be repaid to them but who knows how much of that ever will be. And wait for it—that $35 billion loaned doesn’t include the gifts that the Bank of Mum and Dad has been doling out! This intergenerational transfer of wealth (which is not inheritance, Kohler is describing an intra-family loan service) has not happened before; it is a starkly new phenomenon. It will take a few more years to figure out what the consequences may be, but already we know that this new distortion is going to make everything in the housing market even more inequitable.
This is not a social analysis, and Kohler is not a social scientist. He knows finance and economics. But he does touch on several perverse outcomes of a broken national housing market, including its contribution to the declining fertility rate (children are endlessly expensive, after all) and the increase in credit card debt (as people cancel credit cards to secure a mortgage and then max them out once they have them again). Housing policy and politics effects everything.
Consider the right to own a pet. Did you know only approximately 14.4 per cent of rental properties in Australia will consider pets? That is a damning figure, and it suggests pet ownership is becoming a marker of homeownership. How fucking punitive. I’m a case in point. My mortgage gives me the freedom to live with pets. I’m fully aware my mental health is fine because Joan Didion (one of my cats) is a living hot water bottle who chooses to snuggle up and purr by my side every night, all night. Among the mess that is housing in Australia, the idea of limiting access to pets and companion animals feels despicable.
What can we do?
Well, we need to elect new leaders at every level. Bear that in mind next time you vote.
But aside from that, Kohler’s argument is convincing, if maddening. Because no one will ever do anything to bring property prices down, average incomes need to increase to make renting and buying affordable. That is all fine and dandy until you remember that we are living in a period of high inflation, and if average incomes increase quickly they would push inflation (and the day to day cost of living) up further. So, if average incomes were to increase at decent but non-inflationary rate—say 4 per cent per year—and property prices stay the same, it will take eighteen years for housing to become affordable again.
Eighteen years. I don’t know what to write here. That may well be the solution, but it is not an equitable or liveable one.
Aside from waiting eighteen years, Kohler’s more immediate answer is trains. And he isn’t talking about superfast bullet trains, just the efficient European trains that do the job of getting people from the city to the regions and back again on time. This rings true to me as someone now intimately familiar with the regional train network and the state of the regional highways. I find my new regional commute less stressful than crossing from one side of Melbourne to the other in peak hour by a country mile. But if it rains too much or the temperature hits 35 everything becomes unreliable. Investment in an efficient regional train network would reduce commute times and increase the housing options available to people living in metropolitan regional, which is something we can achieve without waiting eighteen years.
What Kohler left out
I rate this essay, but there are three areas that I expected more from Kohler.
City slickers like me moved to the regions and created new inequities. Regional prices are cheaper than metropolitan prices whether you rent or buy, so everything looks like a bargain if you are leaving the cities. But this has consequences: those in the regions are priced out and forced to move elsewhere. This is unsustainable unless there is new, quality building stock in the regions that has access to not only transport but community areas and health care and education options. Trains are great, but decent long-term planning is needed too.
Women over 55 are the fastest growing cohort of people becoming homeless. Whether through family violence or relationship breakdown or death of a partner or whatever else, how this plays out in the housing market deserves analysis. What part of housing policy can address this extreme, gender-based inequity? Kohler doesn’t explore this, and let’s not forget, he gave pets a few pages. Older women deserve more.
And the one that terrifies me the most: the quality of housing stock and the increase in natural disasters. So many of us are living in buildings that are not fit for the changing environment. So many of us don’t even know what changes are likely to occur in the area that we live! I don’t even know what questions I should be asking, and I’m desperate for someone to explain the economics of it all to me.
‘The geographic wealth gap is being widened by climate change, as floods and bushfires make living in large parts of the country uninsurable and financially crippling, but many families have no choice but to stay where they are because those areas are low-priced and they can’t afford to move.’
I needed more from Kohler on the dynamics of the regions, housing prospects for women over 55 and the consequences of environmental catastrophe on our current building stock. Perhaps I was even hoping Kohler would explain the dynamics of how much I, as a mortgage holder who moved from the city to the regions, am contributing to the greater mess.
The Great Divide: Australia's housing mess and how to fix it
‘The fact that one of the three least populated countries on Earth contains the world’s second-most expensive housing is a national calamity, and a stunning failure of public policy.’
This is not the essay to read if you want to know what interest rates will do or which way inflation will trend. Nor does its value lie in the proffered solutions (which are going to take eighteen years even if we implement them now). Rather, the value of this essay is in understanding how we got here—a pernicious mix of poor policies and bad politics over decades that has created what amounts to an insane relationship with housing and property ownership.
Understanding how we got here and what role each of us play is a necessary—but not sufficient—step to overhauling the rigged nature of housing affordability in Australia.
I have a PhD in housing (impact of Airbnb on housing markets) & have many thoughts on city people moving to the regions, but have never heard of Howard’s immigration policies put that way! I must admit I’m a bit late to the party on this quarterly essay but I think I’ll be picking myself up a copy tomorrow! Thanks for this great article.
Also, on your concerns regarding climate resilience: I work in engineering and “resilience” is a buzzword that some players (developers, government, peak bodies) are making an effort to consider in new developments. However, there is no accountability to actually adopt recommendations found in a climate risk assessment. It feels like a box ticking exercise. Meanwhile, thousands of people in Lismore are still waiting to be paid their insurance claims for the flooding two years ago! It already is an economic burden that will just continue to worsen as more storms, floods and fires affect our homes.