Who should we believe?

Last week, former prime minister John Howard said he didn't "accept" there was a housing crisis in Australia.

But that very day, Anglicare released a report on rental affordability that showed otherwise.

The report found there were barely any rental properties left in Australia that low income households could afford.

And a few weeks earlier, the property group Domain also warned that Australia was facing "a rental crisis."

"All capital cities are now operating in a landlords’ market, the first time this has happened since Domain records began," it said.

"The rise in investor activity, as well as overseas migrants who will rent upon arrival, will spiral rental demand further and worsen conditions for tenants."

Is a rental crisis not a housing crisis?

The 'Australian dream' is dead

The problems in Australia's housing sector have accumulated over decades and metastasised.

In early 2020, the Australian Housing and Urban Research Institute released a report that explained how much dynamics had changed since the post-war period.

It said the Australian dream of home ownership was no longer "relevant" in the contemporary era.

"The 1940s to 1970s era generated the 'Australian dream', with home ownership levels reaching in excess of 70 per cent," it said.

"However, this era was a function of a particular window of opportunity that has now slammed shut and is unlikely to reopen.

"The housing market of this earlier era was much more affordable than today’s. It did not take a great degree of savings or a large household income to purchase — typically two to three times average household earnings, compared to today’s up to five to 10 times, depending on the city."

What did that mean for younger Australians?

Well, the researchers said the declining rate of home ownership among millennials and younger age groups (everyone aged 40 and below) would guarantee that Australia's historically-high rate of home ownership would drop away.

They said we had to understand what that would mean for Australian society.

"The projected declines mean Australia will no longer be a near-universal ownership society, but must become a dual tenure society of ownership and rental (both private and social)," they warned.

Loading

"[But] a dual tenure housing system in which one segment (owners) acquires wealth and the other does not is a recipe for long-term social and economic problems.

"Addressing this will require new policy instruments to give renters the opportunity to create wealth and/or processes to redistribute some of the asset-generated wealth of owners."

The report was published in May 2020, at the very start of the pandemic.

It said policymakers had put Australia on the path of "landlordism" years ago and the modern policy environment was not conducive to a regrowth of home ownership.

So, what happened over the next two years?

Well, after the Reserve Bank cut the cash rate target to a record-low 0.1 per cent, property prices skyrocketed by 25 per cent.

It dramatically increased the wealth of people who already owned property.

Government initiatives led to a small increase in the number of first homebuyers, but the institutional settings have remained broadly the same, so the industry's path dependence is unchanged.

And over the last 12 months, the national vacancy rate — the proportion of rental stock that is vacant around the country — has fallen from 2 per cent to 1 per cent, to a new record low.

Australia's rental crisis, and rising homelessness

So where are we now?

With a federal election looming, housing affordability is a major issue. 

Labor leader Anthony Albanese has announced if his party wins the election he will establish a National Housing Supply and Affordability Council.

He says he wants the Commonwealth to play a leadership role in increasing housing supply and improving affordability, like it used to do.

He wants the council to set targets for land supply, in consultation with states and territories, to ensure better land use planning.

And the council will collect and publish nationally-consistent data on housing supply, demand and affordability, to keep the issue centre-stage.

He also wants to introduce a national "Help to Buy" scheme for low and middle income families to help them buy a property.

The idea for such a scheme, partly modelled on Western Australia's shared home ownership initiative, has been pushed by the Grattan Institute.

Will those policies be enough to shift our institutional settings back onto a path that makes home ownership a reality for more younger Australians?

Look to other countries, for a change

When scratching around for new policy ideas, Australian policymakers often borrow from the same countries: the United States, the UK, and New Zealand.

But it means they're pinching ideas from countries with similar policies, with similar policy problems, and where policy problems have similar origins because the ideas have been shared from a similar policy playbook.

How do you break from that cycle?

The Australia Institute think tank, based in Canberra, has looked further afield.

Last week, it released a report on the housing policies used in Denmark, Sweden, Norway and Finland, but it flew under the radar.

The report was written by experts in their fields: Dr Heather Holst, Dr Sidsel Grimstad (University of Newcastle), and Professor Andrew Scott (Deakin University).

It said Nordic countries had a much wider repertoire of policies to deal with housing issues, and Australia could learn from them.

It said a key driver of Australia's acute housing affordability crisis was its over-reliance on just two housing options: private home ownership and private renting.

It said the rate of homelessness in Australia had been rising since 2006, after declining a bit at the start of the century, so it was practically unchanged in the last 20 years (we'll get new data when the results from last year's census are released from next month).

See the graph below.

Dr Holst said Australia compared unfavourably to Finland, which was regarded as the world leader in reducing homelessness.

She said according to recent data there were 4,542 (less than 1 per 1,000) homeless people in Finland compared to 116,427 (roughly 5 per 1,000) in Australia.

The number of homeless in Finland was a little more than one quarter what it was 30 years ago.

She said in the 1980s, Finland used to be like other countries in Europe and North America, and New Zealand and Australia, by trying to prepare the homeless for housing on the understanding that their homelessness was caused by their own personal characteristics and shortcomings.

But it changed its entire approach, and decided to reduce the human cost of homelessness instead of focusing on the economic cost.

The country's "Housing First" approach began to push the idea that if you arranged housing for someone first, it would be easier to solve their social and health problems (rather than the other way around).

It asserted that people had a right to decent housing and useful social services.

Between 2016 and 2019, Finland had a specific target of building or allocating 3,500 dwellings for people that were homeless or at risk of becoming homeless.

"This plan explicitly recognised the savings achieved by investing in homelessness prevention by avoiding the need for later, much more costly corrective work, declaring that 'housing one long-term homeless persons save approximately 15,000 [euros] of public funds per year'," Dr Holst said.

The country now has a policy to eliminate homelessness by 2027.

And that's just one example.

The Australia Institute report also canvasses the numerous kinds of property ownership models that Nordic countries have developed and put to good use.

In Denmark, the rental co-operative sector provides affordable housing for one-fifth of the country's population.

In Sweden, housing co-operatives own 22 per cent of the total housing stock, while in Norway it's 15 per cent (and it's 40 per cent in the capital Oslo).

Norwegian housing policies aim to foster the development of good quality public housing in a non-speculative environment, and give members the right of use as well as collective property rights.

"The surpluses from Scandinavian housing co-operatives' operations do not go towards paying dividends to investors but are instead channelled back into building more housing," Dr Grimstad said.

"This ensures a steady supply of high-quality housing, which has the added effect of helping reduce overall price pressures in the market.

"For younger cohorts of home owners, co-operative urban apartments have become transitional — a step on the path towards individual ownership when they partner and have children and gain sufficient resources to buy another type of dwelling."

I'm just scratching the surface here.

The report has far more detail about the different ownership models embraced by Nordic voters.

When you read them, it frees your imagination from Australian policymaking, where the choices are few and prejudiced in favour of landlords and homeowners.

Could the Australian dream be revived with different ideas?