Andy Blunden. August 2008

Now is an ideal moment to reinvest in public housing

Now is an ideal moment to reinvest in public housing.

The failure of the U.S. government to invest in public housing combined with hapless reliance on the market to fix the crisis in housing affordability must be now universally accepted as part of the mix of abject policy failures that triggered the current credit collapse and impending recession. The sceptre of millions of American families becoming homeless while billions are spent on propping up Wall Street must surely strike us as the apogee of injustice and stupidity.

In Australia, the same crisis of housing affordability has reached explosive proportions. The public housing stock had actually declined by 3,500 units to 395,000 over the past decade, many of which are now due for demolition. Surely the public which has hitherto accepted a 30% disinvestment in pubic housing in Australia is now in a mood to see that policy reversed? Surely when vacancy rates for rental properties has fallen below 1% in Melbourne with private rental prices at an all-time high and 50% of households in private rental accommodation paying more than 30% of their combined income in rent. Surely now is the time to do something about this.

Now, because the entire world is experiencing the consequences of market failure. Now because the Rudd government was elected on a mandate to invest in infrastructure and critical of the Howard policy of government by cash hand-outs. Now because credit is discredited and Australian households are in debt to the tune of $27 billion on their credit cards alone, never mind their mortgages. The inanity of living on credit seems at last to have dawned on the population. It is ironic that even the billions upon billions of dollars which ordinary people have paid to banks for their credit card and mortgage debts seem to have evaporated in this credit crisis. It is time to learn some lessons!

Absolutely everyone in the industry agrees that the first home buyers grant will go straight into the pockets of the sellers. If the grants have any effect at all, if in fact they have the effect they have been designed to have, then the result will be that more young families will take on mortgage debts which they cannot afford – drawn into debt by the enticement of the first home buyers grant, which is minuscule by comparison with the size of the debt, but looks very good by comparison with the stupidly low deposits required by deregulated finance companies. If implemented separately from long-forgotten credit control strategies, the result will be tragic. Implemented at the beginning of a world-wide depression, it will be a disaster. Surely the point was to tackle the credit crisis and the housing crisis, not to use the housing crisis to exacerbate the credit crisis?

Public housing has been a key feature of nation-building in Australia and elsewhere; witness the slum clearance program of the depression years, and the expansion of public housing in the Menzies era. Public housing can also be used as a support for regional policy and especially when aligned with the also neglected pubic transport policy can be a premier vehicle energy policy, water policy, employment and urban planning.

The point is that no developed country has ever succeeded in sustaining home ownership beyond about 2/3 of households. There are always substantial categories of people for whom home ownership is unsuitable, and not just the poor, but young professional people, the people who have been benefiting from globalisation, who also require flexibility in their housing and will prefer to rent, at least until later in life. Also students, old people, mobile workers, and so on. The flats down the road from where I live, with public transport direct to the university and the City, are earning their private owners $500 per week per dwelling. Many people are prepared to pay this sort of money for good quality rented homes and with vacancy rates under 1% they have to.

Public housing on the other hand carries a stigma. 92% of public housing tenants rely on welfare payments! In Australia, public housing is seen as the provider of last resort for the poor of the poor, burdening the taxpayer with the cost of supporting poor tenants and degrading the areas where they are located and frequently locking the tenants into a cycle of disadvantage. And this while an undercapitalised private rental market is charging highway robbery for prestige dwellings.

This is an ideal opportunity for the government to invest in a profitable market, increasing supply in rented dwellings, and thus reducing demand for house ownership while stimulating the construction industry by building new public housing, not concentrated in outer suburban proto-slums but in inner suburban desirable areas where tenants will not only be proud to live, but will pay into the public purse for the privilege and cross-subsidise poorer tenants.

A New Deal program of pubic housing construction will strengthen the commons and foster a genuine loyalty to the community. Cash hand-outs designed to encourage people into private debt undermine the commons and foster social disintegration and individualism. Cash hand-outs was perfected by the Howard government as an instrument to prop up the market, but which only functioned to destroy social solidarity. Why is Rudd continuing the policy which will increase housing stress, increase debt stress, increase social fragmentation, undermine urban planning and exacerbate the credit crisis, while passing up an opportunity for socially beneficial and fiscally responsible development?

It is above all important to break the nexus between pubic rental housing and social disadvantage or welfare dependency.

This means that federal, state and municipal governments must invest in rental accommodation which meets the needs of the whole profile of potential tenants, including well-off baby-boomer retirees, young professionals, students and so on, as well as indigenous people, new immigrants and the otherwise socially disadvantaged.

It means that the governments must take all measures to promote the Úlan of public rental property, both by advertising and the location and quality of housing stock purchased and constructed, deliberately communicating to the public that the public housing is chic and desirable.

It means that the governments must align public utilities, private employment and education with the program of public housing construction, in line with the 2030 Plan for Melbourne and abandon this stupid policy of government by cash hand-outs.