The crude political calculus behind Australia’s housing crisis was never more clearly expressed than by John Howard during an interview on Brisbane radio on September 19, 2003.
Since the election of the Coalition government in 1996, house prices had doubled. Howard’s interviewer wanted to know what the government planned to do about it.The answer was nothing.
“I haven’t found anybody in seven-and-a-half years shake their fist at me and say, ‘Howard, I’m angry with you for letting the value of my house increase,’
" the then prime minister said. That line has been cited with increasing frequency over recent times as the crisis has worsened. More revealing, however, was what followed. The interviewer responded: “Let me be the first to complain – people like myself are actually being forced to face the possibility that we may be renting for the rest of our lives because getting into…”Howard cut him off: “Do you own a home?” Host: “No, I rent.” Howard: “No, well, I’m sorry. I was talking about people who owned a home.”Howard could hardly have been more dismissive of those locked out of housing. Nor could he have been clearer in his view that a house was not so much a home as an investment. As far as he was concerned, the interests of the people who owned homes were paramount. Back then, in 2003, that was more than 70 per cent of people – although the idea of what it meant to “own” a home also changed substantially during the Howard years..."
When he came to power, about 42 per cent of people truly owned their homes – free and clear with no mortgage. Just over 28 per cent had mortgages. By the time he gave that interview, there were more home owners with mortgages than without.
When Howard came to power, house prices and average wages had been ticking up roughly in parallel for decades. Then, quite suddenly, prices zoomed far ahead of incomes. They have kept zooming ahead, with only a couple of minor interruptions, ever since.Between 2001 and 2022 house prices grew more than 400 per cent, more than twice the pace of wages. A pandemic could not stop them; falling real wages and increased interest rates could not stop them. A report out this week from Oxford Economics predicted the national average house price would be more than $1.3 million by 2027.
As Alan Kohler noted in his recent Quarterly Essay on the housing crisis, the shift that occurred around the turn of the millennium “has altered everything about the way Australia operates and the way Australians live”.He’s not wrong. Back then, less than 20 per cent of households were in the private rental market. Now it’s close to a third, and to an ever-increasing extent they are under financial stress. At the last census, in 2021, a record 122,000 Australians were homeless.
That number has likely increased as rents have escalated and housing supply has fallen even further below population growth. In 2002, the average retirement age was 55 and only 4 per cent of home owners aged over 65 carried mortgage debt. By 2020 the average retirement age was 64, and more than 50 per cent of home owners aged 55-64 still had mortgage debt."
"The 50% capital gains tax (CGT) discount, a significant milestone in Australian tax law, was introduced in 1999 by the Howard-Costello administration...
The most significant advantages of the capital gains tax (CGT) discount are often realised by individuals who sell their assets after surpassing the 12-month holding period. This is particularly beneficial if they sell them at substantially higher prices than their purchase costs, as it can lead to significant tax savings....
Negative gearing is shorthand for the tax discount that applies to rental properties that make a loss. That is a common occurrence in Australia, where two in three rentals (just over 1 million) lose money. One reason it is so widespread is that the Australian tax system allows property investors to deduct their losses not just against their investment income – as is standard in most countries – but against the income from your wage or your salary. That can turn a losing investment into a winning tax structure. The possibility of financial gain is compounded by another feature of the tax system, the capital gains tax discount...That is a 50 per cent discount on the tax you pay when you own an asset that gains value, such as a property..."
