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Issue #1689      June 17, 2015

Housing crisis and “good jobs”

Treasurer Joe Hockey’s advice for new homebuyers was quickly condemned as “insulting”, “insensitive” and “out of touch”. Even some of his own colleagues were shaken by their brutal and uncaring nature. The biggest shock of all was to young people, seeking to buy their first home but continuously being outbid at auctions or the house sold after one “open day”.

Graphic by Craig Greer.

“The starting point for a first home buyer is to get a good job that pays good money,” said Hockey.

“If you’ve got a good job and it pays good money and you have security in relation to that job, then you can go to the bank and you can borrow money and that’s really affordable,” Hockey said adding insult to injury.

Where are all these “good jobs” that pay enough “good money” to buy a first home? Most young people are struggling to pay rent, let alone save a deposit of one or two hundred thousand.

Not everyone can be a billionaire or multi-millionaire banker, entrepreneur, mining magnate, media mogul, surgeon, developer, or government minister.

Every society needs nurses, teachers, process workers, scientists, technicians, emergency workers, cleaners, shop assistants, office workers, farm labour, bus or train drivers, construction and maritime workers, child and aged care workers, etc. These are the people who make the world go round. Everything would collapse without them.

“Good jobs”

Is Hockey saying that being a teacher is not a “good job”? That a nurse does not have a “good job”, that risking your life to rescue people or put out fires or care for children is not being employed in a “good job”?

And that the highly paid CEOs of corporations that exploit workers to the hilt, pollute the environment with toxic fumes, poison rivers, rip up land and destroy water sources for coal seam gas have “good jobs” and make “good money”?

Teaching has become less secure, with the growing use of contract labour and undermining of permanency. Teachers are constantly having to fight for higher salaries which are at best on par with the average wage. Schools are understaffed and new graduates find it hard to gain employment.

Thousands of nurse graduates on finishing their degrees face unemployment, underemployment and job insecurity through the use of body hire companies. Like teachers, their pay fails to recognise their training, skills and responsibilities.

Nurses, engineers and many other professionals are up against competition from workers on temporary 457 and other visas who are subjected to abuse and exploited to the hilt.

Housing prices are being deliberately blown out. There are several forces at work.

Firstly, the banks with record low interest rates are forcing people – many of them retirees – to look for alternative places to put their savings. Some have turned to the stock market and other speculative instruments. Hence there is the contradiction between the rise on the stock market and an economy sliding into recession.

Others have been drawn to real estate, seeing bricks and mortar as more secure. Either way the risk has been shifted from the banks to the investor on markets which are subject to boom and bust cycles.

In particular, investors are flocking to housing and making use of negative gearing – a massive tax rort which the Abbott/Hockey government refuses to act on. The banks are coming to the party on this. Under negative gearing they make sure that the rental income is less than their interest payments. The difference (negative income) is then allowed as a tax deduction against their other income.

According to Australian Property Monitors in the early 1990s only about a sixth of new home lending went to investors. This year it is more than half. Housing is no longer just seen as somewhere to live but as a place to invest, just like shares or derivatives.

There is also a discount in the capital gains tax paid if the property is sold at a profit (taking CPI increases into account).

There is a chronic shortage of housing which also serves to drive up prices. State governments are reluctant to release more land to ease the boom as they are raking in billions of dollars in extra stamp duty – very handy for balancing the books.

All of these factors have combined to drive up prices. In reality foreign investors do not appear to have played the major role as some in the media have suggested.

What Hockey has also done, apart from damaging his chances of still being treasurer at the time of the next elections, is put the present housing crisis on the front pages.

Housing crisis

Not only is the purchase of a first home beyond the reach of most young people, there is a chronic shortage of affordable and available rental housing.

More than 100,000 homeless people do not have a safe and secure place to call home. Rental prices reflect the rising cost of housing as landlords seek to meet interest bills and mortgage repayments.

A family looking to rent a home in Sydney is facing weekly payments of $400-$600 or more a week or $20,800 to $31,200 per annum. It depends how run-down the home is, its location and local infrastructure or lack of – schools, public transport, etc.

As from July 1, the minimum wage will be $656.90 per week. Around 1.86 million lowest paid workers rely on this wage rate for a living, close to one third of them in hospitality and retail sectors.

They would be lucky to find rental that does not consume 50 or 60 percent of their income unless sharing. What is left would not be enough to pay for other necessities such as transport, food, utilities, clothing. The recognised standard for maximum percentage of income consumed by housing costs is 30 percent. Even this for people on very low incomes is too high.

They may be homeless because of lack of affordable or suitable accommodation or as a result of domestic violence. For the unemployed, aged pensioners or other social security recipients it is even more difficult to find a home. A single person on such low income can barely afford to rent a room, let alone a flat or apartment.

The unemployed who have managed to qualify for the Newstart allowance are paid less than half the minimum wage, and that is after including their maximum housing allowance.

Two classes

What Hockey has done with his comments, is to reveal his true colours, his arrogance and contempt for those who do not belong to his class, the class he serves, the ruling capitalist class.

This is consistent with the government’s budget, all the austerity measures attacking the most vulnerable and those on the lowest incomes while dispensing more corporate welfare.

Shelter is a basic human right. There is a great deal that can be done to alleviate the situation, the following are just a few:

  • State and territory governments must resume their former role in the construction of public housing. Governments should subsidise housing, just as they do for public transport, health and other services, from general revenue. This will not only provide affordable public housing, but thousands of jobs in cities and regional areas as well.
  • The federal government should increase the basic level of payments to social security recipients and Commonwealth Rent Assistance.
  • Negative gearing needs to be tackled. As a first step it should be abolished for all new property investments. Then a phase-out could commence starting with those who have more than five negatively geared properties.
  • The capital gains tax incentive should be banned on all new purchases and wound back over time.

These measures and competition from public housing would serve to make housing far more affordable and bring rents down.

At the same time, public housing should not be ghettoised into large blocks, dividing the community into two. In Scotland a very successful model has been developed with the public sector building similar houses in clusters with some public and some for private sale.

Neither this government nor Labor with their many negatively geared MPs are hardly likely to take such measures. Labor is making a few noises about minor changes to negative gearing, but let’s wait and see, it is early days.

We need a government that is prepared to stand up to the big end of town, to take on the transnational corporations and govern for the interests of the people and the planet. This can only be achieved by building a strong and militant movement combining trade unions, left and progressive political parties, other activists and the wider community.

The form developed during the Your Rights @ Work campaign that saw the defeat of the Howard government had the seeds of such a model but unfortunately was dismantled following Labor’s victory.

Next article – Endangered Quolls re-introduced to the Flinders Ranges

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