Vote 1, Bricks and Mortar

There’s nothing uniquely Australian about wanting to own your own home. The citizens of most comparable nations haven’t opted for tents, tree houses or caves while we slavishly pursue a quarter-acre block.

Not that you would know it. Our politicians talk ad nauseum about the virtues of home ownership. There is near universal political agreement that pursuing or paying off a home is to be applauded. And it is an activity in which the Australian population has duly obliged.

But increasingly, this blessed ritual is starting to slip from people’s reach. In May, the Commonwealth Bank/Housing Industry Association Affordability Report grimly revealed that first home buyers are now faced with the worst home loan affordability in more than two decades.

The news didn’t improve with the release of census figures last month. The Age recently reported that over half a million home owners (a figure which has almost doubled since the 2001 census) and another half million renters currently experience ‘housing stress’ a wonderfully literal descriptor applied to people who sink 30 per cent or more of their income into paying off their home.

Large numbers of people struggling to pay off a home or being unable to buy one at all wouldn’t necessarily translate into a political problem everywhere.

But our leaders’ elevatation of the mortgagee to near-messianic levels has made the issue of Australian housing costs very political indeed.

And with a Federal election looming, it is far from clear how much political damage the housing issue will cause, or to whom.

When it comes to improving housing affordability, there is little agreement on what the solution actually is. Many of the current solutions come from lobby groups with a vested interest beyond helping individuals own their own home.

It’s the same for the solutions being pedaled by some politicians. The PM intones gravely that it’s the States’ fault. If they just released more land and cut taxes like stamp duty, things would improve.

But Treasury reports inconveniently made public after a freedom of information request by Channel 7 earlier this month noted that calls for increasing land supply on urban fringes is more a useful distraction than a magic potion.

Reducing State taxes simply encourages more people to enter the market, pushing up demand, and thus prices, in the same way that the non-means tested First Home Owner Grant has already. And increasing land supply on the fringes of cities won’t help the supply problem in the inner cities, where land supply is relatively fixed.

Image thanks to Sharyn Raggett.

The ALP, meanwhile, blames the lack of housing affordability on the four successive interest rate rises since the issue catapulted Howard to a fourth election win in 2004.

There’s no doubt recent rate rises haven’t made mortgages any easier to pay off, but homes didn’t suddenly become expensive after 2004. A weighty Productivity Commission report  into housing affordability outlined the problem prior to the 2004 election. Indeed, Howard never would have bothered campaigning on the issue of interest rates if voters thought paying off their home was a breeze.

And yet, some people must think that paying off a home is relatively doable; otherwise homes wouldn’t be so expensive now.

Fairfax economics writer Ross Gittins told SBS’s Insight program earlier this year that the biggest single reason (though not the only reason) for high housing costs had been the return to low inflation and the halving of mortgage interest rates.

[The change] increase[d]people’s ability to borrow and then when everybody went out and tried to buy a better house at the same time because they were able to borrow more, [without a]particular increase in the supply of houses, that just pushed up the price of houses. We managed, by everybody at the same time saying, ‘I’d like to move to a bigger, better house’ to double the price of houses.

Many of the people Gittins refers to reside in seats that will be crucial for both Parties at this year’s election.

After the release of the 2006 census figures, The Australian showed that 17 marginal Liberal seats are in the mortgage belt that is, each of these 17 seats holds more home borrowers than the national average of 32.2 per cent. The ALP needs a net gain of 16 to govern in its own right.

Mortgages are life-time commitments, not ones that last the length of the electoral cycle. Three years isn’t nearly long enough to have divorced voters from their financial preoccupations.

Given this, there’s no doubt Howard will spend much of his time making the trenchant observation that the ALP cannot be trusted to keep interest rates low and voters’ homes safe.

The other factor working in the PM’s favour is that census figures show 65 per cent of Australia’s dwellings are either owned or in the process of being paid off. The vast majority of Australians with a stake in the property market aren’t trying to buy their first home. And while there are many who have recently decided to upgrade (which is what partly caused the boom to begin with), they did as the value of their property rose relentlessly.

While a lack of affordability might be unsettling for would-be first home buyers, it’s a source of undisguised pride for those already in the market. And there isn’t a politician of any shade who will deny Aussie battlers their day in the housing sun particularly when they have done so much to stoke people’s pursuit of the dream in the first place.

The other plus for the Coalition is that perceptions about which Parties are better able to handle different policy areas are hard to shift, despite the fact that just like in 2004 few economic analysts are predicting the economy will hit the wall should Kevin Rudd wake up as Prime Minister later this year.

But perceptions cut both ways, too. The ALP will link the loss of employment conditions under the Government’s WorkChoices laws to voters’ ability to repay their mortgages, or to save for a deposit for their first home. The economic debate during this year’s election campaign won’t be nearly as one-sided as last time.

How housing affordability impacts on the election will rightly be the subject of far more debate before the year is out.

Doubtless, there will be many more solutions offered up this year that won’t attempt to curb the insatiable though hardly unique desire of Australians to buy their own home.

However, where the issue of Australian housing arguably will be unique is in the electoral impact our consumption over the last decade will have when polling booths open later this year.