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Australian home ownership: Past reflections, future directions

Professor Terry Burke Swinburne University of Technology Dr Michael Fotheringham Executive Director, AHURI Dr Heather Holst Victorian Department of Justice and Community Safety

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Presenter: Professor Terry Burke Swinburne University of Technology Research: Australian home ownership: past reflections, future directions Download the report: ahuri.edu.au/research/final-reports/328 Respondent: Dr Heather Holst Victorian Department of Justice and Community Safety

Australian home ownership: Past reflections, future directions

Professor Terry Burke, Swinburne University of Technology

AHURI Research Webinar Series Wed 20 May 2020

PRESENTATION

Australian Home Ownership: past reflections, future directions

Terry Burke Christian Nygaard Liss Ralston Swinburne University of Technology

PART 1 What is this study about

Uses an Institutional Framework to understand Australia’s home ownership past and its likely future.

What is an Institutional analysis

• Every country has a distinctive housing system including that of tenure.
• The housing system is shaped by the institutional framework of that

country or society.

• So what is an institutional framework?
• It is all those values, structures, and mechanisms that shape social and

economic behaviour, organisational forms, and governance in a society

An institutional framework—components and behaviours of the housing tenure system

Why use such an approach?

• Much analysis of Australian housing problems, including ownership

decline, is over simplistic and does not accommodate complexity.

• The explanatory focus tends to be on one, or a limited few,

explanatory variables e.g. affordability, foreign investment.

• In turn this leads to over simplistic policy response e.g.

deregulation of the planning system, investment controls

• But for all the incremental policy changes over recent decades it is

hard to see evidence of better housing outcomes.

• Institutional Analysis promises a richer but more complex analysis.

How was the institutional approach used?

• 1. A data analysis of long term trends in Australian home
• wnership using changes in the institutional context as

explanation.

• 2. A comparative analysis of ownership trends in 18

equivalent countries highlighting how institutional differences can generate different ownership outcomes.

Australia’s changing institutional Context

1940-1970

• High economic growth and Full employment
• Secure and stable labour markets
• Regulated financial system with implicit
• bjectives of supporting home ownership
• Construction industry geared to ownership

products; the detached dwelling

• Supportive housing, taxation and planning

policy

• Rapid growth of young (and particularly two

income households –the drivers of

• wnership
• Dwelling as a home not an investment

1980 -2020

Weaker economic growth and employment Deregulated labour market; Greater job insecurity Deregulated finance system (no special focus on ownership) Construction industry created new rental products, i.e. multi unit apartments Taxation, planning, policy as much facilitative of private rental as ownership Financialisation of housing; the dwellling becomes as much as an investment as a home.

Home purchase, outright ownership and all

• wnership trends, Australia, 1947– 2016

Outcomes of the changing institutional

• environments. What does the data say?

Ownership has held up better than might be expected, due to ageing of the population Overall ownership trends disguise major age cohort differences:

• Long term ownership (1986-2016) has fallen sharply for the 25-44 age cohorts

compared to 3 percent for all age cohorts

• The fall in ownership has been concentrated in the lowest 50 percent of household

incomes; the highest 20 percent have had minimal fall.

Outcomes of the changing institutional environments.

• Single income purchasers have fallen from 44% of all purchasers in 1981 to 14% by 2016
• The rate of ownership for migrants in 1986 was marginally higher than the Australian born.

In 2016 it is well below that of the Australian born

• Victoria over the last 30 years has a high contraction in ownership than other

states and territories

What does the future hold?

What is likely future context? Projected ownership rates 2016-2041

Slower economic growth Weak real income growth for young households Workforce participation growth slower Little improvement in housing affordability More rental products e.g. build to rent Little change to policy directions facilitating rental investment Continued rapid population growth.

So Australian ownership is in trouble; how does this compare internationally?

• Australia in the 1960-70 was the definitive ownership society

with the highest rate among developed countries

• By the mid 2000s we had lost that status; other countries

had pushed ownership well above Australia’s 71% peak.

• Post the Global financial crisis ownership is in retreat in

most developed countries

• The biggest retreat has been in market liberal societies like

Australia; the USA, UK and New Zealand.

The GFC and ownership retreat. Why?

Despite large price falls and improvements in affordability

• wnership still fell. Why?
• GFC reinforced income inequalities many household experienced

real income falls

• Finance institutions become cautious in lending to households
• Stimulation measures of governments favoured developers and

rental investors e.g. Build to rent in the UK.

• GFC accentuated the financialisation of property as investors (the

more affluent in society) sought secure outlets for money

Where do we go from here; policy implications of

• wnership decline?.

Three related institutional and housing system changes;

• Recognition of the need to make a transition to a dual tenure system

giving equal weight to ownership and rental.

• Acknowledgement of the generational and wealth divides implicit in

this system with need for compensatory redistribution mechanisms.

• Policy focus need to go beyond housing to that of labour and

financial markets, population growth and settlement patterns, income and wealth distribution, income support program, and taxation.

Kick starting the process.

The need for a bi partisan national housing and urban strategy undertaken within a broad institutional framework. If Canada can do it then why can’t we?

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