Should we revive the Housing Trust?

[Will]

Will, I am one of those workers you speak of, i never finished high school yet i have been able to buy my own home. No, it is not in burnside but it is a start.

I was brought up to believe if you want to get further in life you must work for it, not expect someone else (re: the taxpayer) to pay for it

The problem is that even houses in low-socioeconomic areas are becoming unnafordable. I was having a look at the real-estate section of the Advertiser and I found it amazing that modest houses in Elizabeth can now cost in excess on $200 000!

If the cost of real estate continues to grow, workers on modest wages, no matter how hard they work will never be able to buy their own homes. I think this is unnaceptable. I do not want Australia to become like the US. I do not want to live in a country that is so rich yet has a large percentage of its citizens living on the streets or in slums.

I am not advocating the governemnt give away houses. What I would like to see is the government provide modest and dignified houses at prices which workers on low incomes can afford.

You should count yourself lucky Cruise. You are probabaly amongst the last blue-collar workers who will own their own home.

[Cruise]

I just did a search, i can find houses for $145K for sale, now you should believe that is affordable, If you can't afford that you need to take a long hard look at yourself

[AtD]

I am somewhat of a dying breed of people in that I am worried about my fellow citizens and their welfare.

That's a bit presumptuous of you Will.

[mgb]

The problem is that even houses in low-socioeconomic areas are becoming unnafordable. I was having a look at the real-estate section of the Advertiser and I found it amazing that modest houses in Elizabeth can now cost in excess on $200 000!

$200k isn't too bad. That would work out to repayments of $19k per year (assuming a $10k deposit)
The big extra cost that you don't have with renting is the council+water rates. They will work out to be another $2k a year.

The best way for people on limited income is to either pool with someone else to buy the first place, or to rent out a room or two initially to help save the cost. Flats or units are also a good way to get something cheaper and possibly closer into the city.

[Wayno]

some people set their goals too high. What's wrong with an apartment? i know it's cultural, but a house is a bit of a luxury to tell the truth...

Part of the SA Govts job is to manage expectations. We all can't live on 1/4 acre plots, or even 1/8 acre plots...

[AtD]

And don't forget the number of people living in the average dwelling has been steadily declining for many decades now. The "housing crisis" is as much to do with this as it is population growth.

[Will]

I just did a search, i can find houses for $145K for sale, now you should believe that is affordable, If you can't afford that you need to take a long hard look at yourself

Affordability is a subjective term which depends upon someones personal circumstances. For me $145 000 is very affordable (in fact after a few years that is what I'll be earning per annum), but for example an aged care worker on $28 000 a year may disagree with you.

In fact, on the Homestart calculator I found that someone on $30 000 per annum with low debt and who has saved up $10 000 is only eligible to borrow $139 000. And herein lies the problem. With property prices continuing to increase, such workers will in a few years be unable to buy anything. This is why I suggest the government take action now to prevent these people being forced into undignified accomodation or worse.

However I realise this is a pointless arguement because I know that the governemnt will never take action because both parties are now pro-business and as such will allow the market to decide what type of accomodation low paid workers have (if any at all).

[Cruise]

[Will]

:wank:

[Will]

I too can play this game:

[Will Derwent]

As I mentioned before, housing trusts don't make money. That's why it is cheaper to rent from the housing trust - because they are rented out at below market rent.

If you go to the housing trust website and read their financial statements, it shows that they received almost $200 million dollars in federal and state government funding in 2007, and held an asset base of almost $6 billion in houses. More than that, the rental income they received was less than the cost of renting those properties out to tenants ($205 million in rental income and $250 million in expenses). With this in mind, and being totally selfish about it, the housing trust could almost make more money by not renting out their properties to anybody (because at least they wouldn't incur all these rental associated costs). If this is your business plan, it's not a very good one.

Now I maintain, I fail to see how recreating a larger and more expansive housing trust will in net terms make it cheaper to get a house. It may make it cheaper for some people to get houses, but the shortfall in costs comes from the taxpayer. There is no magic wealth creation going on here. The government builds houses, rents them at below cost and gets subsidies by the states and the commonwealth state housing agreement (CSHA). If a private company could make a profit from selling houses to the poor, they would do it (even if they don't care about your welfare, they do care about your money).

Secondly, I see no evidence of a market failure. Housing is expensive because demand is high, land is scarce (local planning laws contributing somewhat), and capital is expensive. Drastic public sector involvement in the market isn't going to magically make things cheaper - it will face the same external factors as every private sector builder. And just because the private sector may be doing something inefficiently (which I doubt it is), that doesn't mean that the government can do it efficiently. In fact, I'd be very cautious about spending money in an industry where the private sector can't make a buck.

And I take offence at the suggestion that I don't care. There are those of us who care plenty, but we think that socialising the economy is just a really dumb way of trying to help people.

[Will]

As I mentioned before, housing trusts don't make money. That's why it is cheaper to rent from the housing trust - because they are rented out at below market rent.

If you go to the housing trust website and read their financial statements, it shows that they received almost $200 million dollars in federal and state government funding in 2007, and held an asset base of almost $6 billion in houses. More than that, the rental income they received was less than the cost of renting those properties out to tenants ($205 million in rental income and $250 million in expenses). With this in mind, and being totally selfish about it, the housing trust could almost make more money by not renting out their properties to anybody (because at least they wouldn't incur all these rental associated costs). If this is your business plan, it's not a very good one.

Now I maintain, I fail to see how recreating a larger and more expansive housing trust will in net terms make it cheaper to get a house. It may make it cheaper for some people to get houses, but the shortfall in costs comes from the taxpayer. There is no magic wealth creation going on here. The government builds houses, rents them at below cost and gets subsidies by the states and the commonwealth state housing agreement (CSHA). If a private company could make a profit from selling houses to the poor, they would do it (even if they don't care about your welfare, they do care about your money).

Secondly, I see no evidence of a market failure. Housing is expensive because demand is high, land is scarce (local planning laws contributing somewhat), and capital is expensive. Drastic public sector involvement in the market isn't going to magically make things cheaper - it will face the same external factors as every private sector builder. And just because the private sector may be doing something inefficiently (which I doubt it is), that doesn't mean that the government can do it efficiently. In fact, I'd be very cautious about spending money in an industry where the private sector can't make a buck.

And I take offence at the suggestion that I don't care. There are those of us who care plenty, but we think that socialising the economy is just a really dumb way of trying to help people.

The problem with the economic conservative mindset is that it fails to understand that social services are designed to help people and not to make money. Things such as public education, health and housing are provided to prevent society from regressing to primitive social Darwinism.

My proposal has already been berated as 'communist', but I am intrigued. What is the economic conservative solution to the housing problems faced by people on low incomes?

[Will Derwent]

This isn't a matter of an economically conservative mindset - its a problem of how governments pass on costs. If you want to build homes for people, you have to buy them somehow, and the cost of those homes to the government is either market rate (in which case there isn't any saving to the home purchaser), or less than market rate, which means that the government takes on the cost of the house and writes it off. It's not profitable because that's reality, not because of ideological mindsets.

At the start of this post Housing Trust fans were inferring this could all be done at a profit once you take the private sector out of it; but as we've seen in the SA housing trust, this isn't possible. Not by a long shot. Whether we can do this by shovelling money from taxpayers to poorer citizens is another matter.

If you want to provide cheaper housing there are far better ways to do it than housing trusts. The most effective (and least risk option) is to offer rental subsidies to low income earners. They can keep the rental subsidy and spend it on a bigger place, or one closer to the city, or spend it on transport, or save it for a house. It also avoids one of the big problems with assistance to the less well off, moral hazard. (Read about it here http://en.wikipedia.org/wiki/Moral_hazard)

Secondly, you need to remove as many supply side blockages to buying your own home. Permitting higher density developments of potentially lower quality that are affordable is a good example. Prices are high because there are more purchasers than there are properties - you need to let developers make more properties. But this is also a matter that is going to take a few years to settle out. If houses are currently overvalued (which they almost certainly are) and falling in value, then no developer in his right mind would invest now. They will wait until prices hit bottom and then invest, when they can make a return on their investment.

[AtD]

Can we get over the insults over socialism and capitalism, since both are theoretical extremes that can't exist in reality. Every developed nation on the planet is market-socialist.

Will Derwent is correct in his statement that the housing shortage is on the supply side. Schemes to subsidise home purchases increase demand and just exacerbate the problem, for example, the first home owner's grant. You could argue that the housing trust addresses the supply shortage, but unfortunately the bottle-neck is further up the supply chain so the burden is shifted to the taxpayer rather than resolved thus the solution is not viable in the long term. A shortage of labour, high prices of key materials and administrative red tape are just some of the causes of the problem. Rent subsidies already exist via Centrelink.

There is no magic stroke of a pen that will solve this (regardless what either side of politics will tell you). The labour shortage can be addressed by skilled migration, although that's politically unpopular (migrants are being blamed for the problem in the eastern state tabloids!) and clearing up red tape is difficult to do given the dozens of jurisdictions involved in SA alone. The credit shortage isn't helping either.