Politicians are right to appear to be sceptical when they receive unsolicited advice, but some of the advocacy that comes their way is hard to avoid.
There are some powerful interest groups claiming to represent the fountain of knowledge about what’s needed and what should be done. The general public is mostly absent in these exchanges. They’ve witnessed the influence of the mining industry and more recently the influence of the property development and infrastructure sectors.
So what are the big issues confronting the property and infrastructure industry just now and why should we care? Some of these must include housing affordability, infrastructure, compliance, unions, enterprise viability, productivity, universities and innovation.
In recent years, governments have tried to create the impression that they have ring-fenced themselves from these influences and set up processes which demonstrate a higher level of probity and transparency than has been the case in the past. But is this the answer? The sheer scale of the issues at large appear beyond the raw talents of many politicians, and these days beyond the abilities of a public service that has been so hollowed out, the depth of internal talent is thin.
The competing ends of the spectrum mostly involve community and social issues versus finance and the economy. Both have generally competing interests. Some see it as simply public interest versus self-interest, but it’s not that simple.
Housing affordability is a good example. At one end of these interests is social housing advocacy and at the other end are private developers and investors. Social housing advocacy comes armed with deeply researched and published insights into what needs to be done. More recently, private developers have sensed that they may weigh in more credibly with similar publications. Most is self-serving.
All sides draw on experts who have long considered these issues and are deemed to be credentialed because of their prowess in business or academia. In other instances, politicians and their senior advisors are compelled to look overseas for models that seem to be working better there. Politicians bring these newly discovered ideas back home to demonstrate that they have balanced out the advocacy while they have attained a level of expertise not previously held. The pity is that all of this effort is mostly focused on the extremities, so when they eventually decide, politicians like to portray that they have moderated the competing interests and found a publicly defensible middle ground.
Add to this a more modern mechanism to help convince the public that their wider and long-term interests are being served. Expert advisory panels staffed with specialists are then assembled. They are to investigate, to consult and to help point governments in the right direction. Industry experts are the most credible to get on board. And to their credit, most come armed with good intentions, but often they have a narrowly framed set of skills and opinion. Planners are a good example. That’s why many plans are never realised.
Depending on the political complexion of the day, governments like to go into the creation of advisory panels largely knowing the answers. The panels often reflect the government, and in many cases privately funded research is similarly composed. Why would you fund advocacy research if you did not want it to make the case for the interest represented?
Any of the big issues cited above could be expanded to demonstrate these observations, or concerns, really. Because real solutions for the vast majority become distorted.
Take housing affordability. The social housing sector advocates for the interests of the most disadvantaged. These advocates are mostly welded to housing supply models whose time has long past. While those who are least able to do so will continue to depend on public intervention, the spectrum of those who are increasingly falling through the cracks is widening. The public purse has more challenges than it can cope with just now, so new and more encompassing solutions are needed. There is a hard-core social housing clique who see the problem as more of a war between the haves and have-nots. But they are right to feel uncomfortable when some of the alternative supply options appear to be more suited to the moneyed end of town. Their housing advocacy remains valid, but it must become more engaged.
The same goes for the developers of housing. Traditionally, their focus has been on home buyers and investors – the housing able. But their business model has also relied on substantial public subscription and concessions. Negative gearing, first home owner grants, and capital gains tax all make up these subscriptions. And just now they are costing the budget bottom line dearly. But there is no shortage of seemingly credible research and publications being put out to help sway politicians that the status quo should remain. Add to this a new theory: the way to alleviate supply shortages is just to pump out more and more density.
Big advocates in this space include the Urban Taskforce (now Urban Taskforce Australia), the Property Council of Australia, the Urban Development Institute of Australia, the Housing Industry of Australia and Master Builders Australia. But the momentum they have advocated in the density space seems not to be solving the real issue. More and more Australians are not seeing the benefit of the current density surge. Housing prices are going through the roof as developers test the capacity of buyers to pay more, land vendors (including governments) test developer appetites to pay more for land, and property agents look to test the offshore market’s interest in Australian property as a safe store of wealth in the face of uncertainty elsewhere. More and more high density everywhere is held out as the solution. The current models are not working as advocated.
The Australian east coast is now witnessing a hyper property and infrastructure development period that has had the effect of temporarily helping to mask the economic black hole that resulted from the now questionable advocacy of the mining industry. The big question is how sustainable is all of this and what problems are being solved?
All the while, governments are hooked as they enjoy the prices that they are getting for selling surplus property assets to enable bigger and bigger developments, and of course the stamp duty revenues which result. While everyone seems to be on the housing affordability bandwagon, the issue remains. And, while over 60 per cent of under-35-year-olds now rent and the average age of first home purchasers edges toward 40, the current set of answers look underwhelming. And the prospects for the working indebted over 60 are not much better.
Housing affordability and self sufficiency spans the full spectrum of housing supply. This includes assisted rental housing, private rental housing, owned housing and retirement housing. The post-war housing models are failing to meet the changing household formation and economic capacity of most Australians these days. Similarly, solutions that take a one-size-fits-all approach are just as out of touch. For example, using PPP models to shift the future supply of social housing out of government and into the private sector fails in my view to break one-size-fits-all approach, and it leaves the powerful rump of public housing advocates in positions of unjustified influence. They are also very expensive.
Australia is confronted by a housing supply market failure. This is not just as a result of inept public policy and leadership. Its about the intractability of powerful interest groups who have yet to come to terms with the reality that their tired old model’s time has come.
I believe government has an urgent obligation and role to play in leading the recalibration of Australia’s housing industry. The starting point must be value for money. There needs to be a critical appraisal of just how much public subscription in housing and related infrastructure there really is, and where that subscription can be most effectively spent.
Housing is unlike health and education, which must continue to deliver universal access to Australians irrespective of their circumstances. The quest to minimise waste and value leakage is just as paramount for all, but housing carries the added challenge of ensuring that the transfer of wealth does not fall into more concentrated hands that do not represent the interests and needs of Australian households. Its time to lead, not be led.
If governments feel they can remain immune from the eventual judgement of voters whose real interests can be indefinitely ignored, they do so at their peril. And 2016 could be a defining year. Politicians are all in the possession of detailed insights into how the public is feeling. The work of JW Research is a source if readers want to make a start in judging the national mood.
The cost of living pressures of ordinary households and the debt levels they are being encouraged to subscribe to are just as unsustainable as the debt levels that result from governments that are living beyond our national means. It has never been more important to treat self serving advocacy with even greater scepticism.