A book of hard truths we need to face, with a solution that is well within reach should we grasp it. The Great Housing Hijack: The Hoaxes and Myths That Keep Prices High for Renters and Buyers in Australia, by Cameron K. Murray

An academic explains how the housing market really works, and why government intervention is needed.

Cameron K. Murray is an economist and expert on housing markets. At various stages in his life he has been a renter, a home owner and landlord, and so comes at the problem of housing affordability not only from an academic perspective, but also lived experience.

There is much received wisdom that Murray turns on its head in The Great Housing Hijack. For example, we learn that rents have stayed steady at 20 percent of income for the last several decades, and that historically they track at roughly that percentage. Or the fact that developers stagger the release of housing to capitalise on the best price. This is all part of what Murray describes as the “five housing market equilibria”: asset prices, rents, location, density and the absorption rate (the aforementioned release of housing). These equilibria have interacted historically to give us a property market that doesn't veer too much off a predictable path. (Remarkably, archaeological records from Mesopotamian stone tablets show property price similarities to today). In short, the market left to its own devices produces big inequalities. High prices and the concentration of wealth are the result. We now have a market where landlords are competing with each other for properties, pricing out owner-occupiers.

Murray writes:

“Historically, housing markets were always divided between the haves and have-nots. What we are seeing since the 1980s is a return to the normal operation of the housing market after the post-World War II decades of heavy government intervention.”

Nor does the future of the market look hopeful. While many commentators may call for an increase in supply to reduce prices, the reality is that the two thirds of the population who own or have mortgages do not want to see the value of their assets diminish. Even a 10 percent decrease in the values of Australian homes would be a disaster, wiping billions of dollars off the housing market.

What is the solution? A simple one, as it turns out. The reader may be surprised to learn it was a Liberal prime minister, Robert Menzies, who in the post war period championed public, affordable housing. It was a time when soldiers were returning from war, creating the conditions that made it politically palatable to offer cheap housing. War heroes couldn't be treated shabbily. The Menzies policy of building houses at a rate of knots worked, increasing home ownership to a high of 70 percent. Murray suggests we treat affordable housing as we do roads, schools and hospitals, as a right for all citizens. He suggests we follow the Singapore model of building housing and selling it at essentially cost price. The system would work as a parallel market to the private one.

A book of hard truths we need to face, with a solution that is well within reach should we grasp it.

The Great Housing Hijack: The Hoaxes and Myths That Keep Prices High for Renters and Buyers in Australia, by Cameron K. Murray. Published by Allen & Unwin. $34.99

MAR24