Understanding the housing affordability crisis (with videos)

 

We can all agree that talking about economics, taxation and retirement funds is one of the most boring things you can do.

But living in your own home is a pretty cool idea. And whether it’s the cost of buying a home or renting a home, things have gotten pretty ridiculous over the last 10 years.

And it’s going to have a pretty major effect on the lives of young people.

So we scoured every corner of the internet to find INFORMATIVE and SOMEWHAT ENTERTAINING videos that explain exactly what's going on.

By the end of this, you should have a solid understanding about the concepts, issues and debates.

Let’s go.

WELCOME TO YACSA'S GUIDE TO THE HOUSING AFFORDABILITY CRISIS!

A brief introduction:

  • House prices have spiked in the last 10-20 years

  • By house prices, we mean the cost of buying OR renting

  • That means a lot of young people are finding it impossible to find a safe and affordable place to live.

  • As a response, the government have considered letting young people use their retirement savings (superannuation) to buy their first home.

  • Economists, the opposition, and even the government have said that's a terrible idea that will hurt young people.

  • Also, negative gearing is a thing.

OK. Got it? 

No? That's OK, this is incredibly complex. But we PROMISE it will make sense after this.

STEP 1 - THE HOUSING AFFORDABILITY CRISIS

 

Nicole Gurran, one of Australia's leading academics in this space, explains the housing crisis in a more nuanced way:

And Eliza Owen did a TED talk on how to explain to older people that things are way worse off than they’ve ever been, and that telling young people to ‘just save up’ completely misses the point.


STEP 2 - WHAT IS NEGATIVE GEARING

Here’s a quick video from Buzzfeed that uses jelly beans to break down how negative gearing works:

Now that you know how negative gearing works, watch Waleed explain how negative gearing is used, and the link to the affordability crisis:

Basically…

  • The first (only?) rule of economics is the price is determined by supply and demand.

  • That means if there was only 1 chocolate bar left in the world, the high demand and low supply would make the cost of that chocolate bar very expensive.

  • If there were 1 billion toothpaste flavoured chocolate bars, there would (probably) be low demand, and a huge supply, so the cost would be low.

  • What negative gearing does is it increases the demand for housing - it is an attractive investment so people want to buy more of them.

  • And because negative gearing increases the demand, it also increases the price.

  • And prices have gone up faster than wages.

  • Hence, the theory goes, negative gearing has made our homes more expensive and unaffordable.

And high houses generally lead to higher rental prices.
 

STEP 3 - USING SUPERANNUATION

So in 2017 the federal government considered allowing young people to access their superannuation to pay for their housing deposit (When buying a home, you normally have to pay roughly 10% up front as a deposit).

Here's a video that somehow explains what superannuation is by using a TARDIS who likes to water plants (you're very welcome):

For those who didn't watch the video, superannuation is:

  • A mandatory payment of 9.5% of your salary, by your employer, into an investment account, that is managed by someone else so you do not have to think about it, that you can't access until you retire, that is used to fund your retirement.

  • Very boring

SO IS ALLOWING PEOPLE TO USE SUPERANNUATION TO PAY FOR HOUSING A GOOD IDEA?

Nope.

Saul Eslake explains that this will not solve the housing affordability crisis, and will actually make houses more expensive:

You can read more about why people are saying it would be a bad idea by checking the following links:

The Conversation explain the nuances in their academic-y way.

Buzzfeed explain it in their usual lighthearted yet informative genre.

Whilst The ABC explores the politics involved.
 

WE'RE DONE!

Congratulations on completing YACSA's introduction to housing affordability.
If we've done our job right, you should now be pretty aware that:

  • Housing affordability is a massive issue, and we are in the midst of a bona fide crisis.

  • Things are much, much, much harder than they were 10, 20, 30 and 40 years ago.

  • The crisis will affect the lives and futures of young people.

  • Asking young people to use their superannuation on housing is just plain silly.

And if you forgot all that, or you just skipped to the end, here's an image we made that sums it all up:

housing affordability.png

What do you think? What could/should be done? What are your questions, concerns, ideas or opinions?