Cameron Murray’s ‘terrifically unfair’ answer to our housing woes resembles a lottery, not the serious reform we need
- Written by Elizabeth Baldwin, Associate researcher, Grattan Institute
With 120,000 people homeless each night and one in five low-income private renters spending more than half their income on rent, it is clear Australia urgently needs a housing policy change. A new book by economist Cameron Murray, The Great Housing Hijack, claims to provide a guide for just that.
Murray is spot on about one thing: the housing policy debate has been hijacked. As he notes, the breathless reporting of every fluctuation in the market is unenlightening. People with a stake in property markets flood the debate with spurious claims.
Unfortunately, Murray’s book only adds to the cacophony. His analysis is inconsistent with the evidence, and his proposed solution yet another distraction.
But we can’t give up in despair. It is important to sift critically through the research and advocate for what works.
Review: The Great Housing Hijack – Cameron K. Murray (Allen & Unwin)
The most controversial argument in The Great Housing Hijack is that planning and zoning rules do not change how much new housing is built, just the location:
The planning system and its zoning rules do not regulate how fast new homes are built. There are no speed limits. What town plans do is regulate where different types of immobile buildings can go.
Murray says developers will only ever build a limited number of homes at a time, regardless of planning permissiveness. He argues they will refrain from flooding the housing market. Instead, he says, they will often prefer to just hold on to land, keeping the option of developing it in future.
Rally for public housing, Sydney, June 17, 2023.
Bianca De Marchi/AAP
Read more:
Urbanisation and tax have driven the housing crisis. It's hard to see a way back but COVID provides an important lesson
How do we escape the policy quagmire?
Murray proposes bypassing the private market altogether with a scheme called HouseMate. The federal government would buy or repurpose land, build homes, then sell them at a discounted price to Australians who do not own property.
The sale price would cover only the construction cost, not the cost of land, so it would provide a big subsidy for the people lucky enough to be chosen. Buyers would get to enjoy living in a discounted home, and could resell (to others eligible for HouseMate) after five years of ownership, pocketing most of the gains. But the catch is, there would only be a limited number of places available each year.
To build the homes, Murray suggests the government could compulsorily acquire sites, but that is not likely to fly at scale.
The government would probably end up buying most of the land at market rates. Murray estimates that it would cost the federal budget about A$3 billion to provide 30,000 places each year, although the government may eventually recoup some of that cost by taking a share of the capital gains from resales, and lending to participating buyers, as Murray also proposes.
Another use for that money might be boosting Commonwealth Rent Assistance: $3 billion a year would be enough to increase the maximum payment by at least 50%.
Rent Assistance is targeted to the most vulnerable renters. It is available to everyone who is renting and receiving an eligible income support payment. About 900,000 households currently receiving the maximum rate would benefit from an increase of up to $2,500 a year, helping to compensate for the hit rising rents have made to their household budgets.
In contrast, the only eligibility criteria for Murray’s HouseMate would be age; there would be no means testing. Anyone who did not own property would be mad not to apply. With a limited number of places each year, getting picked for HouseMate would be like winning the lottery – and indeed Murray floats the idea that “queuing could be managed using lotteries”.
This is a terrifically unfair way to distribute housing help: someone earning $250,000 a year would have the same chance of winning as someone earning less than $50,000. Many people struggling to afford housing would miss out altogether.
There is a reason governments don’t usually model welfare programs on PowerBall.
Read more:
The Help to Buy scheme will help but won't solve the housing crisis
We already know what governments need to do
We do not need grand lotteries with catchy names in housing policy. Despite the distractions and debates, we already know what needs to change. The good news is that governments have started down the right path.
The federal government increased Commonwealth Rent Assistance by 15% in 2023. It has established the $10 billion Housing Australia Future Fund to fund 30,000 new social and affordable homes in the next five years. These are big steps in the right direction, although there is still much work to do.
The federal government has also put $3.5 billion on the table to encourage the states to reform land-use planning rules to get more homes built, the only real long-term fix to our housing woes.
State governments, especially in New South Wales, are starting to take action to relax land‑use planning rules and get more housing built.
What governments need to do now is follow through on what we know will work, not throw out the evidence book. Let’s not give in to the din.
Authors: Elizabeth Baldwin, Associate researcher, Grattan Institute
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