Going through hell for a slice of heaven

One of the best instincts in us is that which induces us to have a little piece of earth with a house and garden which is ours.

-- Sir Robert Menzies

The Great Australian Dream, to which Sir Robert referred, is rapidly becoming a nightmare for our kids.

In the early 1980s, the price of the median land and house package in all major Australian cities, except Sydney, was equal to three times median household income.  On top of this the block sizes were large, by international standards and taxes and charges were low.  As a result home ownership in Australia was among the highest in the world.

Since then, but largely since 1996, the price of that "little piece of earth" has moved out of sight of the financial capacity of the average family.

In all of the nation's major cities the ratio of median house price to median income now exceeds 6 with Melbourne being 6.4.

The culprit is land rationing masquerading as "zoning" and State Government taxation.

The National Housing Affordability Conference, held in Canberra this week, highlighted many of the symptoms of runaway housing prices.

Among them was the concern that it locks young people out of the dream altogether or entraps them with horrifically high mortgages or relegates them to dense, high rise living unsuitable to rearing children.

This in turn acts as a disincentive to have children;  care for elderly and save -- things the younger are increasingly being expected to do.

On top of this it absorbs and wastes a large and growing proportion of the nation's wealth.  Housing accounts for just over 58 per cent of the nation's wealth.  This is very high by world standards and has increased sharply over the past few decades.

While investment in housing is both necessary and healthy, a large share of the investment in housing in Australia is illusory.  It reflects in price inflation and regulatory-driven scarcity.

Until the late 1980s state and local governments focused on insuring a large, accessible supply of low cost land.  Then under the misguided pursuit of controlling sprawl, the focus shifted to limiting the supply of land particularly on the city fringe.

The law of supply and demand drove the price of land ever higher.

Governments contributed further to the high prices.  They pushed up taxes on housing by 300 per cent over the past decade.

Don't expect things to change.  Too many people have too much at risk.

This includes many of the leading lights of the Affording Housing Summit who seek to treat the symptoms rather then the cause by seeking to require builders to increase the amount of low cost housing.

Governments are also hooked on the easy money generated by house price inflation.  The banks and developers are locked into the inflated prices and fear for their investments if the regulatory measures underpinning them were removed.

And many thousands of investors are geared to the hilt betting that prices will only rise.

Most significantly the agencies and professions that regulate the housing sector have succumbed to an anti-growth, they-know-best ideology.

In other words, the guardian is committed to destroying the dream.  Pity our children.

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