How do we fix the completely dysfunctional housing market that has locked a generation of Australians out of secure residential rights? I’ll start by laying out some broader arguments, and finish by talking about Perth, a place I’m reasonably emotionally invested in. The fundamental problem with housing in Australia is that the price of land has grown from being 30% of the price of property in the 90s, to being 70% of the price of property today. This has resulted in the median house being 7–12 times the median annual income, up from 3–4 times 25 years ago. To fix this, and to bring housing back into reach for the vast majority of Australians, we have to start making some big changes to the rules governing the housing market. We need empowered state government action to deliver the kinds of housing we need, at the prices that we can afford, without compromising on our environmental commitments or our standard of living.

This is a logarithmic graph. It means that Housing Prices have climbed at 3x the rate of inflation, and 2.5x the rate of wages over the last 30 years.

There’s always been a vibe on the left that we’re in a property bubble. In this daydream, at some point it will pop, and we’ll all be able to afford housing at 1990s wages to price multiples, but as Richard 塚正ー緑 on Twitter discussed a few days ago, dreaming about a bubble is by far the more optimistic hypothesis. As the unconvential economist Steve Keen has found out to his detriment, betting against house prices continuing to rise is a surefire way to end up walking all the way from Canberra to Mt. Kosciusko. The alternative hypothesis, from Richard, is that ballooning house prices are

a mechanism by which an increasing proportion of all productivity and income growth (in our society) is appropriated as rent (to homeowners) and the political system becomes more and more inclined to protect those rents, and intergenerational inequality explodes

That sounds horrific to me and stands opposed to everything I think Australian social democracy has stood for, ever. So, in the Sewer Socialist tradition, I’ve got some solutions. These are a mix of old ideas from Singapore’s Housing Development Board, which in my opinion is one of the few places that has truly ‘fixed’ housing in the 20th century and observations from the remarkably successful German housing system. Instead of the vague calls for ‘decommodification’ of housing, I’m proposing that we build lots of dwellings close to existing transport and other urban amenities and give it to people who want it, at a mortgage which is a fixed multiple of their household income.

We should run an architectural competition, for 3 bedroom apartments, which is where the current housing market is failing and pick the best 10 designs and just start building them wherever lots become available. State governments should create an independent statutory agency that has a board appointed by Parliament, with borrowing powers, broad planning permissions and it should be directly funded by a broad based land tax. It should also have the legal authority to have right of first refusal on sales of residential brownfields close to transport infrastructure. Whenever a lot is up for sale in designated areas, the agency should step in, buy it, demolish the existing property and tender out the building of 3–5 storey block of walk up flats might which look something like this…

Not an ‘artists impression’. The 3xGruen project in Pankow, Berlin.

Construction costs of family-friendly 3 bedroom apartments which look like this, which keep open space, gardens and spaces for children to play would be in the order of 150k to 250k, depending on the size and level of finish, and the tender and auction process would keep constructions costs down. The costs of the land itself would be paid by the land tax (thus redistributing the inflated land prices down the wealth ladder), and the cost of construction would be covered by the mortgages that middle class households and families enter into with the state housing agency. Control and management of the block itself should be handled democratically by a co-operative of the residents of the block.

The state agency would still own the underlying land, and eventually when people want to move, or sell their units, they could be guaranteed an inflation indexed sale price of their mortgage back to the state agency, thus guaranteeing a store of wealth for their retirement. Over the medium term, this would also have the added benefit of cutting down on housing speculation significantly, and almost entirely remove the risk of housing bubbles and their resultant financial crises. We could, at last, return to a society where the assets and productivity of our society is dedicated to the improvement of our lives and not dedicated to the religious worship at the Altar of The Block that we’ve lived through the last 25 years.

In practical terms, in Perth, an annual land tax of 0.5% of property value on property valued above $500,000 would not just slow the growth of house prices dramatically, but generate some $1.5 billion per annum, and improve our GST distributions! Pensioners, and other cash constrained home owners could defer the tax burden onto the value of the house, and this would be reimbursed to the state when the property transfers ownership next. This revenue stream, used carefully, this could bring on the supply of some 15,000 new apartments a year, putting significant downward pressure on the entire housing market and providing a pipeline of housing growth that housed the entirety of Perth’s future population growth within an affordable and environmentally sustainable medium density housing program.

The scourge of NIMBY (Not-In-My-Backyard) property owners could also be countered with such a program. The most morally justified criticisms of redevelopment in our amenity rich inner suburbs is that the benefits of rezoning is captured by the greed and corruption of property developers, which research by Cameron Murray and Paul Frijters at UQ has discovered to be one of the most corrupt areas of state regulation. Clearly, relying on private developers to provide the bulk of housing for Australians has not only resulted in the environmental degradation of much of our native bushland and the creation of some of the least efficient and most expensive housing in the world, but has also consumed our political system in a web of deceit and corruption.

In the late 19th century bloom of left-wing ideas in the United States, the development of sewer socialism was one of the biggest achievements of the American Left in Wisconsin. Today, in the Age of Trump, we’re all revisiting periods of socialist successes. This quote by Alon Levy at Pedestrian Observations on Sewer Socialism has jumped out at me on the role of ideology in urbanism,

“There’s inherent tension between trying to run a government or a government program according to the tenets of socialism, liberalism, conservatism, or any other ideology, and trying to run it pragmatically. I wrote some early posts criticizing the latter tendency, for example here and here; an emergent view coming from the corpus of my political posts… …is that instead of removing ideology from transit politics, ideologues should instead learn best industry practices and use them in the service of their chosen political philosophy.”

Our society’s housing crisis is at the root of so many of our problems, be they public concern about immigration, the rise in inequality and slowing economic growth, and the impending climate catastrophe. Spending bits and bobs in good years on a couple more social housing units isn’t going to cut it. We need change, and we need it to be on pragmatic and achievable grounds because that’s the only way we’re going to take the public with us. Efficiency and competence in delivery are left wing values, and we shouldn’t cede that ground to anyone.

Thankfully, we have cause for optimism! The change in tone on the left of politics in Australia over the last few months has created space for new kinds of thinking. The left is back! Politically, at least. We’re back in the business of doing things, from the South Australian Labor government promising to build power plants to fix the energy market, to the Victorian Labor government promising to buy a paper mill and run it to protect the jobs and finally to the resounding victory of the West Australian Labor Party on a solidly materialist platform of state-led job creation. These programs are remarkably popular. We should use this opening to take back control of shelter and put affordable roofs over our heads again. We have the political tools, we have workable policies, and for the first time in a generation, we have state Labor parties which are willing to act. Let’s make them do it.