William Dawes: Our homes are our castles, so hands off when it comes to pension assets test
THERE is something special, sacred even, about the places we call home. Even our language reflects this fact in expressions like, “Safe as houses”. Or, “A manʼs home is his castle”. And even, for the sentimental, “home is where the heart is”.
Our homes are where we live, play, build families and form the networks that make a neighbourhood.
Itʼs part of the reason that the housing affordability crisis hits home even for people already on the property ladder: We are all concerned that coming generations wonʼt be able to build the same sort of lives, and communities, their forebears enjoyed.
Yet last week the NSW Young Liberal president, Harry Stutchbury, proposed a solution to Sydneyʼs housing affordability crisis: Remove the “primary dwelling pension asset test exemption” and force retirees to either sell up and “downsize” (often far away from the community where they have spent their working life and raised a family) or give up the pension and reverse-mortgage their home to cover living expenses.
While it may seem like a rational, if coldhearted, solution itʼs one that doesnʼt stack up, economically, politically or morally.
RELATED: Household costs outstrip pension payment increases Indeed itʼs a solution that borders on the cruel as it coldly treats Australian pensionersʼ dwellings not as homes, but merely assets.
Itʼs understandable that, in reaction to so many on the Leftʼs insincere emotive policymaking, some in the Liberals see it as a mark of credibility to appear coldly efficient or calculating in their solutions. But for Liberals to be truly conservative, they shouldnʼt react with meanness to their fellow citizens.
Nor does the economic logic stack up. The housing market is not the share market. Shares are far more liquid than property, and unlike shares or cash, a home offers us a shelter from the vicissitudes of life. This is obvious to most.
Liberals looking to reinvigorate their base, which would surely include many people who would be caught out by such a change in policy, should also look to history.
Robert Menzies elevated the family home when he said it “is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole”.
And this speaks to something ancient in each of us: We all yearn for a place to call home. This is natural and good. This is why it is nonsense to speak of peopleʼs homes simply as assets. Homes are not an impersonal security, they give security to families.
And in any case, acting as though driving pensioners out of their home will solve the housing problem doesnʼt stack up because it treats the problem in terms of supply rather than demand. Stutchbury decries the fact that elderly Australians are refusing to downsize in retirement, thereby reducing “the volume of housing available in the market, pushing up prices”.
In other words, he is saying, we donʼt have enough space for housing.
But this is ludicrous. Australia has the most land per person, both aggregate and arable, in the world.
Our problem is one of demand, caused primarily by high levels of immigration without matching infrastructure growth, as well as an unsustainably high rate of foreign acquisition of Australian property.
Property market: Sydney is not safe as houses, median price today is $1 million
In addressing the UKʼs own affordability crisis, the Bow Group uncovered that the number of Chinese citizens alone who could afford a property overseas was 63 million, a figure roughly three times our population. The demand issue has been - exacerbated in Australia by policy - insanity. In 2009, the Rudd government threw out rules on foreign home ownership. For instance, it allowed people on student visas to buy properties. On moving back overseas, they did not have to sell the property. The real estate market was, in effect, opened to the parents of hundreds of thousands of foreign students in Australia. Even if we were to rectify the excessive foreign demands on our housing market, we only have two options to meet domestic demand for more homes — building up or building out. Despite the fad around “urban consolidation”, the clearly preferable solution is to build out.
If we build up, returns simply go to current landholders. “Urban consolidation” unsurprisingly leads to the concentration of land ownership. This is not conducive to a property-owning democracy.
Finally, welcoming reverse-mortgages as Stutchbury and some other do is an odd posture to take. It seems silly to use debt to fix a problem substantially caused by debt. The increase in house prices is clearly linked to our easy access to debt.
It is no coincidence we are near the very top of the table for house prices and housepurchase debt.
Because of this causal relationship, the Australian Prudential Regulation Authorityʼs targeting of the debt market has been relatively effective.
Reverse mortgages are unprincipled in another sense: they mean that the family which survives a deceased pensioner will not inherit their familial home, but rather debt.
This makes a mockery of the hard work and frugality of past generations, and deprives the future generation of an opportunity to continue its local community ties.
Liberals will neither find solutions nor win votes by treating homes as assets to be - manipulated and exploited. And Australians will not find answers in simplistic economics or by increasing the prevalence of debt in our society.
Australia must address the risk to our commonwealth posed by pervasive foreign “investment”. While some kowtow to ideology, Australians are getting locked out of the market.
Our shelters are becoming someone elseʼs assets. We should prefer to put citizens first, not because of some narrow-minded populism, but because we know what the true purpose of home is. As Menzies said, homes are not just material, but also human and spiritual.
William Dawes is a Young Liberal branch president. David Corbett, who has worked for an internally-focused British think tank, contributed.
The original article can be found here.