Friday, 12 June 2015

Is Joe Out of Touch?

In the wake of Joe Hockey's comments about housing affordability in Sydney there are various memes circulating which suggest he, and the Coalition government in general, are out of touch with ordinary Australians.  I've been wondering if this is what the comments really show.

Now, if the question was "did Joe say something foolish and insensitive" then the answer would almost certainly be "yes".  No surprise here.  Joe often says foolish and insensitive things.  But that's not the question.  The question is, is he out of touch?

The context was a press conference about an ATO investigation into possible breaches of foreign investment restrictions on real estate.  Apart from the actual subject at hand, Hockey made two key statements about Sydney housing.  The first:

"The starting point for a first home buyer is to get a good job that pays good money," 

And the second:

"If housing were unaffordable in Sydney, no-one would be buying it..."

Neither of these comments is actually inaccurate.  The problem is simply that both are ambiguous.

It has always been the case that if you wanted to buy a house, you needed to have secure employment.  Unemployed or underemployed people have never been able to buy housing in Australia - unless of course they inherited money.

What has shifted, if you like, is the definition of a "good job" and "good money".  It used to be that if you had a job as a tradie, or a steady job in a factory where you got to do some overtime, you could save enough money to buy a modest home in the Sydney suburbs.

Those days are long gone.  Now you would be flat out finding a home for under $400,000 anywhere in Sydney.  Even unpopular outer suburban local government areas have huge prices.  Blacktown, which includes housing commission suburbs like Bidwill and Mt Druitt where no-one really wants to live, has a median house price over half a million dollars, and the lowest quartile (i.e. the number 25% of houses are below) is above $450,000.  Cambelltown, in the far south-west of Sydney, another area with lots of public housing, has a bottom quartile price of $420,000. Good luck buying one of those on your factory hand's wage.

Not that such jobs are easy to come by these days, especially in the outer suburbs.  Of course unemployment is a problem, but by historical standards the level of unemployment is still fairly low.  The problem is that the definition of a "good job" for home ownership purposes has changed.  Now a "good job" is a well paid professional gig - a lawyer, say, like Joe himself, or doctor, or engineer, or a public service middle manager.  The trouble is that these jobs are not available to everyone.  Indeed, even those once secure factory jobs are now mostly a thing of the past.  Instead, people without high levels of education are doing things like caring for older people, or working in the retail industry, usually on a casual basis.

So Joe is not wrong, but for an awful lot of people his advice is unhelpful.

His second point is even more revealing, even insightful by Joe's standards.  People are indeed buying housing in Sydney.  Demand exceeds supply.  Who is doing all this buying?

Some of it is being done by overseas buyers, and some of these purchases may be technically illegal - but not many.  The ATO is only investigating 200 cases.

Most of the houses is being bought by people with good jobs that pay good money.  Some of these houses are being bought for their owners to live in.  Others are being bought to rent out for amounts slightly (but not hugely) more affordable than they are to buy.  These investment properties make a loss for their buyers but the owners are able to offset losses against the good money they earn in their good jobs, reducing their overall tax bills.  So in a sense, Joe is helping to pay for them.  If he had the guts he could do something about that.

Just in case Joe hadn't made the point clearly enough his boss Tony Abbott decided to underline it.

"I'm someone who has, over the years, felt a bit of mortgage stress. Even as a cabinet minister, sometimes it's hard to pay a Sydney mortgage and I know over the years I've earnt a lot more than the average person."

I thought perhaps this was further evidence of Tony's inability to manage money.  Then I realised he lives in Forestville on Sydney's northern beaches where the median house price is over $1.2m.  Even a person with a good job would struggle with that.  No wonder Tony was so keen to become Prime Minister.  Joe has probably had the same experience.  He lives a bit further south in North Sydney where the median house price is over $1.7m.

Are Tony and Joe out of touch?  No, they are very much in touch.  Not only do they own their own very expensive houses, but all their neighbours do too.  Of course some inherited them, or bought them when they were much cheaper, but houses are bought and sold in their neighbourhoods all the time.  By people with good jobs.  With some help from Joe.  They are Joe's and Tony's constituents and they are all on the same wavelength.

The problem is not that they are out of touch with ordinary Australians.  The problem is that these days ordinary Australians are a very diverse lot.  The rich - Tony's and Joe's constituents - are so much richer than they ever were.  The poor are not.  Even if they work hard, slaving away in their nursing homes, cleaning the houses of their rich compatriots or working a second job on the weekends, they will never earn enough to buy houses when the prices are set by the increasingly affluent rich.

 Joe and Tony provide a typical rich man's answer - they should get rich too.

If only it were that easy.
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