Housing problems in Australia is going to be the single most issue that might change the course of political stakeholders and consequentially electoral outcomes.
Young adults are spending an increasingly longer time in the family home according to the Australian Institute of Family Studies. The study highlighted how 43% of people aged between 20-24 were living at home, compared to 36% in 1981. Furthermore, the increase is starker in the 25-29 year old’s, which has grown from 10% up to 17% over the same period.
Young people in Australia have felt the rising costs across the board which have severely impacted their ability to leave home, due to increased financial pressure. In the capital cities, the cost of housing has skyrocketed, fuelled by both market speculation and foreign investment which have driven demand. From the Australian Bureau of Statistics report in 2020, Australian property prices have shown a dramatic surge with 42.52% nominal growth and 16.36% inflation-adjusted growth between 2010-2020.
While this boom in housing prices is a fantastic equity builder for those fortunate enough to own a property, it has grave economic consequences for this generation of young working Australians looking to secure a home.
Wage growth in Australia has been extremely slow over the past 10 years, falling from 4% year-on-year (YoY) to just 2.4% in 2020. When Adjusted for inflation, it translates to only a 0.5% real wage increase.
This means young Australians have less disposable income. Less money to save for a housing deposit despite the governments first home buyer scheme. Young people are seeing a greater percentage of their take home pay going to utilities, transport and rent. On top of this is the increasing sum of money borrowed to own a home. With average household debt at 186.8% of disposable income, Australians are asking to take on some of the highest levels of household debt in the developed world.
Unlike previous generations, younger Australians are working longer hours and are in less secure working arrangements. The concessions granted to previous generations of secure, full-time work with little to no formal training are no longer available. To enter most professions now requires a formal education, which ladens prospective workers with large debts before they have even saved a penny toward owning their own home.
Consequently, there are significant political implications for a failure to act on housing affordability. The first is that with Australian wealth and equity tied to the market, any attempts by the government to devalue the price of these inflated assets would be tantamount to political suicide. With the majority of homeowners over the age of 30, and clearly the largest voting bloc, any real attempts to devalue housing would be met with retaliation at the ballot box.
This challenge isn’t isolated to Australian decision makers. Governments and politicians around the developed world are experiencing increased land and rent values. One of the main factors for young people staying home is the cost of rental properties in cities like Melbourne and Sydney.
In Europe, Berlin has experienced a similar demand increase by tenants, in a city where 85% of people rent. The provisional government there has opted to bring in rental freezes, capping the price of rent by the floor space of the property. Likewise, they have capped the rate in which landlords can legally increase the rent annually. In the city this move is wildly popular politically, with the SPD, Left and Green getting substantial support from the city’s tenants. It also emphasises that where there is the political will, there is a means for tangible political action.
There is potential for exploring of these kinds of arrangements in the heated property markets in Australia, particularly to entice young people out of the family home. If young people had confidence in stable and affordable rental agreements, then perhaps this would encourage them to leave home, as well as encourage governments at all levels in Australia to begin examining housing as a real issue effecting independence and quality of life for its young adults.
For political parties, it is in their own interests to continue driving up house prices, as it has become a key metric in the Australian interpretation of overall economic performance. If the housing market dips, the economy must be doing poorly. If housing prices rise, then the economy must be swimming along nicely.
On the flip side of this equation is these newly disenfranchised voters. Young people struggling to enter the housing market, due to the lack of political will to address the core of the issue, will inevitably be deterred from the two major parties. Australians in the age range of 18-30 are already more inclined to vote outside of the two-party system than older Australians, and a short sightedness by politicians to act now, will only damage their electability over the coming years.
