Housing and Neoliberalism: Growing inequality in Australia Adam Stebbing & Ben Spies-Butcher Neoliberal economic restructuring has changed the nature of social provision. This is particularly the case in Australia, where the welfare state was built on a wage earner compromise that relied on labour market regulation more than direct tax and spend policies (Castles 1985). As a result, policies that liberalise labour and capital markets often have more impact than overt social policy. Social policy has also changed as governments seek to encourage choice and self-reliance through marketisation. However, support for private social provision usually entails expanded public funding. Private health insurance rebates, childcare rebates and private school funding each support forms of privatised welfare. This creates a dual welfare state in which different social groups are stratified into different modes of social provision, both receiving public support, but in different forms (see Stebbing and Spies-Butcher 2010). The most inequitable form of public support for privatised welfare comes through the tax system. Tax concessions reduce the taxes paid by those undertaking particular activities, like investing in housing or superannuation. Benefits relate to contributions, so those that contribute more receive a larger benefit. Support is also based on a concessional tax rate, or exemption, and so the benefit rate also increases with a person s marginal tax rate. The largest of these concessions relate to savings over the life course, meaning the inequalities generated by tax concessions can accumulate over time (Spies-Butcher and Stebbing 2011). Housing, however, is subject to perhaps the most socially significant inequalities associated with savings. Unlike the age pension, the public equivalent to private housing is poorly funded, stigmatised and confined to a small proportion of the population, providing a more stringent safety net. Yet, housing is central to individual welfare and social participation. It is often dubbed the fourth pillar of retirement policy, but secure housing is clearly a prerequisite to employment, accessing services and to community belonging (Yates and Bradbury 2009). Support for home ownership played a central role in the initial wage earner model of social protection (Castles 1998). Without affordable and accessible housing, other elements of social protection are weakened, because low payment rates cannot meet basic needs in addition to high housing costs. This paper explores changing patterns to housing tenure. Given the decline of older wage earner institutions and the growing importance of tax supports for housing, we might expect growing stratification of housing tenure. But because home ownership requires a large investment, changes are likely to emerge gradually over time. Our paper begins with an overview of housing policy and of concerns around housing affordability. We then outline the dual welfare state thesis and how this is likely to impact housing tenure. We then focus on cohort data that tracks ownership rates for particular groups over time to explore the impact of the dual welfare state. We then conclude by reflecting on the emerging dynamics and what this means for social policy more generally.
Housing in Australia Australia has had high rates of home ownership, reflecting deliberate policy support for this mode of provision (Castles 1998). Soldier settlement policies saw significant increases in home ownership in the wake of each world war (Troy 2012). More generally, concessions for home deposits, regulation of home loan interest rates, favourable planning laws, subsidised public infrastructure and the regulation of employment and wages all supported workers to enter home ownership (Troy 2012). This brought together social policy with planning, labour and capital market controls. Alongside this, investment in public housing targeted those workers, usually at the margins of the labour market, unable to afford home purchase. The period of economic restructuring saw the end to many of these policies. Liberalised lending regulation has enabled lower deposits, but much of this benefit has been capitalised into higher house prices. More variable interest rates potentially expose home buyers to greater risk. Changing attitudes to taxation and public debt, as well as the vertical fiscal imbalance of taxation in the federation, saw privatisation of the costs of development, requiring new owners to pay directly for infrastructure. Changing industry policies have also led to the decline of regional and rural employment, creating greater pressure on cities. Labour market changes saw greater wage dispersal and a dramatic shift in favour of less secure work through casualisation. Part-time work also increased, sometimes increasing household incomes by facilitating the entry of women into the workforce, but also facilitating casualisation. Greater inequality potentially creates stratification through competition for scarce housing. Recent surveys of house prices have shown that there is little affordable housing for low wage workers or those on benefits in major cities (Yates et.al 2007). Housing and the Dual Welfare State Richard Titmuss (1958) identifies three forms of welfare. Of these, social welfare, involving direct provision of public services or payments, is the most prominent. But, Titmuss (1958) argued that occupational welfare, where the state obliges employers to provide workers with health insurance or pensions, and fiscal welfare, where the state provides tax support to the private purchase of welfare services, could be equally important. Australia s wage earner model relied heavily on occupational welfare, supported by full employment and residual social welfare payments (Castles 1994). Deregulation of the labour market has made access to occupational welfare less universal, more conditional and more stratified. This has increased reliance on social welfare for many. However, alongside growing social payments, Australia has seen a substantial increase in fiscal welfare. Tax concessions related to welfare, in areas like pensions, health and housing, have grown substantially, and now amount to 4.9% of GDP (Treasury 2013). This support is less visible, because it generates a fall in revenue rather than an increase in spending, and so does not show up in standard budget documents. But, the impact is virtually identical to spending programs, as resources only accrue to those undertaking specific actions or
belonging to specific groups, and have similar budgetary effects. The expansion of tax concessions has led some to describe the impact of neoliberalism on Australia as producing a dual welfare state (Stebbing and Spies-Butcher 2010). The main tax concessions for housing relate to owner occupied housing. Home buyers benefit from an exemption to capital gains tax and from the non-taxation of imputed rents. This is reinforced by the exemption of the family home from the pension s means-test, meaning that an older renter is much less likely to qualify for the pension (or full pension) than an older home owner. More recently, the first home owner s grant and first home saver accounts have added additional support for entry into home ownership. These concessions have the potential to generate distortions in investment markets. In the context where most people could access home ownership, and where those that could not were accommodated in public housing, this was of less concern. But, so long as housing is primarily acquired for its use value (ie to live in) rather than its exchange value (ie to invest and sell), the impact of these wealth inequalities on lived experience could be contained. Tax concessions for home ownership clearly favour home owners over renters. This is exaggerated by a second set of tax concessions for investment. Commonly known as negative gearing these concessions allow investors to subtract losses on an investment against their other (e.g. labour) income. The cost of this concession, while smaller than for home ownership, is also considerable. Negative gearing also benefits a much smaller group of people, who tend to be on higher incomes and able to invest. The benefits of negative gearing also accrue more directly as income rather than in-kind benefits. Thus, it is more likely to exaggerate the lived experience of inequality. The rules for negative gearing potentially encourage over-investment, as they are of most benefit to investors who are highly leveraged and so face substantial interest bills, encouraging investors to continually expand their property portfolio. Alongside these substantial tax supports for owners of private housing, funding for first-tier housing policy has remained stagnant. Public housing has experienced considerable real funding cuts. Public housing stock has been declining as a proportion of total housing for some time (Troy 2012). This has generated longer public housing waiting lists, leading to tighter targeting of need and a steady concentration of social disadvantage within the public housing sector. In turn, this reduces the income from the public housing stock, while lack of resources drives underinvestment in maintenance and a cycle of decline. Governments have increased subsidises for private rents through rental assistance. Essentially, this has changed the nature of the first tier of the housing welfare state from public provision to social payments. Even so, long public waiting lists and acute rental stress suggest these policies remain inadequate. Growing housing insecurity Because home ownership reflects lifelong savings patterns, and because the population is ageing, the impact of recent policy changes and increasing housing unaffordability is unlikely to cause rapid declines in home ownership. Not unexpectedly then, the home ownership rate only declined slightly between
1998 and 2010, from 70.4 to 68.8 per cent of households (ABS 2011). This is the proportion of households with and without mortgages for private housing at a point in time. However, this potentially overstates housing security because mortgagees are counted as home owners regardless of their debt. This rate also obscures potential disparities between the housing tenure of different agecohorts and family structures. So, using data from the Australian Bureau of Statistics (ABS), we more closely examine changing housing tenure to particular age-cohorts and family structures since the mid-1990s. The relatively stabile home ownership rate hides broader changes to housing tenure among Australian households in recent decades. As Table 1 shows, 10 per cent fewer households own their housing outright since the mid-1990s. Outright home ownership fell from 42.5 to 32.6 per cent between and. While an increase to mortgagee households offset this, it coincided with a modest increase to households renting privately and a small decrease in those relying on public housing (see Table 1). More broadly, these figures correspond to growing financialisation and increasing household debt. Table 1. Housing tenure in Australia, 1996 to 2010 Housing Tenure Owner 42.5 32.6-9.9 Mortgagee 28.7 36.2 +7.5 Private renter 20.4 23.7 +3.3 Public renter 6.0 5.8-0.2 Comparisons among younger and older households further reveal that the decline in home ownership has not been uniform across age cohorts. We select two age groups for comparison households with a reference person aged 36 to 45 years and those with a reference person aged 65 and over. The latter includes households of retirement age as the pension is predicated on retirees owning their home. The former group represents those expected to have entered ownership and to be having children. Home ownership remained comparatively stable among households of retirement age (78.1 per cent owned their home in ), with most of the fall in home ownership offset by an increase in mortgagee households (see Table 2). Rates of private rental among households of retirement age, the most insecure housing tenure (for this group in particular due to most relying on the age pension), have increased by much less than average. In contrast, outright ownership substantially declined among households with a reference person aged 35 to 44 years, by almost 15 per cent, from about one quarter in to less than 10 per cent in (see Table 3). While this coincided with an increase in mortgagees amongst this age group, the most
significant change has been about a 10 per cent increase in private renters from 19.8 to 29.7 per cent of these households over the same period. The relative stability of home ownership rates among households of retirement age, particularly compared to the 35 to 44 year cohort, perhaps explains why increasing housing insecurity has not received due attention. Table 2. Housing tenure for individuals aged 65+ yrs in Australia, 1996 to 2010 Housing Tenure Owner 81.9 78.1-3.8 Mortgagee 3.3 6.5 +3.2 Private renter 5.6 6.3 +0.7 Public renter 7.2 4.8-2.4 Table 3. Housing tenure for individuals aged 35-44 yrs in Australia, 1996 to 2010 Housing Tenure Owner 23.9 9.3-14.6 Mortgagee 49.0 54.4 +5.5 Private renter 19.8 29.7 +9.9 Public renter 5.4 3.7-1.7 Growing housing insecurity among households in the younger cohort has further equity implications because many aged 36 to 45 years have young children. On closer inspection, households with dependent children have experienced changes to housing tenure unevenly since the 1990s. As Table 4 shows, 13.2 per cent of couple households with dependent children owned their housing outright in, which is less than half the rate 15 years earlier. In, the proportion of these households in public housing, while low, was only one third of that in. The most substantial change among this group has been the 11.7 per cent increase in mortgagee households to 62.7 per cent in. The proportion of couple households with dependent children that rent privately has increased by 5.3 per cent to 20.5 per cent (see Tables 1 and 4). Overall those in secure tenure declined from 33.8 per cent to 14.6 per cent. Table 4. Housing tenure for couples with dependent children in Australia, 1996 to 2010
Housing Tenure Owner 28.6 13.2-15.4 Mortgagee 50.4 62.1 +11.7 Private renter 15.2 20.5 +5.3 Public renter 4.2 1.4-2.8 Single parent households have experienced a more substantial decline in housing security since the mid-1990s. While 30.4 per cent of single parent households owned their housing outright in, this had decreased to 11.7 per cent in (see Table 5). Moreover, whereas 21.0 per cent of single parent households lived in public housing in, only 12.6 per cent did so in. There has been a modest increase in the number of these households with mortgages, but the more significant increase has been the growth of privately renting single parent households to 43.2 per cent in (from 24 per cent in 1996-97), suggesting long-term insecurity. Table 5. Housing tenure for single parent households in Australia, 1996 to 2010 Housing Tenure Owner 30.4 11.7-18.7 Mortgagee 21.5 28.2 +6.7 Private renter 24.0 43.2 +19.2 Public renter 21.0 12.6-8.4 Conclusion The analysis of ABS data showed that the relative stability of the overall home ownership rate conceals growing inequalities among age-cohorts and family groups in recent decades. Home ownership rates have remained stable among households of retirement age, but substantially declined among households in the 35 to 45 years cohort. Moreover, while much of the decrease in home ownership among couple households with dependent children corresponded to an increase in mortgagees, the decline of home ownership has been particularly concentrated among single parent households.
These findings suggest that housing tenure has been affected by the breakdown of the wage-earner model. Coinciding with growing wages dispersion and private housing scarcity, the stagnation of first-tier housing provision has contributed to the inadequate supply of affordable housing. This, in turn, reflects the declining capacity of single parent households to purchase private housing or access social housing. Extensions to second-tier subsidies and the continued exemption of the family home from the pension s means test has benefitted households that bought private housing before the recent boom. This partly explains why home ownership remained relatively stable among households of retirement age who had opportunity to buy pre-boom, but has declined among households in the 35 to 44 year cohort that confront rising housing prices. This is consistent with the dual welfare thesis and its long-run implications for inequality. These findings are, of course, incomplete and preliminary. Further research is needed to analyse the extent to which recent policy developments exacerbate housing inequalities. Nevertheless, the extent to which home ownership and public renting has declined among single parent households between 1996 and 2010 is particularly disconcerting. The proportion of single parent households renting privately the most insecure form of housing tenure climbed to 43.2 per cent in 2010 and is now double that for couple households with children. Worryingly, governments seem to be responding by reducing payments to this group, reinforcing a dual welfare model where those receiving more direct forms of assistance are stigmatised and marginalised. Because of housing s role in retirement, it also follows that single parents and other households unable to afford home ownership will experience cumulative disadvantage in retirement.
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