JULIAN

My parents, they were struggling artists. So my dad often said to me, the only money that they ever really made was out of real estate. But they flipped houses, you know, that's how they moved up.

My parents did really well and were able to, you know, eventually buy, they bought a completely unrenovated terrace house in McMahons Point in Sydney, which is where I was fortunate enough to grow up through my high school years.

ANGE:

In the early 2000s, working as a journalist on TV, Julian Cress was looking to change up his career. A stroke of genius led him to create a cultural sensation in Australia… a project that would become a household name, and something that would influence how the country thinks about housing.

JULIAN:

I was just fascinated with the arrival of reality television as we know it today, which kicked off at the beginning of the new century, with Big Brother and Survivor.

Audio Excerpt – Survivor Voice Over:

“This is tribal council, where each week one member will be voted off the island.”

Audio Excerpt – Big Brother Voice Over:

“Yesterday on Big Brother, 1.6 million Australians watched our housemates go in and the drama was just beginning.”

JULIAN:

You know, real people, off the street, on television, in the case of Big Brother sitting around and not doing much. And it struck us that, if you'd put them in a house that was unrenovated, then it'd be really interesting to test their relationships and see how they would go, and what they could come up with as a challenge to actually renovate that home.

ANGE:

That’s how Julian became the co-creator of a show that would make its mark on Australian TV and, decades later, never leave.

Audio Excerpt – The Block opening credits:

“Welcome to The Block!”

JULIAN:

It was astonishing, and very exciting for us. You know, we thought it would work. We didn't think it would work that well. It became the highest rating program in the history of Australian television. It averaged about 2.3 million viewers every night.

Audio Excerpt – The Block voice over:

“The four couples you’re about to meet will be completely in charge of their own make-overs”

ANGE:

The Block was an instant hit. Back then, it was a pretty scrappy operation. It was more fly on the wall doco style than the flashy reality TV beast it is today. And it couldn’t have come at a more perfect time. In the early 2000s, Australia was on the cusp of a housing boom. And if you want an example of just how much prices have risen, you can actually look at the original Block.

Audio Excerpt – The Block auctioneer:

“An opening bid, to start here today, of $750,000.”

JULIAN:

We filmed the first series in 2002 and it went to air in 2003. We bought a block of apartments, just beside Bondi Beach in Sydney.

ANGE:

So it was four units Bondi in 2002. How much did that cost?

JULIAN:

1.950. For a whole building. Yeah.

ANGE:

Crazy.

JULIAN:

It'd be more today.

ANGE:

Australia’s obsession with real estate and home renovations, and our interest in watching that play out on TV, was growing. And Julian thinks his show was so successful because he tapped into something in our cultural DNA, that home improvements aren’t just a hobby but a path to wealth and success.

JULIAN:

I think that Australia is and has been a DIY culture, embedded culture, for generations. But it's very Australian to do DIY, and real estate, because it really is the one place that you can build a future and you know, real estate has risen and risen. Houses double in value every ten years, roughly. And if you put your blood, sweat and tears into it, you can maximise those returns. And I think that's why it's so much a part of our culture in Australia.

ANGE:

The thing is, what happened to housing in Australia over the past few decades isn't just because of some genetic predisposition towards real estate. It’s the result of decades of deliberate decisions that have turned us into a nation of landlords and property speculators.

Audio Excerpt – House auctioneer:

“At 684,000 it sells, it sells and it is sold!”

Audio Excerpt – Saul Eslake:

“I am surprised there isn't more anger among young people at the way in which housing markets have been rigged by their parents and grandparents against their own interests”

ANGE:

The result of that is a crisis that we’re all familiar with.

Audio Excerpt – Nicole Gurran:

“I don’t know what else we could describe the situation we are in now other than a housing crisis”

Audio Excerpt – News Reporter 1:

“National house prices have hit a record high.

Audio Excerpt – News Reporter 2:

“New figures show asking prices for homes are up 85% over the last decade”

ANGE:

And it has broader implications than just where we, individually, can afford to live. Housing has turned into a generation-defining political issue, and it’s quickly drawing battle lines between those that can and can’t buy a home.

Audio Excerpt – Max Chandler-Mather

“The government is trying to pull the wool over your eyes, and crush your hope that they're capable of doing anything real or substantial to tackle the housing crisis.”

Audio Excerpt – Anthony Albanese:

“We want to not be held back by a Noalition of the Liberal party and The Greens political party saying no to public housing”

Audio Excerpt – Jacqui Lambie:

“No more of the politics, no more of the rubbish, I just want roofs over people's heads”

ANGE:

From Schwartz Media, I’m Ange McCormack. This is The Great Housing Disaster, a special series from 7am.

Over the next five episodes, we’ll look at the state of housing affordability; we’ll go inside the rental crisis and meet the people fighting back; we’ll get a picture of who benefits from the crisis being this way; explore solutions, and get political accountability from the housing minister, Julie Collins.

This is Episode 1: Who’s to blame?

Audio Excerpt – 1950’s advertisement:

“Mary, you're coming into tea?...No, Mary is not coming into tea just yet. She and Ted have a problem. The same problem that faces almost every couple who want to marry. Where are they going to live?”

ANGE:

After World War 2, Australia suffered a housing crisis of record proportions. And the language around it back then was pretty similar to how we talk about it today.

Audio Excerpt – 1950s news report:

“Australia has felt the general post-war unrest, have known falling values in wages and higher cost of living. And on top of this, a desperate shortage of houses”

ANGE:

But our solutions were very different.

NICOLE:

So after the Second World War, Australia like many other nations, realised that it needed government Intervention, essentially strong central planning and policy settings to overcome a pent up shortage of housing.

ANGE:

Nicole Gurren is a professor of urban and regional planning at the University of Sydney.

NICOLE:

You know we didn't build houses during the depression and then the war came. And then we also not only had a shortage of housing, we also had a population boom. So there was a lot of energy that governments around the world, including in Australia, threw at the housing situation. And part of that was the Commonwealth set up cheap loans to the states to build public housing, which was regarded to be an opportunity for working people to have access to stable rent and ultimately save up and move into homeownership.

Audio Excerpt – 1950s news report:

“The government set up a housing commission with a clean-cut directive. That it would provide as many homes as possible, for as many people as possible, in the shortest time possible. A big order!”

NICOLE:

Governments also, particularly by the late 60s, early 70s, had a really big role in supporting the release of residential land, and putting land out into the market so that, you know, individual landowners weren't able to, in effect, monopolise land supply and push up prices. So those government land development organisations really had an important role in moderating the supply and the cost of residential land.

ANGE:

This was basically a golden era for affordable housing in Australia. Almost three quarters of the nation was on the property ladder and living the dream. And Governments made that happen, in part, by producing land for development at low prices, and by building lots of public housing. Australia saw the highest rate of public housing being constructed ever. In 1955, the conservative prime minister Robert Menzies boasted that his Liberal government built more public housing than the previous Labor government - and not only that, said he would continue to do it.

Audio Excerpt – Robert Menzies:

“I am here to say to you, that the Australia housing record is the best in the world”

ANGE:

Australia was showing it off too. In March 1977, a Rolls-Royce carrying the Queen and the Duke of Edinburgh swept through what was then the working-class Sydney suburb of Waterloo.

Audio Excerpt – 1977 News Report

“Thousands of Australians came out to greet the royal couple”.

ANGE:

They were there to visit a new, inner-city, high-rise public housing block.

Audio Excerpt – 1977 News Report

“The queen came to open the 32-story high rise tower blocks which had not long been completed”

ANGE:

In other words, we were proud of how we were going on housing: rents compared to income were at its lowest point; home ownership was at its highest. It’s a comeback story that shows Australia can, if we want to, dig ourselves out of a housing disaster. But of course, we also can, when we want to, throw it all away.

NICOLE:

The sort of chill wind of neoliberalism swept through Australia as it swept through the rest of the world, and that sort of golden era of housing policy as you put it, started to turn in the mid-90’s.

ANGE:

Can you tell me a bit more about what was happening and what that led to in terms of housing?

NICOLE:

It's really been a global phenomenon. In part, it's occurred because of this, globalisation, if you like, and the access to, to cheap money essentially. So, to explain that in simple terms, when, for instance, in the early 80s, my mother went to single parent, went to try and access a homeland. The bank said, no. She's a woman. You know, maybe she was going to get pregnant. Absolutely not on the cards that were going to lend to her. 3 or 4 years later, Saint George was a building society then and a number of other non-bank lenders had entered the scene and a sort of financial deregulation. So you had households having more money and then more access to borrowing more money sort of by the 90s. But we still have quite high interest rates. Now, when those interest rates started to tumble in Australia, that began to be reflected in house prices. On the neoliberal side of things we had governments also incentivising investment in the property market.

ANGE:

Financial deregulation meant more households had the opportunity to borrow more money. Then there were lower interest rates, and incentives to invest. And one of those big incentives was negative gearing. It basically means if you buy an investment property that has higher repayments and upkeep costs than it makes in rent, then you can claim that loss on tax. And it’s existed in some form or another for a long time in Australia. But it’s become far more widespread since the 90’s… after John Howard became prime minister.

Audio Excerpt – John Howard:

“I am very conscious of the enormous responsibility that is being paced upon me and placed upon my colleagues,after the verdict of the Australian people today”

SAUL:

Howard came in in 1996 in a landslide.There was a mood of optimism and hope around that time, which, of course, you know, kind of has tended to dissipate over the subsequent 20 years.

Audio Excerpt – John Howard:

“I commit myself and my future government to the service of all of the Australian people, Thank you”

ANGE:

We know what happened after Howard got in - we’re living with the consequences of that today. The property boom that followed resulted in a fundamental philosophical shift - where property went from being a basic necessity, to a lucrative financial asset. That result didn't come as a surprise to a lot of people, with some even warning that Howard’s changes were going to kick start a housing crisis.

After the break, the economist that sounded the alarm, but the government didn't listen to

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ANGE:

Saul, do you want to start off by - could you introduce yourself for the tape please.

SAUL:

Do you mean just name and title?

ANGE:

Yeah, who you are, who are you?

SAUL:

Yeah, Saul Eslake independent economist, former chief economist of ANZ Bank and of Bank of America Merrill Lynch in Australia.

ANGE:

Saul has been an economist and commentator for decades - on top of working in the Australian financial market. He spent 14 years as the chief economist of ANZ Bank, and most of that time was during the Howard era. But Saul met John Howard well before he became Prime Minister.

SAUL:

Oh, when did I first met John Howard? Probably. Yeah, I can remember when I was in the Young Liberals in 1979.

ANGE:

Right. And what did you make of John Howard then?

SAUL:

Oh, I mean, he was a force for reform in the Fraser government, which was a government that didn't actually undertake much reform at all. And in particular, did not undertake much economic reform in those days. While John Howard may have been the social conservative that we now remember him as being, he didn't seek to carve out positions in that area. He was an economic reformer. So at that time, you know, I looked upon John Howard favourably as someone who was a champion of economic reforms in the same way that I would now look back at Paul Keating, who not only championed reforms but achieved them.

ANGE:

And in those early years, what were Howard's beliefs about homeownership?

SAUL:

Oh, well, you can actually go back further than when I knew John Howard, because the first, first home owners grant scheme was introduced by the Menzies government in 1964, having promised it at the 1963 election at the urging of the New South Wales Young Liberals, whose president in 1963 was a somewhat younger John Howard. And I don't think it's a coincidence that the homeownership rate in Australia peaked at the census of 1966 at 72%, and has been going down ever since. Indeed, it's precisely that scheme that I date as the beginning of almost 60 years of evidence that tells us that anything that allows Australians to pay more for housing than they otherwise would, results in more expensive housing, rather than in a higher proportion of the population owning their housing. Because our homeownership rate has been going down ever since.

ANGE:

So it was a gradual change. From the era of the 50’s and 60’s where Australia boosted housing supply without inflating demand - to a long string of policies that inflated demand for housing, without doing enough to boost supply. Having convinced the Menzies government to pass that first home-buyer grant, John Howard watched on from the opposition benches as a key moment in this story happened – the Hawke government introduced Capital Gains Tax…Which is the tax you pay on the income you make when you sell an asset - whether that’s property, or shares.

Audio Excerpt – Paul Keating:

“Simple proposition - why should somebody who gets their income from buying or selling property or shares pay no tax while millions of ordinary wage or salary earners pay their share of tax each week?”

ANGE:

And that was something John Howard always hated – and wanted to scrap.

Audio Excerpt – John Howard:

“We have done much to restore the economic foundations of our country. Now we have created a new tax system which will make those foundations even stronger in the future.”

ANGE:

In 1999, as Prime Minister, he didn’t completely get rid of capital gains tax - but he did cut it in half.

SAUL:

That change was a huge windfall for property investors in particular. And what that did, that converted negative gearing from what had traditionally been a strategy to defer tax, but with the changes that Howard and Costello made in 1999 it became a strategy for both deferring and permanently reducing the tax that you paid. By 2003-4, 43% of loans were all going to investors… In other words investors were getting a bigger share of the housing finance that was going around, and they were using that to bid up the price of housing to the detriment of first home buyers. And not surprisingly as a result of that there was a significant increase in the number of Australians who became landlords. So just to put some figures on that, in the late 1990s, about 14% of taxpayers were landlords. By 2010. That is ten years after the changes were made in 1999, 20% of Australian taxpayers, one in every five, were landlords.

ANGE:

In other words, that change provided incentives to speculators and tax avoiders, at the expense of people who were looking for a place to live. According to the latest figures - almost 4 in 10 people taking out a mortgage these days are landlords. And when you combine that with the fact that it’s easier for someone to buy their second home than it is their first, because of the equity, that’s how we’ve ended up with people like this.

Audio Excerpt – Radio Host:

“Can I ask you out of interest how many you’ve got David, how many rental properties you own?”

Audio Excerpt – David:

“Well…um, okay…283.”

Audio Excerpt – Radio Host:

“283 rental properties?”

Audio Excerpt – David:

“Yeah”

Audio Excerpt – Radio Host:

“WHAT?”

Audio Excerpt – David:

“I’ve worked hard for that…”

ANGE:

Saul I’m wondering at the time was that a predictable outcome, and was anyone warning of the impact that would have on the property market into the future?

SAUL:

Well, I know at least one person was and that was me. You know, I gave in my capacity as chief economist of ANZ in a number of presentations, saying that this was likely to result in an acceleration in the rate of increase in house prices. And to their credit, ANZ allowed me to say those things even though they were in the business of lending for housing,
And it was one of those predictions that I got right. Often you make forecasts of things like when the reserve Bank might be about to cut interest rates, and they turned out to be wrong, but this was one that turned out to be right.

ANGE:

What exactly were you saying at the time, and how were you saying it?

SAUL:

This was one of the first entries on what became quite a long list of the dumbest tax policy decisions of the last 25 years. And the interesting thing is that the justification that was given for the changes that Howard and Costello made in 1999, was that having the capital gains tax rate would turn Australia into a nation of entrepreneurs and shareholders. Well, it didn't do either of those things, far from turning Australia into a nation of shareholders and entrepreneurs, it turned us into even more of a nation of property speculators than we ever were. And it might not have been so bad if the majority of that investment in housing had gone into boosting the supply of housing, that is, had gone into the construction of new housing rather than the purchase of established housing. But the figures that were available at the time suggested that the overwhelming majority of properties purchased by property investors were properties that already existed.

ANGE:

And was anyone listening to you, or did it feel like you were just saying this and it was falling on deaf ears?

SAUL:

More the latter than the former. I mean, clearly, if people whose decisions mattered were listening to me, they might not have done it or they might have reversed it. But, I'm kind of used to saying things and nobody taking any notice, doesn't stop me doing it.

ANGE:

So house prices remained relatively steady during the 70’s and 80’s… The median price for a home was about 3 and a half times the average income - and prices rose alongside wages and inflation. But since the new millennium, they’ve risen to the point where the median price of a property is over 760-thousand dollars. And that’s about 7 and a half times the average income. That’s higher of course, in capital cities. And it goes without saying: wages aren’t rising anywhere near as fast as that. According to new data - If you wanted to buy a median priced home in Sydney today and NOT be in mortgage stress - you’d need to earn a household income of $293-thousand dollars a year.

I guess can you describe what kind of an impact that has on a generation?

SAUL:

Yeah, I think you can by looking at rates of home ownership by age over time. So for example, the homeownership rate among people aged between 25 and 34 has fallen from a peak of 61% in 1981 to 43% of the 2021 census. So across a broad spectrum of Australians, you know, the homeownership rate has gone backwards by far more than the overall homeownership rate. Now, that hasn't fallen as much because the proportion of the population who are aged 65 or over, where the homeownership rate hasn't shifted at all, has gone up. And so that disguises quite a lot of change that has occurred beneath the surface. You know, among the many consequences of this, of course, has been an enormous increase in intergenerational inequity in the distribution of wealth.

ANGE:

That increase in wealth inequality is backed up by research that shows more than half of young home owners are now relying on their parents - or the so-called Bank of Mum and Dad - to buy their first home. We’re seeing this happen now, but the effects of it will be felt long into the future. Because if you don’t have a Bank of Mum and Dad handy… How will you ever get on the property ladder? The gap between the haves and have nots is only getting bigger. And theBank of Mum and Dad wouldn’t be so rich today if it weren’t for John Howard. But even if that wasn’t Howard’s stated intention, he wasn’t exactly upset about it. John Howard famously said once, I'm sure you remember this quote, that no one's angry with him for making the value of their property go up. What do you make of that?

SAUL:

Quite well, yes, I remember that saying as well. I think he used to say no one stopped him on his morning runs or walks. Yeah, walks, not runs. And said, Mr. Prime Minister, please do something that will make my house cheaper so that someone else can afford to buy it from me more readily. But, you know, it gives an insight into why governments keep doing things that have such perverse results. I mean, for all the crocodile tears that politicians shared about the difficulties faced by would-be first time buyers in getting their first foot on the property ladder. The reality is, they know that there's only about 500,000 votes for policies that would make housing cheaper, as opposed to more than 11 million votes for policies that continue to make housing more expensive. Even the dumbest of our politicians can do that math.

ANGE:

This is why you see politicians of all sides saying things like, “No one wants to see property prices fall.” Which is fair, but Saul says we’ve landed ourselves in a situation where our economy rewards investing and speculation, more than actual work.

SAUL:

I mean, wages and salaries. You know, that is the reward for working are taxed at full marginal rates, whereas with the exception of interest, almost every other form of income is taxed preferentially. Income that comes through or out of superannuation funds. Income that comes in the form of dividends, income that comes through capital gains and income that comes through trusts are all taxed at lower rates. So yes, I mean, despite what we might say, our tax system penalises wages and salary earners compared to people who derive investment income. I mean, I wouldn't often quote a communist dictator on anything, but I think Xi Jinping is right when he says, as he often does, that housing should be for living in, not for speculation.

ANGE:

But the reality is, housing is a great investment for those that are lucky enough to be owners. And that political calculus that Saul mentioned remains - don’t upset those voters. Even if it means housing stays out of reach for those that really need it. He says those people should think hard - and fire up - about who’s really to blame for this.

SAUL:

You know, I've sometimes said I'm surprised there isn't more anger among young people at the way in which housing markets have been rigged by their parents and grandparents against their own interests. But instead of marching on the streets they take out their revenge on their parents by refusing to move out of their parent's home, expecting the food, the meals cooked, their washing done, and a blind eye to whoever turns up to have breakfast with them the following morning. You know, but I mean, that's obviously facetious, and it's meant to be provocative, but I am genuinely surprised that there isn't more anger among young people at the way in which their parents and grandparents have cheated them

ANGE:

Obviously there are some young people who are genuinely angry about how their parents and grandparents cheated them. Because a housing boom for boomers has meant that for some young people, they’ll be renters for life. And they’re furious. But they’re also fighting back.

That’s on the next episode of The Great Housing Disaster.