Episode 191 | The Growing Housing Affordability Crisis | Michelle Adair, The Housing Trust

Housing affordability is on everyone’s mind but what’s being done?

In this episode, we welcome back Michelle Adair, CEO of The Housing Trust. The Housing Trust, which is the second-largest housing provider in the Illawarra, delivering subsidised rental homes to over 2000 people, with almost 1100 properties from Thirroul to Nowra. Michelle is at the forefront of the housing affordability crisis. Her professional and personal experiences will move you as she illustrates how deep this problem runs, and who has the ability to rectify it.

Here’s what we cover:

What’s wrong with the current housing policy?
Is focusing on first home buyers an effective strategy?
What is the role developers play in this crisis?
What is the economic case for providing more social housing
Is welfare enabling further social problems or remedying them?
How to balance a growing and a stabilising market?
Does the government want low housing prices?
Who benefits the most from housing concessions?
What role can investors play?

RELEVANT EPISODES:

GUEST LINKS:

https://housingtrust.org.au/
Housing: Taming the elephant in the economy [full report]
Housing: Taming the elephant in the economy [4-page summary]
https://www.canberratimes.com.au/story/7319955/governments-ignoring-holy-grail-of-affordable-rentals/
https://www.smh.com.au/national/before-she-was-a-ceo-michele-and-her-kids-lost-everything-20210427-p57mqu.html

HOST LINKS:

Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT:
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in August, 2021

Veronica Morgan: As property owners and investors, we want prices to rise, but as parents we're conflicted, we worry that our kids will never be able to experience the security of home ownership. Many of us really sit convenience of city living, but don't give too much thought to whether or not our essential workers. We're talking nurses, teachers, and don't forget, baristas will be able to afford to live close enough to provide these essential services. And this is happening now in regional towns too, which begs the question. What's the true cost of rising house prices.

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free fall or forecast report, which experts can you trust to get it right? The elephant in the room.com did I use

Veronica Morgan: Today? We're having an ambitious conversation. We're tackling a huge elephant in the room. As more of us increase our wealth through property more are being disadvantaged. The gap between those who have, and those who will never have is widening overall home ownership is falling and the rate of home ownership for those under 35, as hard since the mid 1980s, meanwhile, various state governments have been legislating in recent years to improve a lot of tenants, but doing very little to improve stability for long-term renters and the burden of responsibility for providing rental housing falls heavily on mum and dad, investors who get sucked into buying some pretty ordinary apartments due to the dubious allure of negative gearing. And these investors, quite frankly, are the ones taking all the risks and should be able to expect to get a return, to make it all worthwhile. Instead they're at times demonized and those hoped for returns are often lackluster.

Veronica Morgan: You're getting a sense of how complex this whole thing is, and probably why it hasn't been tackled by those in power. Joining us today to deepen our understanding of the far-reaching implications with this policy vacuum is Michelle Adair, CEO of the housing trust, which is the second largest housing provider in the Illawarra, delivering subsidized rental homes to over 2000 people with almost 1100 properties from Thirroul to narrower. And last time we spoke with Michelle was way back in episode 66. We're so glad to have a back. Thank you for joining us today, Michelle. Thank you.

Michele Adair: It's great to be with you again, Michelle,

Chris Bates: It's such a big issue and it's something that I've spent a lot of time thinking about, and it's amazing to sort of unpack if we start at this at a high level and what's your real gut feel of what's wrong with our housing policy at a B level, I guess? Well,

Michele Adair: Actually Chris, you're heard already using the right language. You're talking about housing policy and that's, what's fundamental to a different type of conversation and certainly different policy and then experiences in the market while ever we talk about property and we talk about property prices and we talk about, you know, property escalation and I guess commodify property as purely a wealth creation vehicle, rather than talking about housing and the provision of the human, right. We're never actually going to close that gap and we're never going to be able to talk about it the right way. So that's the first thing. We have to have an ideological change where we see having a home as the first priority. And then we see home ownership as a wonderful aspiration, which, you know, Veronica described quite rightly in, in her introduction as being less likely for a growing number of people into the future.

Chris Bates: Is there any places around the world though, where you feel have got the housing policy rights and have got sort of fast growing sort of populations similar to Australia because that's obviously you need to have a housing policy that suits that sort of population growth.

Michele Adair: Yeah. Poster child at the moment is Scotland actually, who interestingly has a population smaller than the size of greater metropolitan Sydney. And yet they're doing really good things in relation to this first principle of the human, right? And then after that, how do we make them stuck available? How do we make it affordable? So to give you an idea, it's estimated that nationally, we need about 36,000 more homes to be built for low-income renters every year that's roundabout. So 36,000 homes is about 14% of Australia's total residential construction. In contrast, the UK, Finland, France, and Australia, about 20 to 31% of their annual stock is actually dedicated to low-income renters. So that gives you some international comparison.

Chris Bates: So we, we need about 14%, but what are we actually building at the moment?

Michele Adair: We, we only, we are only doing about 14% at the moment. What we need to be doing is more like 20 to 30%. So the national shortfall right now tonight for affordable rental housing is in excess of 180,000 homes nationally, just in new south Wales. We're expecting new data soon about the social housing waitlist it's published about this time each year. And we're expecting that to be around 52 to 53,000 households on the social housing wait list. And of course that's everything from, you know, retirees to young families and singles.

Veronica Morgan: That's only going to get worse over time. Obviously as home ownership falls, I'm, I've always been fascinated. And I've said this on the podcast before my sister lives in Italy. And whenever I've been there, it's been one hour. It could be a while before I get back there. But I love to have these conversations with my brother-in-law he's Italian about the property prices. And he just says, there's no price growth. They are quite low wages. And I'm always shocked because things in shops cost a lot of money, you know? So like it's cheap to live there, but their actual, it appears that their cost of housing is less and that's rent and they've got different rental tenancy rights and all the rest of it. But I guess the F we, you know, in this country, we always talk about rising wages. We need wising wages. We don't have rising wages, et cetera, et cetera, but it's all, you know, if you look at it as one package, you know, the actual cost of living rather than wages, then, you know, the, the cost of accommodation obviously plays a huge part in that. Doesn't it?

Michele Adair: Yeah. And it's completely skewed in Australia. We know that the cost of housing in Australia is just another one of those league tables internationally, where Australia is, you know, down at the worst end of the spectrum in terms of really, really poor affordability. If you're spending more than 30% of your total household income, just trying to keep the roof over your head, you're in housing stress. And of course what's happened in the market in the last 12 to 18 months, which again, you know, in reference to your introduction, every time price rises and every time somebody is, you know, celebrating the fact that they've excuse me for being so colloquial screwed another 20 or 30 bucks a week out of a tenant, you know, to increase their their rental returns, you know, that that's actually really, really hurting and an increasing number of people on very good reasonable full-time salaries are now eligible for the first time ever for, you know, technically subsidized housing being affordable rental housing.

Michele Adair: And there simply isn't enough stock, you know, the, the, the redevelopment and the language, the language is just so wrong. We we've just heard in the, just the last couple of weeks in, in the Sydney press around a bit of a stash between the new south Wales, government and Sydney council around the redevelopment of Waterloo. You know, that particular project to me speaks volumes about how broken our housing system is. So it's going to be about 3000 homes. Okay. So supply increase about 3000, only about one of those are going to be affordable, which means two thirds are not, what on earth are we doing in this country where we're saying that that is okay to build residential property, two thirds of which is not available to people. It just doesn't make any sense. Am

Chris Bates: I understanding of that project in particular, as they're taking down a lot of social housing already to replenish the stock that they just sort of knocked down, is that sort of, so it's not even, I don't think the increase in actual housing for affordable housing is actually that much of an increase,

Michele Adair: Correct. We very often only get back about the same number of social housing properties as we lose in those redevelopments. That's true. Often there is a new mix for the first time and the addition of affordable housing. So the eligibility criteria and the definitions of social housing is different to affordable housing. It's affordable with a capital a, it has to make government ministerial guidelines. So you'll often see a mix come comeback, which is a really great thing. You know, we want, we want diversity in our communities, but the net amount of social housing in just about all jurisdictions around Australia, with the exception. Now, our very recent budget announcements in Queensland and Victoria, where they have wonderfully invested billions of dollars to try and catch up the amount of social stock is going backwards. And there's virtually nothing happening in the affordable space.

Veronica Morgan: Cause there's been a little bit of a, I don't know whether that's PR or whether it's misunderstanding on my part to think that there was a redevelopment is recent years, I think in Roselle Lilyfield area. And, you know, the sort of spin on that as being well, yes, we redeveloped it's much better standard of accommodation. We get more people in these new developments and there were before, et cetera, et cetera, but also because we can sell off some, to the private market there, we have more money to be able to invest in other areas to build more social or affordable housing elsewhere. Is that not happening?

Michele Adair: No, it's not happening well, it's not happening fast enough. It's not happening at volume and at scale, and it's not happening in, in a way that enables those tenants to maintain their relationships with their communities. So, you know, if you look, let's, let's, let's state the obvious a lot of these old social or public housing estates and properties are an absolute disgrace. They're unhealthy, they're awful to live in there freezing cold. They're just terrible. And they need to be replaced. One of the great difficulties that we have now, particularly for the large estate redevelopments, is that we've actually got nowhere that we can move people to in the short term while we redevelop. But then personally, I do think we should have a policy that guarantees that tenants from those redevelopment areas should be, should be guaranteed. A home that is suitable and fit for their needs and circumstances within a 10 kilometer radius radius would be, would be reasonable. And it doesn't have to be necessarily back in exactly the same, you know, street address, but certainly when an inner community where you can maintain your relationships, keep your kids in existing schools, all of those sorts of things. And given the really crisis shortfall in numbers, every redevelopment has got to have a very significant uplift in the amount of social and affordable. Because as I say, what, what is the point of, of making housing available? If by government's own definition, it's not affordable. If that, that just doesn't make any sense.

Chris Bates: I mean, they can definitely do that with new developments that could come in really strong with what's going to get approved. It needs to be mandated that 30 or 40% of development needs to solve this problem. What are some of the other things that you think the governments, I mean, the company, if they really care about these problems, which I argue they don't, but you know, what are some of the other things that they should be looking at rather than just mandating on new developments? Well,

Michele Adair: The, the most critical thing is access to land. You know, it's, it's the biggest costs in any residential project and it's the scarcest resource. All levels of government are sitting on very significant land and property assets where they are either set aside for things like road reserves or, you know, maybe, you know, public use down the track, make those available on a meanwhile use at peppercorn rental to a not-for-profit community housing provider to, to partner and deliver housing. That's an immediate solution where land or property assets can be sold, then sell them again, at least with a first offer to a not-for-profit CHP. These are of course assets that are actually owned by the community in the first part. So they can be continued to be dedicated for public use this constraint that most governments and most councils have this highest and best use. So at the housing trust, we're in a position at the moment where we actually put in a successful bid for a cash grant to be able to deliver some affordable housing for older single women and women with children.

Michele Adair: And our proposal was based on a particular parcel of land that happens to be owned by council and they accepted our proposal, but then said, yeah, you know, we can't guarantee that we're going to sell this land. And if we do, we're going to sell it on the market to the highest public better. Well, that's just not okay. You know, if he's, I would argue strongly, not only is it flawed public policy from a human perspective, but we know that the investment in social and affordable housing creates jobs and it stimulates the economy in really positive and constructive way. So, you know, I often talk about the investment in social and affordable housing for governments as delivering the holy grail. You know, they get jobs, they get economic stimulus and they get positive health education and social outcomes. I I just don't know what it's going to take to unlock the economic rationalists, if not the humane people, you know, concerned about livelihoods,

Veronica Morgan: I'm keen to pack that more because, you know, we live in a capitalist society, right. And that looks to welfare as being a cost as opposed to something that is valuable for an, I guess the word welfare is, is loaded, you know, rather than something that actually is positive for our economy. And I know even just watching, you know, listening to all the commentary around COVID and job seeker and job keeper and all that stuff, being that you put dollars in the hands of those with least, and they will spend it and put it straight back into the economy. You put dollars in the pockets of those who actually have something and they'll save it and that doesn't help the economy at all. So, you know, there's lots of really interesting, I guess, ways to look at stimulating the economy. But I I'd like to really understand in more depth because if you're building a building and so you can say, well, there's jobs involved in that and, and et cetera, et cetera, the knock-on effect of that. But once it's full of people, how then does that help the economy in that particular

Michele Adair: Area? You're, you're absolutely right for arnica. It doesn't, and the recycling of existing housing stock is not innovative. It doesn't grow GDP and it does absolutely nothing except increase the wealth of people who are already probably wealthy enough to be able to buy a property. So a growing number of economists, and in fact, some work just done by city futures at the university of new south Wales, analyze the, the perspectives of leading economists in which would make 80 or 90 of them in Australia and as well as other property and housing experts. And it highlighted the fact that we historically know very well and understand the impact of the economy on the housing market. But we never think about the housing market and its relationship to economic growth, to productivity gains, to labor participation rates, work force, and flow on of course, then to, to health educational participation and, and, and the like, so again, you know, right now we're, we're living in the, in the latest COVID outbreak here in Sydney. And, you know, so much of the, the, the cases of transmission we know have been because of changes in the labor force and employment patterns where people have got to work a couple of, you know, casual part-time jobs. And so they're traveling around, they're traveling large distances to work. So this again is a direct consequence of a failure of governments to understand the impact of housing and policy and its location and its cost relative to all of the other parts of the economy. So we, we have to change that too.

Veronica Morgan: It is fascinating. I haven't watched the full I've read the summary report. I've, I've watched some of the interviews with the professor and we will include the links in the show notes. And I do want to watch the full presentation. Very interesting. One of the things that occurred to me is that there's a, there's a challenge here of market forces, because there's an argument, you know, that it it's crazy that people should have to live so far away from where they were, because that impacts on productivity and in travel time. Right. And so I'm like, but the problem is you've got a market force there that allows people who can't afford to, to pay more for property. That's closer to where they work, you know? And so it's so complicated to have to pull this all apart, to try to work out how you could, you could unpick it and unravel it and actually make it fairer.

Veronica Morgan: And I'm wondering, and then you think about decentralization, that's, that's come as a, as a consequence of COVID, you know, the amount of people moving out of the cities and, and being able to work from home. And clearly I think, you know, you're probably talking about a cohort of people that can't actually work from home. They have to actually go out to work, but it appears that the interviews that we've done with people in regional Australia is that, that actually that's just exacerbating the problem everywhere. It's not just a city problem now, would that be fair to say

Michele Adair: Absolutely. And how are, and ed, our federal government has just, you know, started a national advertising campaign with a few million dollars to encourage people to move to the regions. You know, I mean, we, we, we effectively have zero vacancy rates we have in regional Australia. It just about everywhere rental prices are, are at typically 20 to 30% above what they were this time last year, you know, we've got one of our, one of our examples, just, just in Wollongong, we had a family, three teenage kids, both parents working, full-time pretty decent jobs in inverted commas. They could afford to pay $700 a week rent and they still couldn't find anywhere. I mean, wow. You know, it's and it's worse, of course, in, in some areas, some communities are still reeling and it's still got permanent residents living in tents after Bush fires and floods.

Michele Adair: You know, we've got the impact of Airbnb in some communities, not, not in others. And we can't get essential workers and looking forward, you know, the, the trends around the need to be able to really respectfully prioritize rental affordability, not just at the moment we have a, we have a federal housing minister. So minister Sukkot, who is the minister for housing and homelessness. And, and he, he's, he's very articulate about saying the government's priority is to prioritize home ownership and, and where they can first home buyers. There is mention of rental affordability and of the right of people to be able to rent a home and to be able to do that safely and securely. We know that the, the number one reason that women are compelled to stay in violent relationships is because they have nowhere to escape to. And yet the national domestic violence summit, we saw wonderful budget announcements about about increase in frontline, domestic violence.

Michele Adair: So this is it last year in the budget, but the the national domestic violence summit that's, that's had to have been postponed because of COVID. It does not have housing on the agenda that is unacceptable. And, and yeah, and it just doesn't make sense. Housing is not on the agenda, there's stuff there about cybersecurity and there's stuff there about, you know, mental health and that stuff there, you know all, all sorts of good necessary things. But the number one reason as I say that that women are forced to either stay or return is that they can find nowhere to live

Veronica Morgan: Mortifying. Why do you think governments, you know, tackle the affordability issue by basically turning a blind eye to the fact that it extends beyond first home buyers by basically throwing stimulus at it, which is just going to push prices up anyway. I mean, is that just all lazy policy? Look,

Michele Adair: I think it's, I think it's fundamentally ideological. I think that culturally Australians have had this post-war battler, you know, get a home, historically the vast majority of people who lived in public housing as it used to be called, where people working, you know, in blue collar full-time jobs and they were actually able to move on and, and, and very often buy a home. You know, the three of us are probably thinking about our own circumstances and the fact that we probably all have mortgages. And there is this as, as a, as a mom, I have two, two adult children. I am very mindful about what can I do personally, to be able to increase my personal wealth so that when I die, I know that my kids are more secure now that comes from, from the best place. And, and the vast majority of us are in that, in that space. And you're able to do that wherever we possibly can. And, and that's, that's an admirable okay. Thing to do, but we shouldn't be forced to do it because of failures in public policy. And that's the reality. I would not be, I would not be doing this if I was confident that, that my children, all of whom are full-time working adults in, you know, good professions, growth industries could, could actually be able to, to be secure.

Veronica Morgan: And you're intimating there that basically without a leg up from parents, the next generation and current generation of young adults and the next generation of young adults really I've got, Buckley's have been able to do it on under their own steam.

Michele Adair: We know that that's a fact. We, we, we know that that, that is absolutely a fact. And I share this from a very personal perspective. I, I chose to go public with my personal experiences of, of homelessness in the last in the last couple of months. So four times in my life, I have been right on the brink of either homeless or very close to it. And through absolutely, you know, classic circumstances, my father died at only 46, very unexpectedly of pancreatic cancer. It was just a fluke that he had life insurance that allowed my mom to keep our home. Then I had the divorce when when my children were, were only two and four and my ex-husband declared bankruptcy and I lost everything. I didn't forget a car. I didn't even have a heart. You know, I didn't have a car let alone a home fast forward.

Michele Adair: A couple of years, I was renting. Life was okay. I had a job. And then my company, my employer went into receivership. After I paid my rent, I had literally $2 a week to feed and educate and close my kids. And, you know, I had a, I had a girlfriend, I didn't know who it was at the time, but I had a girlfriend from school, leave me a box of groceries on the doorstep. So I could think like she fed my kids and fed us every week for months. And then many years later had a home again. And my elderly, frail mum needed to go into residential aged, residential care. Had she not had the good fortune of being able to access a veteran's gold card, we would have had to have sold up to, to be able to secure safe, appropriate aged care support for her. Now, my story is, is a story that is only a reminder of how vulnerable every single person is. And and none of those things because I was lazy slack uneducated or anything else. In fact, quite the contrary, the only reason that I've been able to rebuild our lives is because I was lucky enough to be, you know, privileged in my poverty through, through a good education and family and friends that could, you know,

Chris Bates: Yeah. And the real issue there is that, you know, if any of those things didn't go to plan, right. And wouldn't, it wasn't a plan. But I mean, if those things didn't, you know, you know, get recovered, I guess in some way, there's no real government sort of solution there for a lot of people who are falling through the cracks, right. And this is just getting worse and worse. So do you think there's like really two main problems we need to get a better longer-term solution that sustainable encourage private investors, impact investing, et cetera, governments also on board to solve the long-term issue there, but also the issue that's building for people around affordability, because prices keep on going up. So there's two sort of main elements to this housing problem, the ones that are trying to, you know, buy their home, but also the people who aren't even trying to buy a home, just want security and stability and, and somewhere to live. Is it, do you break it down to two or is there more,

Michele Adair: It's like he is a really complex problem. And, and, and the only way we're going to solve it is all three levels of government and private enterprise and community housing providers and, and others in the, in the community services sector working together. And just sort of saying, can we agree, you know, this fundamental firstly, as I said before, this fundamental human, right. And can we talk about housing, not just this, you know, esoteric property market that we might as well be talking about. I don't know, something else, you know, some sort of manufacturing industry. So there are solutions at all levels of government and it does take dedicated effort. And there are some great programs, again, you know, there have been really good case studies and opportunities that, that meanwhile use of state government land. You know, there's a project being gone for years in metropolitan, Melbourne where a community housing provider, the local council who varied some of their, their development controls.

Michele Adair: And I think it was the Vic roads gave the, gave the community housing provider peppercorn lease on, I think, nine blocks of land from memory. And they created 17 homes for the next 10 to 20 years on this road reserve. They did it affordably all very sensible. Now exactly the same proposal was put to a new south Wales government by a council in Southern Southern new south Wales with a community housing provider and the state government's response because of this highest and best use was well, if we lease it to you, it's going to be, it's going to be a commercial rent. Well, that's just, that's just not okay. So there are examples of effective contribution schemes. One of the immediate things that can be done is an audit in new south Wales of the effectiveness of the current affordable housing SEP, there is no way at the moment of ensuring that the, the benefits that have been applied in the construction are actually delivered over time. And we should increase immediately. The government could immediately increase the 10 year protection for affordable rental to 20 years and make it, you don't make it an immediate contribution there. We need to stop just thinking, as I said before, that supplier is going to be the answer build to rent provides very positive additional security, very often for tenants, but there's no guarantee that it's affordable. So that's, you know, so we've got you know, we've really do, gotta have to break this down.

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Chris Bates: The labor government missed out the last election. And a lot of people would argue that part of that was, they went pretty hard on tax changes. I mean, negative gearing and capital guidance tax, franking credits, et cetera. And then yesterday they tried it two elections to change negative gearing. And then they said, yes, we're not even going to try the next election. And we're going to drop a negative gearing policy. Does that sort of just show that it's so hard for the government to sort of tackle the property market because the votes are in their favor. Look,

Michele Adair: There's no question that it's unpopular, but we do need somebody somewhere. At some level in government has to eventually embrace tax reform and to really understand it. In fact, I was also encouraged just in the last 24 hours to see that the federal government is going to have a look and start a new inquiry through the treasurer has announced that Mr. Finkelstein is going to be having a look at an inquiring around what is the what is the tax and the cost and the regulatory impact doing to supply? My concern of course, though, is that that announcement continued to be couched within the supply for home ownership, no mention of, of rental supply. I've made the point informally and we'll be doing it formally that that's not okay. And similarly here in new south Wales, we've got a regional task force.

Michele Adair: There is an opportunity to talk about affordable supply in that, but it's not overt in the terms of reference. There are no targets set in the new south Wales housing strategy for the next 20, 20 years around affordable supplier. So, you know, these mechanisms exist and, and a need to be addressed. And there is an opportunity. I understand that about 70% of current homeowners actually have an investment property. Now it might be a weekend or somewhere, you know, that they're not actually planning on, on making available to to the regular kind of rental market, but there is a wonderful new south Wales government program and credit where credit's due. And there have been some very good initiatives it's called the community housing leasehold program. So as a community housing provider, what I'm able to do, I get a grant of a couple of million dollars a year from the new south Wales government.

Michele Adair: And what I'm able to do is use that money to pay in our case, the gap in rent that a private landlord would get by just putting their property up on the market to the, to the highest renter compared to what would make it affordable to a social or, or an affordable housing tenant. So in our case, we've got a couple of million dollars and in return for that, we have to add around 275 homes to the supply. Wouldn't it be great if we could have an inquiry that looked at how many mum and dad owners of, of, you know, investment properties that they currently negative, gearing unsuccessfully. We know it actually doesn't really make that much of a difference. You're relying on on property values to increase over 10 to 20 years to get capital gains. So we know that the negative gearing thing is a furphy.

Michele Adair: Although I agree with you, it does scare people when they think about how to cast their vote. But wouldn't it be interesting to, to ask those people, if there was a way that you could get the equivalent of highest rent, if that's necessary for you? Fair enough, I guess, you know, in a, in a market economy, but that the government would actually be able to access that supply through an extension of this very robust and proven program that we use here in new south Wales has community leasehold program. Maybe that's a way of balancing the attraction of being able to get more stock, but also respecting the the financial and, and the rights of, of current, you know, mum and dad landlords.

Veronica Morgan: Okay. There's a, I would think there's an obvious opportunity there with the, all the inner city apartments and places like Alexandra and Moscow and whatever that are vacant because of the lack of overseas students. And also because he exited to have a lot of hospitality stuff and the first wave of lockdowns, there's a lot of stock there. That's very difficult to rent out and rents have been dramatically falling. The vacancy rates have trebled in many areas. Why isn't there some sort of movement towards actually doing something with all of that stock that those owners are hurting.

Michele Adair: It's a really good question. I don't have an answer for that. I think you know look, I'm a really simple, so my life is complicated enough and I recognize, and I reckon it's a no-brainer I see this stuff. And I think surely it can't be that hard. Surely it can't take that long surely, but yeah, I completely agree with you. And for those owners, it might be, might be a little, a little hard. I'm not sure if, if some of them may be for an investment will or not, but it might be a little bit hard to track down my colleagues in community housing. It's, it is always surprising that we are the backbone and a third leg in the in the residential property and housing market in Australia. So there's, you know, obviously private developers and and companies, there's government, typically state agencies, and there aren't community housing providers everywhere. And the housing market doesn't exist without us effectively. And yet we're often not seen, don't get an official seat at the table. So I think, I think it's a fantastic

Veronica Morgan: Opportunity. We, we sh we probably should get Ben Kingsley on to ask you about picker, which is the property investors council of Australia. And that's, that's a organization that was formed. I know a few years ago because individual moms and dads investors basically don't have a union. You know, we don't have a, an association. Well, this is now association supposedly to, to bring all those individuals together as one whole, because they're not really at the table either. And, and the big problem is that a lot of investors are actually sitting on data assets, you know, so this whole idea about property investment is a furphy for many people, forget negative gearing for a minute. And, you know, and, and I guess it bothers me because the negative gearing policy, and in fact, the change too, in the budget back in 2017, really tries to increase supply cause that is government politics on both sides of the fence.

Veronica Morgan: Say that supplier's the answer. And yet it isn't the answer because you know, now we've got a whole problem in new south Wales about building quality, because there's been heaps of supply of certain type of stock, but it's not actually solving the problem. It doesn't actually make for good investments. And it's certainly not solving the affordability problem on, on any level either. So it's a challenge because basically we've got competing objectives of both growing and stabilizing the housing market, but we've got a system where, you know, the banks dominate our share market, the banks, lender, shitload of money to mortgage holders. Those mortgage holders obviously own property that they live in plus investment properties. And so then, you know, and then you've got construction sector, what employs 5% of all Australian. So you've got a very hungry sector that, that loves incentive and loves to have people incentivized to buy their product. You know what I mean? It's, it's all very, you know, you, you mentioned earlier that, you know, we understand the impact of the economy on housing. I would suggest it as Eliza. I wouldn't send him now first interview with her that the housing market in Australia is too big to fail. It is propped up at all in all areas. And that's because it's intrinsically cobweb, you know, it's, it's, it's in mashed with the economy. It's not separate to the economy.

Michele Adair: Absolutely. It is. I mean, he's, he's no longer, no longer is 60 academic, but Maslow was kind of onto something when he said shelter was the platform as everything else in your life, you know, and it's true. You've heard me say before, you know, you, you can't get an, keep a job, educate kids manage your health, or if you need to move on to positive, happy, healthy relationships, unless you've got a safe, secure, affordable roof over your head, there is nothing that you can do in life without that.

Chris Bates: Yeah, Tony, that is you go get that safe roof over your head, but you take out a big mortgage and then you get stuck in a job that may not pay paying that mortgage. So you might be doing something that you don't love, or you're doing something that's not super productive. You're not encouraged to be innovative and start a business because you've got this mortgage. And so, yeah, one thing is getting that shelter, but then there's a product productivity on flow effects that you know, just getting a house sometimes can cost as well.

Michele Adair: All those life curveballs that, that we all experience, you know, there's, there's some other, there's some other really simple things that, that, you know, we, we certainly do at the housing trust as well with, with our developers. I wish I, I wish I had a dollar for every time somebody came to me and said, oh, I've got a really good deal for you, Michelle. But even the, even the fundamental design question has got to change, you know, and I think one of the things that we are certainly being very conscious of for a number of years is modest design and layout and things, you know, when did it become a thing to have a two bedroom unit with two months? What is that? The housing commission

Veronica Morgan: Out of world war two and then led three very modest bedrooms. One bathroom entire family would share that one bathroom,

Michele Adair: The vast majority of Australians grew up in exactly that, and by the time you consider, you know, the first or second generational, you know, migrant arrivals, my God, they didn't even have that level of luxury, many of them. So when did everybody have to have an en-suite? When did everybody, you know, like this is just crazy. So there's, so there's a whole bunch of design features that we do like that. And, and, and, and of course, you know, community housing providers have always built a whole built. A renters is just our core business. So, you know, I love it when people think that that's a really innovative new idea, but anyway, but things like building materials to make them, you know, lower maintenance costs really thoughtfully thinking about sunlight and air flows. We do not put in air conditioning in any of our properties.

Michele Adair: And again, now isn't that a great thing post COVID. So we think through things like floor plans to really be very thoughtful now, moving forward around what it means to have an appropriate work from home space. I think there are going to be good design features and benefits come out of that moving forward. And, you know, modest homes is appropriate, you know, that not everything has to be. So, you know, some of that stuff around personally, you know, God, my, my first house was actually sounds very grand now, but it was rough as you know, it was an inner city terrace. It was built before there was, you know, sewer and running water. So that bathroom was actually a separate out the back yard. That Donny cart was down the, you know, w well, the outdoor toilet was the original one when that got very upmarket and those that Danny cart used to come down the line behind. And jeez, there was no, there wasn't a square corner in the, in the house. I thought it was terrific now I'm not, I'm not sure when McMansions again became the first home standard, but, but it, it just doesn't make sense. You know, so there is a, there is an element of, of personal accountability and personal realism that should be overlayed as well and personal responsibility for circumstances. But I agree

Veronica Morgan: Become a bunch of sport brats.

Michele Adair: You can do very nicely. Yeah. Again for, for us. So I, I will never, you know, expect governments to solve all of my problems, all of society's problems with, without us making individual end and corporate in inverted comments, you know, contributions as well. But at the moment, there are so many things that are outside the realm of individuals to be able to influence. And, you know, again, a, another tragic story that, that my staff are dealing with seven days a week. You know, we, we received a phone call from a, a quite mature aged lady up on the central coast where her adult son and his partner have been living for many, many years, the property they've just been turfed out of our home. They'd been living in for many years because the owner wants to maximize the uplifting in values at the moment, particular problem for them. They can't afford anywhere else. And he's actually the, the adult son is having chemotherapy on the central coast. So they rang us we're based in Woolongong because they're so desperate to be able to try and find somewhere that they're prepared to try and drive two to three hours a couple of times a week, each way for him to have chemotherapy, because there is nowhere else for them to leave. That is not their fault. This is a failure of the housing system. What's your

Chris Bates: Thoughts around the sort of empty bedroom? So, you know, there's lots of houses that aren't for rent, right? They're just vacant and investors sitting on the land value, and there's no benefit renovating because they just want to keep getting the land value. So that's a problem, but there's also a lot of people in houses that are too big for them. And, you know, as you get older, the kids move out, maybe they visit every so often, but do you think that that's a growing problem where people staying in their homes for ideally too long for the next generations to sort of, I guess, maximize the use of that house?

Michele Adair: No doubt. We've got an aging population and, and and again, are there places that are suitable for, for people to be able to afford to downsize to, again, I I'm sure we all know people in our own families and, and friendship or neighborhood circles that are in exactly that situation. And I, I don't think I really don't think that stamp duty is, is what's keeping them stuck in places I don't that line from the new south Wales government at all. And in fact, if the change to land on the property tax goes through in the way that it will, it could have a very, very serious adverse and unintended consequences for all sorts of people that will make affordability even worse. Yeah, absolutely. But, you know, nobody has a right to tell somebody in a three bedroom home that they have to downsize and move out and, and make that space available for another household.

Michele Adair: But at the same time, I think we do need to look very critically at, is there alternate supply options available that are affordable? What is the cost of moving? You know, if I am a mature aged person, do I like the idea, is it suitable for me to go into, you know, we know that there are major problems with the regulations around retirement villages. People have been burnt there because they are dominated not by providing affordable, secure, appropriate care environments in a wonderful, safe, vibrant community environment for people to be able to age in place their profit making ventures. Let's get real about the motivation behind most retirement villages. So, so again, we have this profit motive that's driving property rather than looking out of providing homes. So, you know, if there was more suitable available housing options for mature aged people, and there was assistance for them, as I said, we think it's within about 10 kilometers, you know, as you get older when my mum, Lou moved into into residential care, so not into a time and village, but into into a hostel into care, we were so lucky that we were able to find somewhere safe and terrific and local that her GP could continue to provide her with care.

Michele Adair: So these are the sorts of things where we've got to be able to look, and it's within that kind of 10 kilometer ring where you've got a pretty decent chance. So what are we doing within that space to be able to provide options that if somebody is sitting in a large home that it's, that it's viable for them, could they perhaps do a redevelopment and turn that into a duplex? Could they, could, they could, they there's, there's all sorts of things, but again, until we start having the conversation from a perspective of principle and vision, rather than profit making cost base w we're not, we're not going to have the right conversations. I don't think

Chris Bates: You could also argue that the person in retirement is thinking at a profit as well, because, you know, the tax laws sort of encourage people to stay in their homes. You know, the tax-free growth on their home for the next generation. If that, even if they're not going to use the money themselves back to your earlier point is they might be thinking, well, I'm going to stay in my home because that's a good investment for my kids. You know, you've got the, the pension test doesn't include the house there's issues there as well, even if they had something else to move into, they may take the profit route, which is, you know, staying in a home. That's not really suitable for them because it leaves more money to the next generation. Do you think that that needs to change as well? The tax

Michele Adair: There there's no, there's no doubt that we need tax reform at probably multiple levels to be able to both not hurt and damage people who have quite appropriately made housing and investment decisions in good faith for decades, we should not make changes in a way that that is really damaging to them, but nor can we pretend that tax reform isn't a significant issue in a broken housing system. Yeah.

Veronica Morgan: And does that fundamentally mean that it won't happen?

Michele Adair: Look, I, you know, my glass is three quarters for, you know, I'm, I'm not gonna, I am not going to stop banging my head on that wall. And I do believe that there is, I think growing recognition of the problem. I think that there is interest, genuine interest. I believe I do believe that the vast majority of people go into politics and public life for very genuine, altruistic, wonderful reasons, but these are complex problems and, and it does take courage and it does take vision to turn it around. Do you think you

Chris Bates: Need to attack on the NIMBYs as well? Because I mean, the reality is what's restricting supply wide for government. It's also, the government have to do that because that's, what's going to keep them in council and get their votes. So do you think we need to really attack the middle rings of our capital cities, capital cities

Michele Adair: And our regions on equivocally. But again, I would also be a very strong advocate for appropriate precinct, you know, or kind of local level planning. It is not appropriate to put medium to high density housing in all areas. It is not appropriate to ignore, you know, railway station areas and, and precincts just because, you know, we haven't got any of that stuff around here. So there's, there's always a middle ground. And that NIMBY attitude is, is ironic because of course it's perpetuating the fact that, you know, the families and friends of those of those individuals are also increasingly being priced out of the market. So we know that even as, as you mentioned before, Veronica, that while there are no vacancies and we are at, you know, crisis shortfall in, in some areas we have, you know, some suburbs or even some streets where there is enormous disparity between prices and vacancy rates and things.

Michele Adair: So we do need, and I think this is a very important role for our local councils. We've got local government elections now in, in first week of December, this needs to be, you know, you play with everybody, make affordable rental housing and housing affordability more broadly, an election issue with your governments, ask them, what are they doing? Have a look at their plans. Have they got anything in place in my four local government areas? Wollongong council has been working on their plan for about seven or eight years. So there isn't one show Harbor council. No I'm serious. It's been at least seven or eight years. Shellharbour council. They, they published their plan in December 19, but it doesn't actually do anything for, for affordable housing. It's not even a conversation yet at Kiama council, but Haven has got a very good plan with practical solutions and, and, and tech. So, you know, like what is, what is your local government area doing? And I think

Chris Bates: That pocket in particular is going to get a big problem. The reality is we've seen a huge shift in couples and families in Sydney that, you know, wanting to get out and they've gone to the north of Ireland going, that's all got too expensive. Now they're buying in around Woolongong and they're buying in Kiama and, and that's going to have a huge impact on those local property markets, because they've got budgets and capacities much bigger than what the locals have and, you know, they're going to push up prices and that's going to push our brands and all this stuff.

Michele Adair: So that's, that's absolutely right. And, but that, that scenario is, is happening in regional communities, you know, right across Australia. Yeah,

Chris Bates: Yeah, yeah. In particular, the ones that are piggyback will not be back in, but they're close to the capital cities because there are going to see, you know, a much greater number of sort of buyers that are heading there because they can still commute.

Michele Adair: I can, but of course now post COVID, of course, people are realizing that maybe they don't have to commute. And, you know, I mean, we're seeing that our local business Illawarra commissioned some wonderful research from Deloitte on what has been the impact of commuting questions and, and employment patterns post COVID. And, and how do employers adapt their workplace policies and practices to be able to accommodate those changes? And one of the things we're realizing is that you would not perhaps sit on a train and certainly not drive five days a week to work in inner city Sydney, or, you know, Chatswood or wherever you happen to be Paramatta, but you might do it two or maybe three days, because we know now that, you know, we can all work from home at least a few days a week. And so those sorts of patterns are changing. And that's been another driver of pressures in the regions as well, particularly around those capital city rings. If you're at

Chris Bates: A property Dumbo for us, you'll have to remind me what it is, story that we can you know, a lesson that you've heard or someone's done something where there's a mistake that can be avoided, I guess.

Michele Adair: Well that would be in relation to state and local government land that is actually owned by the public. So this is our community land and where it's sold off ad nauseum to the highest private market better rather than being dedicated for use to help solve the affordable rental housing crisis. And that is happening in every council area throughout new south Wales and throughout Australia. So my Dumbo, there would be the people who continue to ignore that very significant policy opportunity and, and pretend that that's okay because it's not, it's just not. And if, if the land doesn't have to be sold, it can be kept under leasehold arrangements. So there is, you know, there is a thing in the act where, where our local councils have, have got to be able to maintain their financial security as indeed. They have to, because, you know, w we need them to keep fixing our roads and foot piles and collecting our rubbish and stuff.

Michele Adair: So, you know, like everybody else, they've gotta be able to run their businesses financially sustainably. So if they need to be able to maintain their property assets, then at least make them available under 30 or 40 year long-term leases, the whole of Canberra for goodness sake is built on this model. It seems to work okay for them. So make that available. So that's not for profit. And, and I've got to stress that again, because we are seeing more and more for profit providers starting to pretend to be in this space. It needs to be secured by not-for-profit or, or through not-for-profit providers. We all employ the private enterprise to build our buildings and, and, you know, do our maintenance in any case. So it's not like the private markets missing out, but we exist for profit, for purpose rather than profit for profit sake. So that a, my Dumbo make the land available to, for, for not-for-profit housing providers. And

Chris Bates: If they do sell it, then reinvest those profits, I guess, back into social housing and affordable housing, is that sort of the that's not happening well, it's

Michele Adair: Not, and, and it shouldn't be lost. So not-for-profit housing providers, you know, I mean, I've got I'm one of the smaller, big providers. We are actually now the largest provider behind new south Wales, government of affordable housing in the Illawarra by a long shot. We've, you know, we've got now 1200 properties. And by Christmas, you know, our balance sheet is going to be worth $200 million and we have significant debt and capital investments value and potential. So what difference does it make if the land is, is sold to us rather than sold to the private market? It can be sold with a caveat to ensure that the, that the stock is going to be delivered as, as affordable rental housing. And that can be done for 20, 40 years, whatever you like. That's fine again, through our constitutions, if the worst were to happen and we would emerge or go into receivership, well, the title is still there to protect it.

Michele Adair: So there's no downside. The only difference is, is really this, this thinking rather than being able to flog an asset to the highest better and be done with it, how do we optimize the return for that asset in a holistic way? That is both. We must be, I've got to run my business profitably, but it's profit for purpose. So how do we optimize that asset value in a way that is truly sustainable, and that is financially and socially and environmentally effective. We also know that for Australia to attract the levels of foreign investment capital that we can and should then in the same way, our superannuation funds and other appropriate capital corporate investors gotta be able to show that you're actually doing good, appropriate social value, investment and social and affordable rental housing is unequivocally the best of those options. And I would argue very strongly that much better value and much more social value in seeing our sector as social infrastructure, arguably much more so than roads, probably even more so than hospitals and schools. Because as we said before, none of that stuff works unless you've got a home anywhere. I think you

Chris Bates: Mentioned the big elephant for me is the server farms. That is a huge pool that's growing every year dramatically. And if you could sort of legislate a port portion of that went into housing and there was still a profit for purpose for the investors. And it was done. Rightly that to me is a great solution rather than the government trying to fund these projects themselves. You, you basically can use people's money and still provide in return and, and solve a big issue. So hopefully that, that changes

Michele Adair: Totally agree. And and in fact, we know that industry super funds, their members are saying, what are you doing? What are you doing about this? Yeah. And, and it's not just the obvious ones like the like the building and construction and the local government industry. Well, the starting

Veronica Morgan: Point really is awareness. And that's why we're having this conversation. And I think you raised many, many, many interesting points, but I think the idea that our council local council elections are coming up and yeah, to start asking the questions and start actually making it known that we're interested in this let's face it. Like you mentioned earlier, Michelle, and yes, we've all got mortgages and we've all got the privilege of owning our own home. So we'd ask speaking from a place of privilege and it's nice to be mindful that not everybody is in that situation. And some people are in dire need. And I think COVID brought that to a head too, because there's certain people that are disproportionately impacted by lockdowns as well. And this can be the tipping point for a lot of people. So it's, I think it's important to when you're given a gift as we are, you know, in the sense that we're well off enough to have our own homes, that we also don't forget to help others that are in need in whatever way we can. And if it starts with just agitating a bit and chatting a Superfund or agitating the local council, if that's the starting point, then that's better than doing

Michele Adair: Nothing that's sure is. And all of those things really do make a difference. We've seen it time and time and time again, one voice at the right time to the right ear. One letter, all of those things can can really make a positive, a positive difference.

Speaker 1: Thank you for joining us today, Michelle.

Michele Adair: Thank you. It's been a, a great pleasure.

Speaker 1: Another meaty chat in. Thank you so much. Take care, stay safe and well,

Speaker 2: Please join us for our next episode. It's a little lighter than some of our interviews, but we're digging into the property styling story. We've got some great tips for you and how to actually approach styling your home, whether it be to live in or to sell, but also some little tips and warnings for buyers to make sure you don't get lured by very good at style. If you're looking to buy your dream home or an investment property in Sydney's inner west Eastern suburbs or north shore, my team, and I can help you by without regrets, reach out via my website. Good deeds.com.edu. If you're looking to buy your first home, thinking of upgrading into a new one or purchasing an investment property anywhere in Australia, my team loved to carefully guide you on this journey. And most importantly, get the finance right, reach out via our website. [inaudible] Dot com today. Thanks for joining us. We'd like to see you again and remember don't be a Dumbo.

Chris BatesAugust 30, 2021de-index

Episodes

Episode 191 | The Growing Housing Affordability Crisis | Michelle Adair, The Housing Trust