While working class people struggle to find a place to rent or to afford their mortgage repayments, capitalists — in banking, real estate, development and construction — are making millions in profit out of this disaster.
The price of rent has risen around the country, with large increases even in regional areas. Spend any time on Australian social media, and you’ll come across renters discussing the disastrous situations they’re being forced into. Tiktok creators like Rach McQueen (@rachmcqueen1) and Jordie van den Berg (@purplepingers) post regular exposés of run-down, inadequate rentals being offered at ridiculous prices. In many cases, landlords will try to pass off spaces such as garages as housing.
The situation is so bad that people are desperately applying for homes they have not seen, and rents are being further inflated by rent bidding. While it is illegal for property owners to invite rent bidding, it is normal practise for the law to be sidestepped. Property owners will accept bids from potential tenants even if they can’t solicit them — and even having a rental application accepted is no guarantee that the landlord won’t just give it to a higher bidder.
This is all made worse when property owners try to cash in by converting rental properties to short-term stays — 200 people have been evicted from Utopia Suites in Brisbane, as the entire apartment building has been turned into overpriced AirBnBs by the landlord, re-branded as ‘Kooii apartments’.
It’s not surprising that there are now calls for a Royal Commission into the housing crisis. For years, governments around Australia have reduced public housing stock. Their ‘solutions’ to the housing crisis have been to encourage more houses to be built — which does nothing if those houses are then overvalued or offered to renters at ridiculous prices.
A tiny fraction of new housing will often be set aside for ‘social’ housing — privately owned charity housing. This approach does not address the fundamental issue — that housing is treated as a private commodity on the market, and not a vital human need.
We need immediate rent caps, and a program to take privately owned rental and ‘investment’ properties into public hands, under the control of a public, democratic, accountable body, to provide housing at minimal cost to everyone who needs it. We also need the immediate cancellation of mortgage debts. Millions of working people owe exorbitant amounts of money on their home loans to the bank, putting them in impossible situations as interest rates rise.
Landlords
The rental market in Australia is currently dominated by small-scale landlords. They are referred to as “mum and dad investors” by the media, to create the impression that the market is dominated by regular people. This is a half-truth — many working-class people have been led into property investment, but it is not the normal experience of most workers.
One in ten people have an investment property, and of that group, less than a third — 600,000 individuals — own multiple properties. Even though the vast majority have a single property other than the home they live in, more than half of all investment properties are owned by a landlord who has more than one. So if you meet a landlord on the street, they’re most likely to only have one property. If you try to rent a house, you’re more likely to be renting from someone who has more than one.
Landlords with many properties often use renters as a primary source of income. They operate as small businesses, ‘providing’ housing at increasingly inflated prices that actually prevent people from finding a place to live. They are gatekeepers of housing, and they operate for private profit — not for the purpose of ensuring people have a place to live.
Outside of this small group of ‘professional’ landlords, holders of investment properties are often workers, in jobs which have benefited from a good wage, usually won by militant unions in decades past. They have invested in housing so that the value of their savings does not decline. This was basically a bet that the housing market would always rise.
Gambling on the housing market
The reason for the housing crisis is that housing is not treated as a human right, but as an investment opportunity. Housing is regarded as a commodity, and one that working people have been swindled into relying on for their savings.
House prices have risen for the last few decades in Australia, far outpacing inflation. This will not continue forever. Houses have been massively overvalued for a long time, and a price crash — a ‘market correction’ — will see millions of Australians paying off mortgages far beyond the actual value of their home. Many will lose their homes. Those who are relying on selling their home to fund their retirement will find themselves with much, much less than they expected.
Instead of providing a comfortable living wage pension, both Liberal and Labor governments have promoted superannuation and property investment — gambling on the stock exchange, or gambling on the housing market — as the way to provide for people in their old age. Both of these strategies will unravel for working people, as we are exposed to the whims of the stock market and to the unsustainable, record-setting bubble that is the Australian housing market.
The pensions that most people will be forced to rely on in old age are inadequate. They are administered by a punitive and unforgiving welfare system, which treats people in a shockingly malicious way. We have seen this on display in recent weeks in the Royal Commission into the Robodebt Scheme.
The mortgage crisis & inflation
One third of working-class people rent, while another third are paying off mortgages on their homes. These people have been placed under increasing pressure by rising mortgage rates. These have been driven by the Reserve Bank, which sets interest rates on money that it lends to banks, which pass on the rises to people who have borrowed from them.
However, the banks can also raise their rates independently — and they have, with a number of major banks raising interest rates beyond the rates set by the Reserve Bank, at the same time as making record profits.
The purpose of Reserve Bank rate rises is to make people poorer in an attempt to control inflation. The idea is to reduce borrowing and spending in the economy, causing prices to go down. This is a neoliberal policy, a holdover from the right-wing reforms of the early 1990s, led by the Labor Party under Paul Keating.
The Reserve Bank governor, Phillip Lowe, sees a danger in worker’s wages going up ‘too much’. He said last year, “If wage growth was 7 or 8 per cent then inflation would be 6 or 7 per cent … we were in this world in the 1970s and it worked out very badly”. This is the standard capitalist excuse for inflation: to claim that workers have too much money to spend — even though workers wages have continued to drop in relation to profits. The current global inflation is not a “wage-price spiral”, but a price-profit spiral. It is driven by capitalists raising their prices as high as possible.
Even mainstream economists don’t pin the current inflation on high wages — they point to higher costs in international supply chains. Even given those costs, the biggest Australian capitalists have continued to make massive profits. They are not raising prices to deal with costs, they are raising prices to increase their wealth. The Reserve Bank essentially only has one trick to controlling inflation — raising interest rates. It does not work, it is based on a discredited theory, and it is driving people into poverty. There are fears it may be the trigger for the next recession.
Labor’s capitalist approach will make things worse
All capitalist investment, in every industry, is about maximising the return from that investment. This is why capitalists fail to invest in socially useful areas, why they off-shore jobs, cut staffing, overwork existing staff, put downward pressure on wages, and why they will even carve off lower-performing chunks of their own businesses and outsource their roles. When the rate of return is too low for an investor’s taste, they will often refuse to invest at all.
The Australian rental market is dominated by small-scale investors because serious capitalist investors do not find it profitable enough. As outrageous as rents are, they are not outrageous enough for big capitalists. The serious investors focus on selling property and making a return from massively overvalued prices. Their role is mostly restricted to constructing buildings to sell off. The Albanese government’s answer to the crisis is to change this situation and encourage larger investors to become landlords.
They have put forward the National Housing Accord. This is an agreement between governments, investors and the construction sector. Through this policy the Albanese government wants to encourage ‘institutional investment’ in housing, particularly from superannuation funds. This would be a substantial change to the rental market — instead of small-scale landlords ripping off tenants, large professional fund managers will be ripping off tenants.
The system will never work for us
The Labor Party has long had an approach to try and tie working class people more closely to the capitalist system. Superannuation made people’s retirement incomes dependant on the stock market. It was an attempt to give workers a stake in a system that is fundamentally prone to crisis. Turning superannuation funds into landlords is more of the same neoliberal ideology.
The approach of the Labor Party since the 1980s has been to pretend workers have a genuine stake in capitalism, by tying our fortunes to the fortunes of the ruling class. However, millionaires and billionaires can weather crisis in the system in ways that working class people cannot.
Even the minority of the working class who have benefited from the housing crisis are on shaky ground. While the biggest profiteers are insulated from the effects of inflation and market crashes, those who aren’t at the very top of the food-chain often face ruin. Workers, who are the actual creators of all of society’s wealth, are left to the mercy of the markets.
Workers have always had to fight to protect themselves from crisis in the system: by fighting low wages, job losses, cuts to welfare and public services, inflation, and privatisation. We cannot accept capitalist answers to this crisis — capitalist politicians don’t have the same priorities as us, and their ideas will never solve the problems caused by their system. We have to put forward our own answers to the crisis — a different way of doing things, based on democracy and collective ownership, to fulfil human needs.
To solve the housing crisis, we must fight for:
* Immediate mortgage relief for the 1/3rd of working-class people who owe money on their home — fight to take the major banks into public control and cancel mortgage debts.
* For all rents to be capped at 20% of the tenant’s income.
* Establishment of a publicly owned body to raise public housing stock, both by taking private rentals into public hands and by building new housing to a high standard. Property investors should not be able to sit on empty houses. For compensation to private landlords only on the basis of need.
* Immediate regulation of the short-term stay industry — properties must be available for renters before they are available for AirBnBs.
* For public housing services to maintain housing at a high quality — no more relying on the cheapest option the landlord could find.
* For a guaranteed aged pension for all working people, set at a comfortable wage.
* For all of this to be organised by bodies that are accountable, and under the democratic control of tenants and communities.
* For the wealth of society to be taken into public hands, taxing the highest income earners and taking big business under democratic control.
