Last week a reader sent me the right hand part of this set of charts
The data are for Australia, but it is hard to believe that, if we had up-to-date census data, the pictures now would be much different for New Zealand.
I’ve seen charts like the left hand one for New Zealand, but what I found sobering – and frankly scandalous – were the results for lowest and second lowest quintiles in the right hand chart.
A decent society has to be judged, in considerable part, by how it treats the poorest and most vulnerable among us. People can run all the clever lines they like about how many of the people in those bottom quintiles have things now that comparable people in 1981 didn’t have. But it is doesn’t excuse the entirely manmade disaster of the housing markets in New Zealand and Australia (and various other places).
In 1981, when our societies as whole were substantially materially poorer than they are now, (Australia’s real GDP per capita was about 80 per cent higher in 2016 than in 1981), young people at the lower end of the income distribution was just as likely to own their own home as those at the upper end of the income distribution. But now people at the bottom are less than half as likely to own their own place. In a well-functioning market that simply wouldn’t have happened. But we – and Australia – having housing and urban land markets rigged by central and local government politicians and their officials, and the people at the bottom are the ones who how most severely and adversely affected.
Sometimes people will try to tell you that preferences have changed, such that young(ish) people no longer want to own their own place to the same extent. But look at how little the home ownership rates for the upper quintiles have changed. That alone suggests that people are being forced to adjust to new affordability constraints, not that a whole generation of young people – given the opportunity – no longer prefer to own their own place.
The chart is taken from a pretty substantial report by the Grattan Institute, a centre-left think-tank in Australia. Flicking through some of the report, I found a couple of other charts.
One of the ways of adjusting to new, artificial, affordability constraints is simply to stay living at home for longer.
Another is to get financial support from family.
Back when real incomes were half what they are now (1970s), most people (in all quintiles) buying a first house by the time they were 34. Now only about 35 per cent of lower income people are buying a first house by the time they are 44, and a much increased share of the (reduced percentage) buying a first home at all are needing financial help from family (presumably mostly) to do so.
There is simply no need for any of this – the more so in a decade in which interest rates (and thus mortgage servicing costs) are lower than they been for generations. It is what our governments have done to us, most notably to the poor among us. It is shameful.
There are no excuses. One day, those responsible (from both sides of politics) will face the judgement of history for their active complicitly, or quiet indifference.
And no, a capital gains tax would have made no material difference to any of these outcomes – these are, recall, Australia data, and Australia had no CGT in 1981 but does now. But perhaps some of the passion that fired those now so upset with the Prime Minister did reflect a sense of the failure of leadership in addressing this fundamental, longrunning, failure of policy around housing and urban land. There is a real opportunity for the Prime Minister – or for the Opposition – to take a decisive policy lead, and actually make a change for the good, for the poor in particular.