Tuesday, September 15, 2015

The Philosopher, the Economist, and the Prime Minister's Dogbox

While catching up on your weekend reading you might have come across this curious little article from the New Philosopher magazine - The Philosopher's Dogbox - offering a thoughtful discourse on the virtues of renting a home.

Its author, Damon Young, observes the nature of tenant-hood:
A child of the depression, one of my grandmother's favourite slurs is "bludger": a shirker, and idler. It echoes the property equivalent: renter. To lease a home, in this universe, is to be capricious, lazy, and vulnerable. And the last is like a cosmic punishment, to be pushed around by landlords is the penalty for sloth. Those who lose the housing game often end up in flats or apartments, what my grandmother calls a 'dogbox'.
... amid the changing shape of the private rental market:
Many cannot afford mortgages at all - including, to my grandmother's alarm, my wife and myself. Part of a generational trend of falling home ownership, we will never be that couple on the bank advertisements, beaming after bidding. We rent, and we keep shifting as high turnover and prices force us from house to unit, suburb to suburb. And we are now competing with wealthier renters, whose accounts are fat enough for leasing but not for buying. Even with discipline and austerity, virtues my grandmother rightly lauds, we will not be rewarded with her three bedrooms, red bricks, and hydrangea borders. We live well, but our two bedrooms and tiny courtyard are that bestial symbol of failure: the dogbox. (A kennel that costs almost half our household earnings, after tax.) My grandmother's mantra - work hard, save cannily and own early - is sadly anachronistic.
Young then takes us on a tangential journey: through Martha Nussbaum's, Fragility of Goodness, where "no amount of data or prudence can guarantee freedom from suffering - in fact, sometimes this very susceptibility gives existence its preciousness"; to a contemplation of Karl Marx's musings on private property, that "has made us so stupid and one-sided that an object is only ours when we have it..." - allowing us to wonder if perhaps "we no longer identify as owners - successful or failed, canny or imprudent - we are one step away from this emphasis on having."

For the Philosopher, consignment to the dogbox is not without solace, but there is a palpable discomfort in his story. Enter the Economist, who is only too happy to explain. A second article might also have caught your attention over the weekend - Bloomberg's The Threat Coming By Land. It begins with a proposition:
... One of the most pressing economic dangers of the future is getting short shrift: Landlords are eating the world.
Because of course, it is our landlords who are winning the housing game. It is landlords - indeed our mums and dads, and not our Philosopher's grandmother - who have consigned us to the dogbox.

The article continues:
There is a growing concern that wealth inequality has skyrocketed, and that capital income accounts for a growing share of the economic pie. This was the theme of Thomas Picketty's "Capital in the Twenty-First Century." But although we usually think of "capitalists" as they were defined by Karl Marx ... we forget that land also is a form of capital, which means landlords (and homeowners) are capitalists, too. ... It is land, not corporate capital, that has been responsible for the the lion's share of the increase in capital's share of income.
The article goes on to argue that land taxes make good economic sense because they promote productive use of land, and stabilise its value so that its cost does not draw money away from its productivity. (If this sounds familiar - it should: the Brown Couch has long said that land tax is the fairest tax on earth). But its reference to landlords as capitalists is what interests us today.

Quite aside from his casual reference to Marx that draws us promptly back to the Philosopher's critique, in acknowledging property as capital the Economist reminds us of a key foundation on which modern housing policy is built: the idea that ownership is akin to permanence, and permanence means stability. In the face of the raging battles between capital and labour that marked the opening decades of the 20th century, "every spadeful of manure dug in, every fruit tree planted, converted a potential revolutionary into a citizen" (Neville Chamberlain, 1920).

Patrick Troy explores the implications of this for Australia in his 2012 book Accommodating Australians, where he discusses the development of the first Commonwealth State Housing Agreement (at pages 90-92). It's worth extracting here at length as, aside from the substantive point it serves to highlight, it provides some useful background for the state of housing policy today:
The initial reaction of the Opposition to the Commonwealth State Housing Agreement was almost apathetic. Little was said in criticism of the agreement, the Opposition aiming its fire at the issue of industrial unrest in the building industry. The Leader of the Opposition, Robert Menzies, was at his most perfunctory in his comments on the Bill. Certainly, there was little political point in assailing a national housing project at a time of demonstrable need, but strangely the Opposition did not try to exploit the controversial aspects of the Commonwealth Housing Commission report, particularly nationalisation of land. The Commonwealth State Housing Agreement would have cleared the Parliament with largely bipartisan agreement but for one extraordinary political misjudgement. 
The notion that by some mystical process home ownership transformed a working man into a 'little capitalist' was not new. A real estate agent, Richard Stanton, had expressed the rudiments of the concept to a housing inquiry as early as 1913: "A working man can come to us (to buy a house) and be treated just as if he were a capitalist".
The notion of 'little capitalist' had been often used by conservative politicians to deride the housing priorities of Labor governments, as in this description by a Conservative MP of the establishment of a State Housing Commission in New South Wales by a Labor government: "The Government now brings in a measure that will improve the housing system and sooner or later create a number of small capitalists". (Cater 1941)
Neither side of politics had established a monopoly on unequivocal support for home ownership. Some non-Labor politicians had supported the interests of landlord investment in rental housing and had shown a tendency to sneer at the home-owning pretentions of lower income earners. Others strongly favoured home ownership as a source of social stability. A number of Labor politicians had asserted the interests of tenants exploited by the private rental market, and advocated greater home ownership as a remedy. Others were strong supporters of low rental public housing. These were not clearly drawn ideological positions but the Commonwealth State Housing Agreement debate was to produce a marked hardening of partisan battlelines on the issue of home ownership. 
During an otherwise unexceptional speech in the Committee stages a government supporter, Dr Gaha, proposed a scheme to use child endowment payments as a means of amortising the costs of home ownership, basing his argument on well-worn themes of home ownership increasing satisfaction and stability. He went on: 
"In this way we would make the average worker a capitalist and that is our only solution to Communism in this country. If this scheme now before us has any weakness at all, it is its failure to enable the occupant to become the owner of his own home."
Replying to points made during the debate, [Minster for Postwar Reconstruction] John Dedman tried to refute Gaha's argument but his frank expression was pounced on by Mr Larry Anthony, a senior member of the Country Party and an accomplished parliamentary tactician. The critical exchange is as follows: 
DEDMAN: The Commonwealth Government is concerned to provide adequate and good housing for the workers; it is not concerned with making workers into little capitalists. 
ANTHONY: In other words, it is not concerned with making them homeowners. 
DEDMAN: If there is any criticism which may be directed against the policies of past governments supported by the present opposition; it is this: too much of their legislative program was deliberately designed to place the workers in a position in which they would have a vested interest in the continuance of capitalism. This is a policy which will not have my support at any rate."
What followed is a superb case study of the use of parliamentary forms for maximum political exploitation. Anthony moved quickly to amend the schedule of the Bill to insert a provision that would have allowed a tenant to buy a dwelling on rental purchase terms after three years of occupancy. In a series of highly effective political speeches, Anthony ... excoriated the government for discouraging home ownership. Anthony expressed the nub of the Opposition attack: 
"The minister for Postwar Reconstruction said the legislation to enable workers to own their own homes would create a lot of little capitalists and that would retard the onward march of socialism. That was a most extraordinary statement. Does it mean that the policy of the present government is to discourage home ownership?" 
This approach was in harmony with the evolving Liberal-Country Party philosophy of dismantling wartime controls and encouraging individualism and private enterprise. Opposition speakers were able to contrast socialism, controls and denial of home ownership with individualism, free enterprise and home ownership, expressed in a ringing credo by Archie Cameron: 
"I believe in private ownership of property. I believe in the freehold principle. I believe that a man is entitled to make certain things his own. I believe that persons who acquire property will take greater care of it than tenants will take care of property which they rent." 
Although the government was able to use its parliamentary majority to defeat the writing of home ownership into the legislation, and although the Opposition accepted the main thrust of the Commonwealth State Housing Agreement, the dimensions of the housing debate were changed utterly by Dedman's statement. The Opposition parties were able to paint Labor as resolute opponents of home ownership and to pledge themselves to optimum home ownership. Dedman protested feebly that he would welcome the day when every head of a family throughout Australia owned his own home, but the damage had been done.
By the time the next government - lead by Robert Menzies - came to renew the Commonwealth State Housing Agreement, Dedman and Anthony's 'little capitalists' had been usurped by a forgotten middle class. But the theme of property ownership remained, and the sale of state owned rental housing became a feature of housing policy for many years to come.

But as the Philosopher reminds us, the rate of Australian home ownership is in decline. And as the Economist would have us say, it is the landlords who make it so. To understand this, we need look no further than the path on which Menzies has taken us: the forgotten people - aka the Philosopher's grandmother - bought their homes, then grew old and comfortable within them on a modest pension. Their children bought homes for themselves, too, but they didn't want to just be comfortable as they got old... They wanted to maintain the higher standards to which they were accustomed. The pension was not enough, and to rely on such welfare was contrary to the individualism and freedom that had become our national mantra.

So they bought extra homes. Homes they didn't need; homes that would increase in value over time - allowing them to generate income through rental revenue and price appreciation. And because public housing was being sold off, and more of it was not being built, governments developed tax incentives to encourage more and more of these children of the forgotten people - our mums and dads - to invest in housing. Or, more specifically, to invest in second-home ownership, so that their children and their neighbours' children could move into cheap rentals while toiling and saving for a home of our own.

In the end, they became little capitalists. And for them, as the Economist alludes, this path was a good one. For their children, it was not so much.

Today Australia has a new Prime Minister. We congratulate the Member for Wentworth on his not-so-sudden ascension to high office - this man who once famously claimed to know what it was like to live in a rented flat. To have as our Prime Minister a person who understands the dubious self-loathing that comes with consignment to the dogbox is no small thing. But it remains to be seen what this will mean for anyone who remains so consigned.

In his victory speech Turnbull claimed his would be a "thoroughly liberal government, committed to freedom, the individual and the market". His Deputy, Julie Bishop, gave an express tip of the hat to Robert Menzies and the values he instilled within the Liberal Party. So will a government lead by Turnbull and Bishop get back to work on the dream of a home-owning Australia, and wind back the tax incentives that are producing instead this nation of landlords? Or will they continue along the path their predecessors have set, and maintain that the only thing standing between you and liberation from the dogbox is a good job that pays good money?

Only time will tell.

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