Below is Dr Cameron Murray’s opening statement and submission to the Senate hearing on the Albanese Government’s $10 billion Housing Future Fund.
Considering how obsessed this country is with property investment, it really puzzles me that the housing policy we have come up with to help households being squeezed in rental markets is to not invest in building housing.
A fund is stupid
This bill proposes using $10 billion to invest in non-home financial assets.
Satire and reality have met. In the political comedy show Utopia there is a scene where Rob Sitch’s character explains to a political staffer that building infrastructure today IS fixing the future, whereas a fund is just a risky, expensive, and unnecessary waste.
A great example is the Future Fund, which spent $500 million just in fees last year in order to lose $2.4 billion of value.
Do we really think that spending $20 million in fund management fees per year in a Housing Fund and $5 million on research, to risk losing billions is better than just building new homes?
This fund has been portrayed as a low-risk long term politically-insulated funding source. It is exactly the opposite—it is a high-risk fund that defers tough housing spending decisions to future politicians who now have an excuse to limit housing funding to $500 million.
Another perversity is that the fund is designed “to create a funding source”. Yet, the legislation just says that Treasury will credit the fund with $10 billion. Where is that money coming from? Why doesn’t it need a funding source?
Houses are assets
Australian dwellings increased 7.7% in value (net of rental returns) per year since 2006 when the Future Fund was established. The Future Fund? 7.8% per year.
Had the Future Fund invested directly in Australian housing instead of the financial products it did invest in, it would have made more money once you factor in some rental returns.
Perhaps instead of spending tens of millions a year managing the financial fund and doing further research, we could pay the Future Fund board to be mystery shoppers and simply go out in the property market and buy new dwellings, sometimes in bulk, at a good price from private developers, be it land and house packages, townhouses, or apartments.
This would put housing equity into the fund, increase the rate of new housing construction, and immediately grow a pool of housing to allocate to state public housing agencies, CHPs or, my favourite, by lottery to non-homeowner households.
More research not going to solve anything
What else is there to know?
On the data, we actually have planning approvals data in QLD showing over 20 years of supply already not just zoned, but with an existing planning approval. This is widely ignored because it is not in the interests of property owners to share that information.
Conclusions
If the Property Council is under oath today you can ask them if their members would be better off financially if housing rents and prices increased 20% rapidly or decreased 20% rapidly.
I’ll bring these points together, with an example.
There is a build-to-rent project known as Smith Collective on the Gold Coast, being the former 2018 Commonwealth Games athlete’s village. Two and a half years after the Games the manager told me that
since opening in 2018 the precinct has been on a staged release strategy so as not to flood the rental market.
This was in Jan 2021. So they left hundreds of already-built dwellings empty for two years as a way to stop rents from falling.
The funny part of this is that the project was funded by a middle eastern government’s sovereign wealth fund—their future fund—because the Queensland government thought investing in new houses in its own state was a bad idea.
Exclusive behind-the-scenes footage of how the housing future fund policy was created has been released
“Forget the details, smell the paper”https://t.co/3emv4eNDdl
— Cameron Murray (@DrCameronMurray) March 14, 2023
Dr Cameron Murray is co-author of the Book Game of Mates. Subscribe to his written work at Fresheconomicthinking.substack.com.
