Why we have a housing crisis and why government cannot fix the problem

Dr. The fact that people cannot afford to buy homes and rents are beyond the reach of many is a violation of fundamental human rights and international law, writes William Briggs.

A HOUSING CRISIS may be an acceptable reality in this country, but that doesn’t mean it can ever be tolerated. What is being done, or rather what is not being done, reflects the prevailing economic realities in Australia and the world, for this is a crisis that affects all nations, rich or poor.

The fact that the crisis exists, that people cannot afford to buy houses, and that rents are beyond the reach of many, is a violation of fundamental human rights and international law. There are timid attempts to fix the edges of this massive systemic failure, but the real question of why the problem exists is never answered.

Article 25 between Universal Declaration of Human Rights states that housing is a fundamental human right. According to international law ‘right to housing‘ means more than just having a roof over one’s head. It requires governments to ensure that housing is both accessible and affordable.

Something has gone terribly wrong, and this is fundamentally linked to the economic structures that exist in all countries experiencing housing shortages and crises.

Capitalist economies over the past few decades have been marked by what has been described as: “Financialization of capitalism“. In its simplest terms, this is where the transition from making money through the production of physical goods to financial speculation occurs.

Stock market speculation about what will likely happen rather than what actually exists is sometimes described as “”.casino capitalism“, huge profits are made without producing anything. It is a process known as exploitation. fictitious capital. This process shows trillions of dollars traveling around the world in seconds, benefiting no one but the investor. This ‘financialization’ of capital is clearly reflected in the real estate sector in all economies.

Australia’s housing crisis that has brought so much misery to so many reflected in all OECD countries. Frankly, it is not a phenomenon with national borders.

How the crisis arose is largely ignored by the government and economists. The cause of the crisis is also ignored. The housing shortage is variously caused by immigration levels, foreign ownership, labor shortages or budget constraints. Any or all of these are, at best, minor symptoms of a larger problem.

It is a fact that capital has become financial. The transition from the production of useful goods to financial speculation is also reflected in housing. In such a scenario, housing is no longer a social need and provision of social benefit, but becomes a mechanism for obtaining wealth.

A basic need and necessity (a house) becomes a mere commodity. The value of a home is no longer viewed by its use, but by its potential to generate profits.

The concept of fictitious capital is clearly seen in the real estate market. What dominates this “market” is investing, portfolio accumulation, and investments in mortgage-backed securities. This is speculation, not bricks and mortar trading. Fictitious capital and speculative “bubbles“Go hand in hand.

This situation is exacerbated when profit levels on “traditional” investments fall. Real estate and property become safe and lucrative targets to absorb excess capital. This works well for the investor, but not so well for those looking for an affordable place to live.

The commoditization of housing and its potential as a cash cow for investors is further emphasized in the pressured world of renters. Financial institutions and real estate investment trusts depersonalize the rental market, and the loser is always the renter. According to OECD figures, average rents in all OECD countries have increased by 55 percent in the last 15 years. During the same period, wages stagnated.

All of this raises the question of why there is a housing shortage if the market is so lucrative.

The unpleasant truth lies not in government mismanagement or immigration levels, but in the economic system itself. If housing becomes a commodity and is not considered a fundamental right of the people, it is logical to assume that the investor will only produce goods that can turn into a profit and a good profit in a short time. Supply is in short supply because when demand is greater, prices rise.

To further maximize profitability, developers are prioritizing directing capital into luxury homes and apartments, commercial developments, and secondary residences. This provides a much greater bang for your buck than building more modest housing for working people or the poor.

It follows that it makes economic sense to leave scarce urban land and property vacant for private investors. This further restricts supply, increasing value. Value is in terms of dollar returns for the investor, not value for the consumer. As banks and real estate investment trusts control the flow of credit, real estate as a social good becomes even more dependent on financial capital. Once again, the fact that scarcity means increased profitability needs to be kept in mind.

Much has been made of the recent Australian Budget, its approach to housing and its very modest tax reforms. These reserved measures are unlikely to change the global movement towards the financialization of capital in relation to real estate.

Brad Duggan From Metricon, Australia’s largest builder, expressed his concern While making a statement that he described as “downward” pressure on prices that may come from the budget, he also stated that he thought the new measures would not have any impact on new housing construction. This gives little hope to those in need.

Despite the statements of the ALP or opposition parties, the reality of the situation is beyond the understanding or scope of the government. The Labor government has made most of its case. 75,000 more new home buyers will have a chance to “enter the market” in the next decade. Even if this were to happen, it would mean only 7,500 more people a year, or just 0.034 per cent of all adult Australians. As the economy continues to reel from the looming global recession, these “lucky” Australians will of course face ever-increasing mortgage repayments and stagnating or declining wages.

How this will affect those who have never been able to find a deposit for a house, or struggle with crippling rents, or sleep in their cars has yet to be discussed, but it stands as an indictment of a system that allows profit to take precedence over the needs and desires of the majority of people.

This violates in every respect the UN Charter and its demand that housing, including affordable housing, is a universal human right. But the “right” to profit seems to outweigh human rights and morality.

Dr William Briggs is a political economist. His particular interests are political theory and international political economy. He has variously been a teacher, journalist and political activist.

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