Once again, the government is handing us a set of crutches to compensate us for the fact that the government broke our legs.

With apologies to Harry Brown, who came up with the original quote about crutches and broken legs, actually, what’s happening is they’re giving us a chair to balance on to replace the rungs that they stole from the bottom of the property ladder. Prime Minister Anthony Albanese is very proud of this 5% deposit scheme. Posting on social media, worked hard, done all the right things, and feel like buying your first home is still just too hard. Okay, stop. Yeah, 100% it is too hard. But it’s too hard because the government take half of what we earn once we factor in GST and all the other taxes plus the government’s deliberate restriction on housing supply which has turned real estate into a Ponzi scheme. So yes, Prime Minister, it is too hard and you along with your predecessors are the reason.

But back to the post. Well, it’s about to get a whole lot easier, huh? Fantastic! You mean you’re going to strip away all of the rules and regulations that make it so terribly slow and expensive to develop and build new properties? You’re going to abolish the planning laws that make it impossible to build affordable starter homes in this country? You’re going to put an end to the middle-class welfare for home buyers that has artificially driven up demand and prices and created this property bubble in the first place. Uh, no, of course he’s not going to do any of that.

What Albanese says he’s doing is we’ve just announced that from October you’ll only need a 5% deposit to buy your first home.

It’ll take years off the time it takes to save a deposit. So instead of paying off someone else’s mortgage, you can pay off your own. Plus, you don’t need to pay a dollar in mortgage insurance. You shouldn’t have to rent forever. And we’re tackling housing from every angle to make sure you don’t.

Dear Lord, please give me patience. That last sentence from our prime minister is a flatout lie. They are not tackling housing from every angle. They’re just doing the same one mistake as every other Australian government has over the last 25 years and refusing to tackle the actual problem, the angle that would actually make a real difference. More on that in a minute. But let me start by asking you a simple question. Has housing affordability in Australia gotten better or worse since the year 2000? Worse, right? Much, much worse. This graph shows the average house price compared to an average Australian income. Notice how around the year 2000 is when it starts to climb relentlessly. Housing affordability becomes much much worse very rapidly after the year 2000. Why?

Well, it’s because the government started helping us in the year 2000 with the first homeowners grant. Remember that? Maybe you don’t. But in the year 2000, then Prime Minister John Howard introduced a $7,000 first home owners grant, which is the equivalent of about $14,000 today. Now, the concept was that this would give first home buyers an edge to help them get into the property market and onto the property ladder for the first time. Johnny Howard and Treasurer Peter Costello meant well. But the road to Venezuela is paved with good intentions and the government help is one of the two driving causes of the current housing affordability crisis that we have today. Now, we’ll talk about the second major cause in a minute, but first it’s important to remember that whilst middle class welfare is always a dumb idea, sometimes it’s not obviously dumb at the time. It takes a little while for everyone to realize just how dumb it was.

This $7,000 first homeowners grant seemed okay at the time because the country was running a surplus. It we were on the road to becoming debt-free, which we did in 2006 temporarily and it looked like these good times were never going to end. So what’s the worst that could happen, right? just just a a little bit of socialist wealth redistribution, just a sprinkle of middle class welfare to help those poor struggling first home buyers buyers and to level the playing field. What could possibly go wrong?

Well, fast forward 25 years and it’s gone wrong. An entire generation of Australians have now given up on ever buying their own home, on ever having any rung on the property ladder because the housing affordability crisis has predictably gotten way, way worse as successive federal and state governments have offered ever more help for first home buyers. And that’s to say nothing of the fact that the cost of living crisis is now completely out of control for everyone, home buyers or renters. Disposable income has no dived. The country is in spiraling debt ever more as productivity is crashing out. And middle class welfare, which started out as just the tip, has now well and truly rooted us all. But don’t worry about it because Anthony Albanese is on the case and the government is going to save us by increasing middle class welfare specifically for first home buyers. Yay.

Now, adding insult to injury to Anthony Albanese’s saving of us all, the housing minister, Clare O’Neal, has just ruled out doing the one thing that would actually help all home buyers, all Australians. So, unless something changes soon, the Albanese government is is choosing not to do the thing that will help and is proudly doubling down on the thing that created the housing crisis in the first place.

My name’s Topher Field. This is the Topher project and I help busy Australians like you to keep up with the world as it changes around you. Now I am 100% viewer supported. So if you appreciate having the Topher project dedicated to bringing you stories like this one to bring it to Australians like you and others then please buy me a coffee via the button at topherfield.net and check out my books, DVDs and merch at goodpeoplebreakbadlaws.com.

Right? This 5% deposit scheme is the government’s way of doubling down on failure. And it is so much worse than all the schemes that have come before it. Because where past schemes have been responsible for driving up the cost of housing and therefore for keeping a lot of people out of home ownership, this scheme is going to trap people into home ownership that they cannot afford, which is way, way worse. See, prior to this scheme coming in, it was already possible to buy a house with only a 5% deposit, sometimes less. But it came with a bunch of costs and conditions. Most notably was a thing called lender’s mortgage insurance or LMI. It’s basically a risk fee, usually tens of thousands of dollars, paid by the borrower to the bank to ensure them, the bank, against the risk of the borrower defaulting on their loan and the bank not being able to sell the property for the full value of the loan and get all of their money back.

The government are now saying you can buy with a 5% deposit and not have to pay LMI because the government will be on the hook and therefore the banks don’t need that insurance anymore.

But buying with a 5% deposit was already possible if you had a good income to to have serviceability and if you were willing to cop the fees. Now, the government’s scheme is basically for the government to become a co-guarantor, so the lender doesn’t charge you that lender’s mortgage insurance, which sounds great, and it is going to have the effect of helping some first home buyers finally get into the market.

But soon afterwards, many of those buyers will wish they hadn’t because in the end, you can either afford something or you can’t. You can either afford $9,000 a month in repayments on that $1.5 million house loan that the government helped you to get or you can’t afford that loan. And helping people to borrow money for a house that they still can’t really afford is worse than if you hadn’t helped them in the first place because the devil as always is in the detail.

In this case, there is the financial reality of becoming a home owner when homes are so expensive and borrowing at high such a loan to value ratio and doing that if you’re the kind of person who can’t save a deposit. And I get it. Saving a deposit is pretty depressing because every year while you’re saving for let’s say a 10% deposit on a million dollar house, well, you’re watching that house price go up every year and your goal post posts each year keep shifting. I get it. But hold that thought because that right there, the fact that houses are already a million and $1.5 million, that’s the actual problem and it’s a fixable problem and we’ll get to the solution for that in a minute. But let’s stick with this 5% scheme for a moment longer.

I can understand why people who are saving for their first home deposit would think that a scheme like this was a great idea. Politically speaking, it’s going to work for Anthony Albanese because it’s going to be popular. The scheme applies to houses of up to $1.5 million, which believe it or not, that’s now just a run-of-the-mill average house in Sydney these days. The monthly repayments on that something like $9,000 a month, which is where we run headlong into reality. Because if you have $108,000 in after tax income every year, burning a hole in your pocket, then you can save that deposit and you can pay for the lender’s mortgage insurance yourself. What the prime minister is simultaneously saying is that people who can’t afford to save $30,000 to pay for their own lender’s mortgage insurance can afford $108,000 a year in after tax repayments on a house loan.

Now, you might say they could buy a house for less. They don’t have to buy a $1.5 million house. And you’re right. These are first home buyers. So, they can buy a starter house, something cheaper than the average. Fair enough. But there again, we run into a very serious problem. How come the average is $1.5 million? And how come even for people willing to step down from that? It’s pretty much impossible to get any decent house in the suburbs of an Australian major city for less than $800,000 right now. How come houses cost more than ever before as a proportion of our income? What happened? That’s the real question.

Now, let’s not address the symptoms of this problem with another band-aid government program that drives demand up even further. Let’s look at the actual problem of why our houses are so insanely expensive to begin with. And there are two main reasons. The first, I’ve already mentioned government help, starting with that federal first homeowners grant way back in the year 2000. But we’ve also been helped by state level grants as well, which combine to push up demand and prices with it.

This 5% scheme is just a continuation of that failure. It’s been going on for 25 years already and it looks like it’s going to go on indefinitely into the future and it’s going to have the same exact effect as before creating higher prices. This is not fixing the problem at its source. This is actually making it worse. But the second reason for the housing affordability crisis is just as important, if not more, and that is the way that government has restricted supply with planning laws and the federal government has made construction slower and more expensive with more than 70,000 pages of various building regulations according to Senator Canavan, who to his credit is actually trying to fix these problems at their roots.

Now, I’ve spoken about all of this at length in previous videos about the fact that more than half of the cost of a new construction house in Australia is either the direct or indirect cost of government fees, charges, levies, taxes, reports, assessments, and standards. Which all means that without government, the exact same new starter home on a 400 square meter block of land in a new subdivision wouldn’t be $900,000. It would be $450,000. And hey presto, the housing crisis disappears instantly.

That is a direct consequence of government intervention doubling the prices.

And the government insists that it’s helping us and argues that without these thousands upon thousands of pages of regulations that our houses would be unlivable. We need these standards to ensure that builders do the right thing and that our houses are the kind of house that you would want to live in in Australia. And dodgy builders are certainly a problem we all know that. Just watch A Current Affair for a week or two. You’ll see a bunch of stories about dodgy builders. But funnily enough, dodgy builders are still a problem despite the 70,000 pages of regulations. It’s almost as if the government writing things on pieces of paper in Canberra doesn’t magically fix problems out here in the real world. But what those 70,000 pages do do is create problems in the real world.

The issue of this unworkable building code came up in the prime minister’s recent productivity talkfest and the housing minister Clare O’Neal acknowledged that it’s a problem calling the code unworkable. But then instead of agreeing to slash the red tape, the green tape, and get the housing sector moving again, instead she insists that things like the energy efficiency standards in the building code must stay. All she’s done is pause additions to the code. She’s not removing anything. She’s just agreeing not to add any more onto the code for the next four years. These regulations do not make housing better for the poor. What they actually do is make housing unattainable for the poor.

These codes are the reason why a lot of people cannot get into a house for love nor money. The government, for example, insisted that there has to be a minimum block size, a minimum bedroom size, a minimum standard for this and for that energy efficiency standards, standards for every fitting and fixture inside the house, compliance left, right, and center. And they do that believing that they’re making houses better for Australians. But actually, they’re just making houses unaffordable for more Australians. There are Australians sleeping under a bridge right now because the government insisted that a minimum size of bedroom had to be regulated  and that, of course, increased the cost of housing. There are Australians shivering in the backseat of their car in the middle of the night because the government insisted that houses should have energy ratings  which of course increased housing costs and pushed some people out of housing altogether.

There are families living in a single room of a share house because the government said a block of land can’t be less than 400 square meters. So, they get nothing at all. There are children sweltering in summer, sleeping in sheds because the government said rentals have to have air conditioning. And that extra little bit of cost, that marginal cost made all the difference for that particular family in their particular case. And because housing was made better, they can’t afford it at all.

See, the thing with a property ladder just as with a real life ladder is that you need the bottom rungs. You need somewhere for people to start. You don’t get onto a ladder because you want to be on the bottom rung. You grab a ladder and you set it up and you start on that bottom rung because you’re climbing up to wherever it is that you want to be. But if it weren’t for those bottom few rungs, it would be impossible for you to get onto that ladder at all.

Australia’s planning laws, our slow and cumbersome and expensive subdivision and development process combined with 70,000 pages of regulations all of that has combined to remove the bottom rungs of the property ladder.

Developers can’t build cheap entry-level housing because it’s just not possible. You can’t do it and be compliant, up to standard, with all of the energy ratings and minimum sizes and fixtures and fittings and the list goes on. And what the government has done since the year 2000 and that first homeowners grant and what they are doing now with this 5% deposit scheme is effectively dragging a chair over to this broken ladder and saying, “Hey everybody, climb onto this precarious chair wobbling all over the place because you’re stretching financially and use that wobbly chair to get onto the middle of the property ladder because all the bottom rungs are gone.”

And yeah, for some that will work. For some people, that little bit of extra help from the government will get those individuals onto that ladder, and that will continue pushing property prices up. Happy days for them. But for others, this is going to cause them to collapse entirely because this latest little bit of help from the government causes them to overreach to stretch beyond their means reaching for a middle rung that they actually can’t afford, but that is the lowest rung on the ladder.

And for all of us, this will mean that house prices continue to become higher and higher. That this graph continues to look worse and worse as time goes by. And fast forward another 10 years, 20 years and beyond, we will still be listening to our politicians as they promise to help us with the housing crisis so that first home buyers can get on the property ladder while they refuse to actually do anything about the real problem and they refuse to put the bottom rungs back into the property ladder.

The Albanese government, like every government for the last 25 years, is doing exactly the wrong thing when it comes to housing. They are restricting supply, driving up costs, and they are subsidizing demand. And then they’re pretending like the housing availability and affordability crisis is not entirely of their own making. But it is. The problem though really is that Australians actually fall for this stuff. Promises to help us. We keep voting for this. The most recent polls indicate that if another federal election were held today, then Anthony Albanese would win in a landslide. Politicians don’t get rewarded for fixing problems. They get rewarded for promising to fix problems. Which means that in reality, politicians actually like it when there’s lots of problems because it means they can make lots of promises.

This dynamic, this perverse political incentive  it doesn’t change until we change. The problem is our politicians, yes, but actually more than that, it’s the fact that these politicians were put there by us. That’s why I do what I do. Because in the end, Australia gets the government that it deserves. And right now, that is not a good thing.

With the Topher project, I’m hoping that in my own way, I can reach my fellow Australians and help them to understand that most of the time, government is not the solution. It is the problem. I do what I do because I believe, or at least I hope, that it’s not too late for us. And that perhaps we can see this country change for the better if we are willing to change for the better ourselves first.

You can help me to keep the Topher project going by buying me a coffee via the button at topherfield.net and by checking out my books, DVDs, and merch at goodpeoplebreakbadlaws.com, including this Too much 1984, not enough 1776 design. It’s my personal favorite and it’s a nod to my American followers. You’ll find this along with all my other designs at goodpeoplebreakbadlaws.com. And everything you buy will help me to keep the Topher project going.

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