What if I told you that Australia has enough houses? It’s true, and I’ll show you the numbers in a minute.

Our housing supply has grown faster than our population has grown over the last 20 years. We have enough houses. But how can that be? If there isn’t a shortage of housing supply, then why are prices sky high? Why are rentals so scarce? If I’m right, and I am, by the way, and there isn’t a housing shortage, then why does the housing crisis exist at all?

Well, there’s an old joke about communism that rings true when it comes to the housing market in Australia. It goes, what would happen if the communists took over the Sahara desert? Nothing. For the first 50 years, and then there would be a shortage of sand. Australia simultaneously has a shortage of housing uh but also more homes per person than ever before. Hmm the highest property values in history with more money than ever before being spent on construction, but also record numbers of builders going bankrupt. We have a rental shortage with record high rents and record numbers of landlords losing their investment properties to the bank.

Such a situation is like a shortage of sand in the Sahara desert. It’s not possible in a free market. In a free market, high prices create the opportunity for profit. And as a result, new supply is created because people want to cash in on that profit as fast as they can. So shortages and price spikes, well, they happen in a free market, but they are self-correcting and short-lived.

So, how come Australia has seen 25 straight years of insane price increases and yet neither builders nor landlords can make enough money to stay in business right now?

Well, it’s because thanks to the government, we don’t have a free market in housing in Australia. It’s not even close. And how could it be possible that we would have a housing shortage whilst also having the most houses per person that Australia has ever had? Well, again, we can thank the government for that one, too.

My name is Topher Field. This is the Topher Project, and I help busy people like you to make sense of the nonsense that surrounds us. And when it comes to the housing market, there is a lot of nonsense out there. Now, I am 100% viewer supported. So, if you appreciate this sort of Australian content, then please buy me a coffee via the button at topherfield.net and check out my books, DVDs, and merch at goodpeoplebreakbadlaws.com. Everything you buy will help me to keep doing what I do, cutting through the crap and bringing you the truth through videos like this one.

So, let’s first talk about housing supply. I’ve spoken at length in previous videos about the fact that you can’t fix a housing shortage by increasing demand. But that’s exactly what our government has kept doing with first homeowners grants since the year 2000, plus a load of other schemes. Most recently, this hairbrained 5% deposit scheme from Prime Minister Anthony Albanese. But supply also doesn’t automatically fix the problem either because supply still needs to be the supply of what people actually need. It needs to be the right kind of supply and we have the numbers to prove it.

It’s not often that I give credit to the Australia Institute, but they deserve credit in this case for their coverage of the fact that the number of dwellings in Australia has increased faster than the population of Australia has increased consistently over the last 20 years. Per the article by Matt Grungh, over the last 10 years, population has increased by 16% and the number of dwellings has increased by 19%. And over the last 20 years, population has grown by 34% while the number of dwellings has grown by 39%. The number of dwellings in Australia is not what’s wrong with the housing market.

What’s gone wrong is a combination of two key things. Our expectations combined with government regulation. Let’s start with the expectations problem. People today expect their starter home to be better than what a baby boomer’s dreamhouse used to be. Now, I’m only in my 40s, but I grew up at a time when a majority of houses had no air conditioning at all. The toilet in my childhood home was outside. Going to the toilet at night involved unlocking the back door and walking out under an asbestos roof through an open-ended breezeway that was freezing cold in winter. To get to a brick toilet where the bowl was made of pure ice and the daddy long leg spiders in the corners all had their own names.

Now, I don’t say that because I want your sympathy. That wasn’t a hard childhood 35 years ago. That’s what we called normal. We were two kids to a bedroom for most of our childhood lives. My older brothers shared their bedrooms all the way through their teen years, all the way through to the end of high school. They were still sharing bedrooms with at least one of their brothers. The idea of having your own bedroom to kids like us only 35, 30 old years ago, well, that was a luxury that no one that I knew could afford.

Onsuite bathrooms for the parents were not common. Most parents shared the same bathroom and shower as their kids. The kitchen bench was made out of melamine laminate, usually some hideous shade of the color green. The fridge was a bomb-proof Kelvinator that your parents had inherited from their parents who must have got it, I don’t know, they got it from the spoils of war in the French Revolution or something. I don’t know. But these things were old. And the solar paneled powered dryer was a thing called a clothes line. and it doubled as a swing set when mom wasn’t looking. Central heating, it was something that you bragged about having. And if you had any air conditioning at all, it was one of those massive boxes hanging out of the wall, dripping water all summer long. These weren’t people’s starter homes, either. These were their family homes.

My parents would tell me stories about where they lived when they first got married, their starter home. And in comparison to where they started, the family home that I remember was already luxurious. Fast forward 35 years from back when I used to freeze my nuts off in an outside toilet in the middle of a winter storm. And these days, first home buyers won’t buy a house cuz h we don’t like the color of the stone benchtop in the kitchen. Air conditioners. Well, now they’re in every bedroom. It’s a human right or something. I don’t know. And forget having the family all share the same bathroom sink. Nowadays, the house has to have more sinks than it has people with faces to wash. And this is what many people consider to be a minimum starter home. And if you suggest to people that perhaps they should lower their expectations a little bit, they look at you like you just told Cleopatra to try adding fewer pearls into her sparkling wine.

So the first part of the housing crisis problem is our expectations of what we think the baseline of housing ought to be, of what we think the first rung on the housing ladder should look like.

But that’s actually the lesser of the two key problems here. The second and larger problem is that most of what we spend on our houses is not the cost of the house. It’s the cost of government regulation and the effect of their rules and restrictions and requirements around housing. And that’s true whether you’re a buyer or a renter.

Because despite the staggering cost of a new home, record numbers of builders and developers are going bankrupt. So where’s that money going? It’s not going into the pockets of the developers or the builders. And despite the staggering cost of rent, record numbers of landlords are going under, too. Their investment properties are being repossessed by the banks, and those families are often losing everything. So, where’s that money going? If it’s not going into the pocket of the landlord, how can this be?

If rents are sky-high on properties that suck, surely that must mean that landlords are making a killing. Well, yeah, in a functioning housing market, that’s exactly what it would mean. But we don’t have a functioning housing market. In a functioning market, high prices on a crap product would mean high profit margins. And high profit margins attracts new supply which brings in new competition which brings quality up and prices down. Free markets have problems for sure, but they self-correct. And that’s literally the greatest feature of any free market.

So if you have what we’ve had in Australia for the last 25 years, a market with sustained high prices for a crappy product and simultaneously the sellers, in this case the builders and the landlords and the developers still losing money on that product, then where’s that money going? Something is distorting the market. The freedom of the market to self-correct is being constrained by some kind of external force. And the first place we should look for that external force for the cause of these market distortions is government regulation. And the fact that a huge proportion of the cost of housing is actually the cost of government regulation.

It’s actually no surprise that landlords are going under in record numbers in Victoria because Victoria has led the way in renters rights with ever higher minimum standards for rental properties, ever higher taxes, fees, and charges on landlords. And I said before it happened that this was going to end up hurting renters. And guess what? Here we are. Because most renters are actually being subsidized by their landlords. Yes, really. I did a video about this back in 2017. I’ll put a link to that in the description of this video. And that video from 8 years ago is more true now than it was even back then when I made it. Because the fact is most landlords are losing money week to week on the rental properties that they own.

So why do they do it? Well, because they hope to make all of that money back and then some in capital growth when they sell that investment property. The capital growth will make up for all of the cash flow losses over time. Now, what that means in practice is that the house that a renter is renting costs more than what their rent is than what they’re paying to live there. Which means that this evil landlord is actually subsidizing the cost of housing for renters most of the time. And people lose their minds when I point this out, but it’s a fact. Most landlords are subsidizing the housing cost of their tenant.

Which means that when we jack up costs even more for landlords, well, they’re going to pass it on. They either put it on to the rent or, okay, maybe some of them can afford to wear the extra cost, but most landlords can’t. Their moms and dads, they’re trying to save for their own retirement, and they don’t have the cash flow to wear that extra cost. So, up go the rents. And also, record numbers of landlords are now losing their investment properties, which is no surprise in Victoria right now.

Now, some people believe that these landlords being forced to sell to these investment properties going back onto the housing market is a good thing.

They believe that it will bring new properties onto the market, which will lower prices and increase home ownership. That renters will become home owners if we just force those evil landlords to sell. And again, in a functioning market, there would be some truth to that. Not much, but there would be some. But here, again, we run into the reality that we don’t have a functioning housing market.

See, because government have been propping up demand in housing with all the first homeowners grants for literally the last 25 years. They are the reason why houses today cost way more as a proportion of your income compared to what they did 25 years ago. So, government help has made the housing affordability crisis worse, which means that government help is the reason why most renters are nowhere near being able to afford to buy even the very house that they are renting because they haven’t been able to save a deposit or save one fast enough to keep up with the ever-increasing values of houses.

But even the ones that do have a deposit often can’t qualify for the massive eyewatering home loan that is required because thanks to the government intervention in the housing market, the house they live in has some stupidly high off the charts valuation. Now what that means is that most rental homes going on the market, the ones which are being bought by the lucky few renters who can afford to buy, well that’s actually hurting the majority of the renters who cannot afford to buy because they either can’t afford the cost of government in the form of the deposit or the home loan.

And now these renters that cannot afford to buy their own rental home, well now there’s even fewer rental homes out there for them. Our housing market is a complete mess thanks to top-to-bottom intervention which has added to the costs without adding to the value. There are enough houses in Australia to go around. We’ve been building them fast faster than our population has been growing. We don’t actually have an outright supply problem.

What we have is a lack of supply of affordable starter homes, budget homes, the bottom rungs of the housing ladder, those first steps. And this is the final problem and it’s also the key, the solution to the Australian housing market mess. The final problem is that thanks to government intervention, builders cannot afford to build cheap housing.

Government talks about cheap housing all the time. This is a known problem. We need more cheap affordable housing. And yet the government is the reason why the market cannot supply cheap houses. The combination of planning laws and building standards which are supposed to help buyers and help renters. Well, that’s what makes it nonviable to build things like three or four to a block little single story two-bedroom brick units like what used to be common place when I was growing up in the northern suburbs of Melbourne.

It’s no longer viable to build the kinds of workers cottages that used to be people’s starter homes back in the day, the brick units that used to be the retirement homes of little old ladies when I was growing up in the northern suburbs of Melbourne. No one can afford to build affordable housing anymore. Thanks to regulation, the costs of construction are just too high. So all the builders and all the developers are maximizing their returns. They’re building double story luxury town houses instead. Or they’re building apartments which are thrown up and start to fall down before the building’s even been finished.

And don’t pretend that high-rise apartments are suitable starter homes. For most people, they aren’t. And in terms of being in the the bottom rung of the property ladder, financially, apartments all too often turn out to be absolutely disastrous. Or at least that’s been the case for the people that I know personally who were sucked into buying in high-rise apartment buildings. Personally, I will never buy a property that doesn’t come with its own land. But land release is so slow in Australia and the costs imposed are so high that even if you can afford to buy a piece of land, no one can afford to build a modest home, a budget home on that block. It just doesn’t make financial sense.

You have to build the biggest home you possibly can onto the smallest piece of land because it’s all so expensive. And that is how you get a shortage of sand in the Sahara desert. 25 years after the government started helping first home buyers with John Howard’s first home owners grant, there is now a shortage of land in the world’s most sparsely populated continent outside of Antarctica.

We have a housing shortage despite there being more dwellings per person than ever before because the only people who can afford to buy a house are the people that have already bought one. If you’re not already on the property ladder, it’s really hard to get on because the bottom rungs are gone. A starter home today is $800,000. And even then, half of them are crap.

Now, $800,000 for a home is not an unachievable amount of money to spend if you’re upgrading from a $600,000 home.

And yeah, you can afford a $600,000 home if you’re upgrading from a $400,000 starter cottage of some sort. But going from zero straight to that $800,000 starter home is a leap that most people just can’t make. The trouble is those $600,000 and $400,000 starter homes, they don’t exist. The bottom rungs of the ladder are gone.

And this is why it is absolutely criminal in my opinion that the government has effectively regulated starter homes out of existence. Regulated the bottom rungs of the ladder out of existence. Renters are now stuck renting and they’re stuck renting these $800,000 investment properties that builders are building, cramming the biggest possible house onto the smallest possible piece of land. And the builders are going broke in the meantime. Renters are paying exorbitant rent to landlords who are being foreclosed on by the bank because even that exorbitant rent doesn’t cover the real cost of owning that property.

And the only way such a farcical state of affairs can exist is because the government is the one stealing value at every step of the housing chain. They’re stealing from developers via planning restrictions, over environmental overlays, code contributions, and more. They’re stealing from builders via excessive building codes, energy standards, a plethora of reports and surveys, and more. They’re stealing from buyers in the form of stamp duty, from investors in the form of land taxes and a raft of new minimum standards, which mean that many landlords are renting out houses that are actually nicer than the homes the landlords are living in themselves. And they’re stealing from renters via income taxes and the exorbitant cost of living.

Every step of the way, the government is stealing value from us all. And so here we are. We are in the Sahara desert with a shortage of sand. In Australia with a shortage of land, the most sparsely populated of the inhabitable continents. And somehow we’ve run out of land. People want to blame landlords or blame Airbnb or blame immigration or blame builders or blame baby boomers or blame somebody.

But the housing crisis in Australia isn’t the fault of any of those groups. It’s the fault of the people that we keep voting for over and over again for the last 25 years. And the housing crisis will not be fixed by reducing immigration or by taxing superannuation or by forcing granny to move into something smaller or by regulating rental properties. It will be fixed when we stop voting for politicians who promise to fix it and instead support politicians and parties who promise to simply get out of our way to set the free market free to do its job to self-correct to create those bottom rungs on the ladder so that we can all provide ourselves with housing that we can actually afford.

My name’s Topher Field. This is the Topher Project and I help busy people like you to make sense of the nonsense that surrounds us. I am 100% viewer supported. So, please help me to keep the Topher project going by buying me a coffee at topherfield.net and check out my books, DVDs, and merch at goodpeoplebreakbadlaws.com.

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