The following articles were published in "The Guardian", newspaper of
the Communist Party of Australia in its issue of Wednesday, October
16th, 2002.
Contact address: 65 Campbell Street, Surry Hills. Sydney. 2010 Australia.
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Editorial: Howard's crazy home-ownership scheme
The Howard Government's idea of splitting home ownership and making it
possible for banks and other lending institutions to advance part of the
money and become a joint owner with the tenant has been described by one
commentator as the "whackiest" idea the government has ever come up
with. And so it is.
However, there are devious considerations behind the scheme.
Firstly, the huge increase in house prices has pushed homeownership far
beyond the reach of many wage and salary earners. Even the cheapest and
even derelict houses are going for $400,000 to $500,000 in Sydney. Just
fancy having a mortgage of $400,000 to pay off for the rest of your life!
Another consideration is that the housing boom bubble could well burst
just in time for the next Federal election and all those who have
invested huge money in the property boom could find that their expensive
asset is not worth nearly as much and that they have lost money. This
however, does not mean that their obligations to the bank are any less.
The housing boom has been helped along by the cynicism about having
money tied up in shares given the steady decline in their value in the
last year or so. Share values have tumbled by between 30 to 40 per cent
so the idea of investing in a house and then selling it again making a
big profit became an attractive alternative for those with that sort of
money. They will start blaming the government, however, when the bubble
bursts and they find that once again the system has relieved them of
their money.
Howard has not spelt out the fine print as to how this "whacky" idea is
going to work.
To imagine that a bank is going to invest money in half a house and then
get no return until the house is sold in 20 years time is just plain
screwy. Will the bank charge the tenant rent for the money it has
invested or will it levy an even higher interest rate than at present on
the money it puts in?
What happens when the house is sold at a loss? Who pays for renovations?
What happens when the tenant dies and the house is sold up? Who is to
pay insurances, land taxes, council rates, etc? If the scheme were to be
implemented at present wouldn't that encourage a further increase in prices?
There is yet another reason for the scheme. What say banks or other
lending institutions approach bankruptcy (and more than a few banks have
gone bust in Japan, the US, Argentina and other countries recently)? In
these circumstances the government starts to give taxpayer's money away
to shore up the banks (as is happening in Japan). This would be highly
unpopular with the public but if any number of homeowners were tied up
to a bank facing bankruptcy they could become supporters of such a
government move if it were to shore up their investment.
In the event of a bank bankruptcy, the receivers would be obliged to
sell up the "joint investment" to pay off creditors. What happens then
to the other partner in the deal, the home occupier?
The Howard scheme is just another one of those capitalist schemes that
avoids facing the real needs of the community - plenty of public housing
available for sale or rental at reasonable prices. Even the existence of
such housing would have a salutary effect on housing prices. But all
governments have virtually abandoned their responsibilities in their
rush to serve "the market".
Governments can, if they really want to, control rents, bank interest
rates, stamp duties and other charges that jack up the prices for
intending homeowners. But for both Federal and State governments it is
"the market" that has unfettered and unregulated control and it is
homeowners who are getting ripped off.
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