Housing affordability: Gittins, good government and greed

Sydney Morning Herald economics editor Ross Gittins has yet another stimulating article in today's SMH on the hot topic of housing affordability. He argues that none of the 'solutions' currently being kicked around by the MPs will improve the situation. Increasing the first-home owners' grant, cutting stamp duty, a subsidised saving scheme or anything else that gives buyers more power will only make things worse, pushing prices up:

That is because genuine solutions to affordability are counter-intuitive - contrary to common sense - and pollies often settle for "solutions" that don't work but sound like they should. Because the fundamental cause of hard-to-afford prices is demand exceeding supply, the only genuine solutions involve either increasing supply or reducing demand.

Instead of giving more buying power to all buyers (thus raising prices), Gittins argues, we can cut demand by removing the tax-breaks associated with property ownership. I'll let you read the details of his proposed alternative (and why he says it will never be implemented), but I found the article interesting for three reasons.

First, this piece once again highlights the way that the media often shortcircuits effective government. The very media scrutiny required to keep governments honest also encourages short term, populist solutions, those that are easily packaged and 'sold' to the electorate. Partially this is due to our own lack of patience. We want to see results now, and we threaten political failure to those who don't deliver on time. But I think it is also due to a common misconception of the nature of representative democracy. It is a widespread assumption that MPs are there to reflect our preferences and opinions, that they ought to be swayed by public opinion. But do we want those who govern us to be held ransom to our collective prejudices? No, they ought to lead, to be swayed only by persuasive arguments, not a daily media-driven popularity contest. We elect representatives to make decisions for us, on our behalf. We give them the time, resources and authority to make and implement judgements on our behalf and for the common good. They are not simply agents to enforce the will of the majority.*

Second, I really hope that this issue (housing affordability) doesn't come to dominate the upcoming election campaign. Not only are there more pressing and more important issues that may get marginalised by it, but collectively focusing on this issue encourages us in our self-obsession. I don't need more help in thinking about myself.

And third, there is a better solution, both simpler and far more difficult than the one Gittins suggests: "Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions." (Luke 12.15)
*Of course, there is more to be said on this topic. Andrew Errington has started a series on Jesus and government, in which he will (of course) be drawing heavily on the work of O'Donovan.
Fifteen points for guessing the English town in the picture.