Lot's Wife Edition 3 2024

HECS and Housing: united against the youth
By Thomas Hall
It’s no secret that Australia is in the midst of a housing crisis. With every passing day we’re
one step closer to Jane Austen’s Georgian England, where you can only get a house
through marriage or inheritance. Negative gearing and a capital gains tax concession for
property investors are increasing demand, while planning restrictions, unsustainable
immigration and government mismanagement is flatlining supply. A perfect storm. The effect
of this housing quagmire impacts young people the most, locking them out of the housing
market.
Naturally, this issue is becoming political. Max Chandler-Mather, the housing spokesperson
for the Greens and one of the only renters in federal parliament, is making significant political
inroads with his rallying tiktok videos on the topic, often garnering over one million views.
At the same time, another political storm is brewing, closing in on HELP loans, more
commonly known as HECS. Dr Monique Ryan, the independent MP for Kooyong has
amassed over 260,000 signatures on her petition to change the HECS system. HECS is
indexed to inflation, which effectively means that young people are charged an annual
compounding interest. This, when combined with stagnant wage growth means that the
HECS debt of the youth is growing faster than they can pay it off.
The Fujiwhara effect
The Fujiwhara effect is a meteorological term that describes two cyclones connecting to
become a larger one. Political radars seem to have failed in detecting the Fujiwhara effect
between the housing and HECS crises happening right now, and the aspirational Australian
youth caught in its eye.
Currently the Australian government is led by people who went to university for free and
bought their homes for between three to five times the average wage, thanks to the Whitlam
education reforms and a housing tax system with parity. Since then, changes to capital gains
tax have combined with the existing practice of negative gearing to rapidly drive up the price
of housing. In 2024, the median house price is over nine times the average wage, and it’s
getting worse. Throw in an interminable HECS debt, and you’ve got yourself a really unfair
system.
The Politics
The Prime Minister was right when he said that the Labor government ‘needs to do better for
the younger generation’, the Coalition would do well to follow suit. There is massive political
capital to be raised for either major party, here. At the moment, this area is dominated by the
Greens with Chandler-Mather leading the charge. Granted, it is not unusual for young people
to have a natural inclination towards the Greens but the political order is changing; people
aren’t ‘growing out of it’ anymore. The pool of landowners is shrinking while the pool of
renters is growing. Likewise, everyone who attended university after 1989 walked away with
a massive HECS debt and so too will the students of today. So the number of people with a
HECS debt will soon be the majority.
It’s illogical for both major parties to effectively ignore this when their primary vote is in a
steady decline. True, Bill Shorten lost the 2019 election by going after negative gearing
and
the CGT exemption, and Albenese pragmatically kept it out of the debate in 2022. But a lot
has changed since those elections. Scott Morrison and Anthony Albanese each resonated
with ‘middle Australia’ in their election pitches, but it won’t take long for ‘middle Australia’
to
consist of renters who can’t get into the housing market. Given that ‘middle Australia’ or
‘the
centre’ decides the outcome of elections, the message to major political parties is clear:
ignore HECS and housing at your peril.
The issues of HECS and housing both go against the deeply entrenched Australian grain of
fairness and aspiration. It’s not fair that younger generations are locked out of the housing
market by property investors with a leg up. By the same token, it’s not fair for boomers to
tell
younger generations to ‘grow up’ when we talk about HECS given they went to university
for
free.
Aspiration is under attack by a tax system that makes it easier to buy your tenth home than
your first, not least because your HECS debt is handbrake on your ability to get a loan.
People once dreamed of home ownership with hope that it could one day be a reality.
Opportunity used to be earned but now it’s inherited, evidenced through the rise of the
bank
of mum and dad now funding 40% of first home buyers. The formula was to work or study
hard, get a good job, start a business and grow your savings until you can afford a home.
Any Australian should be able to work hard, make money and then buy a house. It shouldn’t
be the case that hard working Australians are bested on auction day by lazy property
investors.
What can be done?
The federal Labor government has hinted at HECS reform in the upcoming budget, and
continues to tout policies aiming to increase housing supply, ignoring demand. True, we
have a supply problem in this country but dismissing the demand issues only infantilizes the
intelligence of the Australian people.
As a country, we need to ensure that fairness underpins all our systems; political, taxation or
otherwise. And we need to ensure that our country rewards hard work and effort, maintaining
the promise of aspiration. Practically, changing how HECS is indexed, reversing the job
ready graduates scheme (the one that increased the price of humanities units) and treating
HECS as a tax instead of a loan (increasing borrowing capacity) would be a start. Likewise,
putting an end to negative gearing and the CGT concession would quickly reduce housing
demand. These reforms, while welcome, only scratch the surface.
There is a political reckoning coming, and our politicians need to wise up quickly, because
they’re kidding themselves if they think they can outrun the HECS and housing storm before
they get wiped into oblivion.
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