Selasa, 24 Februari 2009

The Adventures of the SCSSHBCDAC

In the nineteenth century, society learned a lot about itself; this was the era in which the 'social sciences' as we know them were established. (Indeed, the word 'social' itself first appeared in scientific and political language around the 1830s.) One of the things about which society was most concerned to learn was the housing of poor and working people; it did so through the intensive investigations of commissions of inquiry, statistical societies, journalists, pamphleteers, reformers and radicals.

There are a number of famous investigations of the housing conditions of the English poor and working classes: Chadwick's 1842 Report on the Sanitary Conditions of the Labouring Population, Beames' Rookeries of London (1852), Mearns' Bitter Cry of Outcast London (1883) and Charles Booth's monumental Life and Labour of the People in London (1898-99). Some have an extraordinary literary quality: Engels' Condition of the Working Class in England (1845, first English publication, 1887), and Mayhew's London Labour and the London Poor (1851-52), are still in print today.

Less well known are the Australian or, more to the point, the Sydney investigations. The 'housing question' was pursued here too, in the Sydney Morning Herald's articles on 'the Sanitary State of Sydney' (1851), W H Jevon's 'social surveys' of Sydney and other colonial towns (1854), Henry Parkes' 'Select Committee of Inquiry into the Condition of the Working Classes of the Metropolis' (1860), and the investigations of the Sydney City and Suburbs Sewerage and Health Board's Crowded Dwellings and Areas Committee (1875), hereinafter the SCSSHBCDAC.

It is with the work of the SCSSHBCDAC that we are concerned here, particularly the intensive personal investigations of housing in the City of Sydney by its two subcommittees, whose members comprised the City Medical Officer, the Mayor, City aldermen and other worthies. Their reports remain, in the opinion of the Brown Couch, compulsively readable and deserving of a wider audience than can be accommodated around the dusty bound volumes in which the SCSSHBCDAC's minutes of evidence are presently confined.

This is the first, therefore, in a series of extracts from the reports of the SCSSHBCDAC. These extracts show a different Sydney from the one in which many of us live today, and a different political culture – though the reader might also wonder at how much of each still persists now. They also remind that along with the reports of its earnest investigators, the nineteenth century also produced the penny dreadfuls.

*
Episode 1. The Darling Harbour-side Horror.

Day 1. No 1 Sub-Committee (R B Read, Esq; MRCS, M Chapman, Esq). Kent, Clarence and Sussex Streets, from Liverpool-street to Druitt-street.

Met at 9 pm, on Wednesday, the 10th instant [November 1875], at the Volunteer Club, and proceeded to a portion of Brisbane Ward. Mr Fosbery, the Inspector General of Police, kindly placed at our disposal the services of Sergeant Larkin and Constable Mulqueeny, of the Detective Force, who rendered us valuable assistance. The night was remarkably cool, with a light southerly breeze blowing. Barometer, 29.72. The temperature in the open air 51•, in a well ventilated room 57•.

We commenced our inspection by examining the ‘Star of Peace’ and ‘Mill Hotels’, in Kent-street, which we found in fairly clean condition, the ventilation, however, being of an unsatisfactory character, as indeed was the case in almost every house we inspected, the old fashioned sash-windows being in use, which open only at the bottom, while the upper portion is immovable. The ‘Globe Hotel’, which we next visited, we found ventilated the same way; the rooms in this hotel were very low, and the closet in the yard exceedingly offensive.

We next inspected a block of buildings in at the corner of Sylas-lane and North-street, and spent some time examining a group of houses and cottages at the back, which we may class as entirely unfit for human habitation. The rooms are low, not more than 7 feet high, and in a small yard, 5 feet x 6 feet, there is one closet for six houses. In another, two closets, one of which is out of order, for about forty houses, and there is an absence of water to keep them clean. We also inspected some houses in St John’s Place, Sussex-street, which were in very bad condition, the ventilation being exceedingly deficient, and there being only one closet, without any door, for four houses; the stench from this closet was unbearable. Health under such circumstances is simply impossible.

In none of the houses we visited was the ventilation of a satisfactory character, and in many of them, in addition to this deficiency, the accommodation afforded for human beings is inferior to that provided for cattle and horses.

At midnight we found ourselves at the foot of Liverpool-street, at which place the stench from the head of Darling Harbour was offensive to a degree which we could scarcely have credited without personal experience of it. It appeared to us a matter of surprise that any persons at all could live in the immediate vicinity of this nuisance. It was low-tide at the time,– the whole of the foreshore was exposed, and the air reeked with the poisonous exhalations from the drainage polluting the harbour. Suffice it to say, that nothing that has been said or written on the subject of this horrible nuisance can equal the foul reality.

We concluded our inspection at 12.35, and did not reach our homes until 2 am.

Next episode: the Lewd Lodgers.

Senin, 16 Februari 2009

Sex for housing

Valentine's Day was well and truly ended for readers of the Sunday Telegraph by Lisa Mayoh's report about advertisements on share-housing websites that offer rooms in exchange for sex. Mayoh's report begins:

SLEAZY men are taking advantage of Sydney's rental crisis by placing online advertisements offering women free rooms in exchange for sex.
The zero-rent ads, targeting desperate women looking for somewhere to live, are becoming increasingly common on popular "share house'' rental websites.

Personally, I doubt that these ads are very common at all, and think that the number of women looking to enter into such arrangements is much smaller still.

Which makes the response of one of the websites on which such ads appear all the more puzzling: flatmates.com.au says it will keep running these sorts of ads, despite receiving complaints from users of their site. The site's administrator explains:

We support non-misleading zero rent or $1 rent ads that imply it's in exchange for sex. Here's why: if we didn't allow (reasonably) open and honest ads like this - it would just go underground. You would see cheaper places advertised and people (usually young girls) going there for interviews having no idea what the real deal was. NOT GOOD! (for the girls obviously, but for the listers too).

Okay, so these advertisers 'would just go underground' if flatmates.com.au turned them away. This is rubbish. First, maybe some of them would go to RSVP or some other matchmaking service and, while they're at it, clean up their act a little. Second, while they're allowed to lurk behind ads for share-housing, they are already underground. The excuses offered by flatmates.com.au about the implications of these ads being open and obvious don't cut it.

Flatmates.com.au claims that a sex-for-housing arrangement is about 'choice.' My colleagues in the youth homelessness sector have another name for it: 'survival sex'. I cannot believe that it makes good business sense for flatmates.com.au to risk becoming known as the creepy pervert flatmate website. I expect they'll find that out in due course.

Senin, 09 Februari 2009

Agents who ask too much: making sense of rents

In a recent post about rent increases, I noted that there are different measures of rents out there. These include:
  • 'asking rents' - the rents sought by agents in their advertisements for properties to let. These are reported by Australian Property Monitors (APM) and get a bit of coverage in the press;
  • 'new agreement rents' - the rents paid by tenants at the start of a new tenancy. These are reported by Housing NSW in its Rent and Sales Reports, using data from bonds lodged with the Rental Bond Board (RBB); and
  • 'established rents' - the rents paid by tenants in established tenancies. These are reported in the Census, and we can work out how much they've increased between Censuses by using the Rents index in the Consumer Price Index reports.
I said then that I'd look further into the differences between them: here's what I've come up with, looking at reports of these measures over 18 months.



(Sources: APM 'Rental Report', various editions, March 2007-September 2008; Housing NSW RBB data special request, March 2007-September 2008; ABS 2006 Census and CPI reports, March 2007-September 2008. Click on image for a better view)



In short, 'asking rents' are higher than 'new agreement rents', which are higher than 'established rents'.

For our present purposes, the most important thing is that 'asking rents' are higher than 'new agreement rents' – in other words, landlords overall actually get significantly less for their properties than what their agents advertise. In fact, on average their houses get about $50 less, and their flats get about $45 less.

Perhaps landlords and agents are just hopelessly optimistic. Or perhaps many of them are hopelessly greedy.

The lesson for tenants is not to be afraid of trying to negotiate the rent down. You might feel like that's difficult to do in a tight rental market, but many agents and landlords are shooting for rents that are far in excess of what the market can bear.

Another lesson is to query whether 'asking rents' are a valid measure of the level of the rental market.

Some notes on the chart.
  • First, a note of thanks to the housing analysts at Housing NSW who, by special request, provided the TU with the RBB data relating to 'new agreement rents.' These data are median weekly rents for houses and for flats in the Sydney Statistical Division, which is a slightly different breakdown to that usually present in the Rent and Sales Report. The data provided allows a comparison with APM's data.
  • The 'asking rents' data comes from APM's Rental Reports, which are available for download from APM's website. There's a couple of issues with these data.
  • First, there's a few gaps in the series of reports available from the website, but I've been able to fill in these gaps because each report refers to figures from previous reports.
  • The second issue is more of a problem. As Dan at Bubblepedia has observed, sometimes APM retrospectively revises downwards previously reported figures. In particular, the report for September 07 gives asking rents of $400/$380 (ie houses/flats); in the report for September 08, the figures for September 07 are given as $360/$360. The September 07 report also gives figures for June 07 of $385/$380; these are reduced in the June 08 report to $365/$360. For the purpose of the graph, where the figures are inconsistent I have used the most recent (ie lower) figures.
  • About 'established rents' - this represents the median Sydney rent recorded at the August 2006 Census ($250 per week), adjusted according to the Sydney Rents Index in the CPI. Unfortunately, I was not able to get this broken down to houses and flats.
The TU tips its lid to Dan at Bubblepedia, who first queried whether 'asking rents' were overshooting the mark, and who spotted the revisions in APM's figures.

[PS (Sunday 15 February) - have a look at the Herald's report on these findings, including comments by APM and the Real Estate Institute of NSW.]

Minggu, 08 Februari 2009

Tenancy Culture Studies: Monopoly

The subject of today’s lesson, being the second in the Brown Couch’s Institute of Tenancy Culture Studies series, is the world’s most popular board game: Monopoly.

(Monopoly)

The object of Monopoly is simple: buy properties, especially in neighbouring groups over which one can achieve a monopoly, and develop them with houses and hotels. Draw your salary, avoid tax, stay out of jail, and extract rent from your fellow players until they are bankrupt.

This jolly recreation has been the first introduction to property relations for millions of impressionable young minds. In the 64 years since Monopoly was first produced, over 250 million sets have been sold worldwide and, according to the game’s current owner, Hasbro, more than 480 million persons have played at being landlords of the game’s famous colour-coded properties. Lately Hasbro has been churning out various 'special editions' of the game, including Star Wars and (for goodness sakes) Pokemon editions, and the 'Here and Now: World Edition 2008', featuring inflated property values and currency denominations and Sydney as one of the red properties. (The present study will refer to the London properties most familiar to Australian players.)

The story of the game itself is significant, in a two-fold way, for the student of tenancy culture. The official story of Monopoly begins with its invention by Charles B Darrow, an unemployed heater salesman from Pennsylvania, who was struggling to get by in the Great Depression. In 1934, Darrow first tried to get the games manufacturers, Milton Bradley and Parker Bros, interested in his invention, but was rebuffed, with Parker Bros detecting 52 design flaws in the game. Undaunted, Darrow himself made copies of the game for sale in Philadelphia department stores. Sales were good, Parker Bros became interested again and, in 1935, the company bought Darrow’s patent: a classic little-guy-makes-good story, befitting capitalism’s favourite game.


(Mr Monopoly, aka Rich Uncle Pennybags)


Monopoly actually has another history, with a different significance, starting 30 years earlier. In 1904, Elizabeth Magie patented her invention, ‘The Landlord’s Game’, which was designed to educate its players in the economic theories of Henry George.


('The Landlord's Game', from Magie's patent.)

The game was produced commercially and in various homemade versions by Georgists, students, Quakers and other reformers. It was from this folk-tradition of Monopoly-style games that Darrow took his own ‘invention.’ Parker Bros bought Magie’s patent when it bought Darrow’s, and over the years has used its intellectual property to suppress variations on the game that have from time to time emerged.

What about the playing of the game? From a technical point of view, it must be said, Monopoly is a poor game. Despite what its enthusiasts say, there is little skill or strategy involved. In the early rounds of the game, the most important factor is good luck with the dice; and the later rounds are largely determined by the earlier rounds. The basic strategy is: if a property is available for sale, buy it – which more a rule of thumb than a strategy. True, some properties present a slight advantage over others, because of they are landed upon more often: the orange properties (Bow, Marlborough and Vine Streets) are more or less average dice throws from Jail; similarly, the light-blue properties (The Angel Islington, and Euston and Pentonville Roads) are roughly average throws from 'Go'; and Pall Mall, Trafalgar Square and Mayfair are the destinations of ‘Chance’ cards. (Conversely, the green set of properties (Regent, Oxford and Bonds Streets) and Park Lane are the least likely to be landed upon.) But really the greatest advantage is in rolling the dice well.

Despite these deficiencies, Monopoly does very successfully induce a strong emotional experience. This is especially for players on the losing end of the scramble for property: for them, the experience of the game becomes one of desperately hoping to scrape through a round of play without incurring a demand for rent and getting through to pay-day again. One’s time frames shrink, from long-term dreams of property-empire-building to just getting back to ‘Go’, and shrink again to just the next dice throw. After a point, Jail starts to look good – after all, it’s rent-free.

In every family there is one person who claims to be an expert player. Monopoly’s technical deficiencies put the lie to their claims that they enjoy it as an exercise of skill; instead they delight in the execution of Monopoly’s emotional experience. This person is not an expert, but rather a pervert.

Rabu, 04 Februari 2009

Debt and blame

Malcolm Turnbull's Coalition will oppose the Government's stimulus package because of
... the scale of the deficits and borrowing being contemplated, given the uncertain economic outlook and federal Labor's track record.... Mr Rudd has asked Parliament for permission to take us $200 billion into debt.
By coincidence, just yesterday I was having a look at some data from the Reserve Bank about debt.
The data give a handy perspective on $200 billion worth of debt, not to mention the 'track records' of government.

Our first graph shows the total money lent by banks and other financial institutions to owner-occupiers and investors, from 1991 to September last year.


(RBA Table D02: Lending and Credit Aggregates. Click on image for a better view)

That's a lot of housing debt – especially for the investors, who went from owing $10 billion in 1991 to $310 billion in 2008.

Staying with the investors for a moment: our second graph shows the loans extended to them by banks and other institutions in each month of the period - and what they spent it on.


(RBA Table D06: Lending Commitments - All Lenders. Click on image for a better view)

Apart from showing how much money investors had to throw at existing dwellings, this graph also shows a great acceleration in lending for money-throwing around 2000. What happened then?

In 2000, then-Treasurer Peter Costello changed the way capital gains tax works, so that henceforth capital gains would be taxed at half the rate at which income is taxed. This meant there was a rush of clever dicks trying to transform income into capital. This modern-day alchemy is otherwise known as negative gearing.

Here's how it works:
  • the clever dick takes on debt and buys an asset - say, a house;
  • the debt consumes income, but this income is not taxed and the price of the house rises by even more - at least, that's the plan;
  • the clever dick sells out, and now they have to pay tax - but, thanks to Costello, they pay at half the rate.
Another way of describing this sort of plan is 'gambling', because those higher prices really depended on some other clever dick or, sadly, owner-occupiers, coming up with even more money.

At the heart of the present global financial crisis is the implosion of a global bubble in asset prices, and in particular house prices, as clever dicks and desperate owner-occupiers have proved unable to continue paying for ever-greater debts.

Turnbull is hardly Costello's best mate, but he does base the Coalition's claim to better economic management on Costello's record. He should not. With his CGT reforms, Peter Costello behaved like a tout at the door to the casino.

The Prime Minister, Kevin Rudd, has also commented on the global financial crisis. It is, he says, 'a crisis which is not of our making'. On the occasion of the first of the Government's stimulus packages, he declared:
I will not sit idly by and watch Australian households suffer the worst effects of a global crisis they did not cause.
And again, on the announcement of the second package, for acted for 'Australians – who did not cause this crisis...' (that's from yesterday's Hansard - careful, that's a big pdf).

Instead, Rudd says the causes of the crisis lie in 'extreme capitalism' and, more particularly, 'unrestrained greed on Wall Street.'

True, the greed of those highrollers is audacious, shocking. But we should not ignore the role played by ordinary citizens, 'Mums and Dads', 'Australians', who borrowed and gambled on house price inflation. What is perhaps more shocking and, as Rudd's comments demonstrate, certainly harder to acknowledge, is the banality of greed.

Senin, 02 Februari 2009

Stim city

The Federal Government has just announced its second stimulus package, which includes $6.6 billion for the construction of 20 000 new social housing dwellings.

In doing so, it gets it right where the first stimulus package got it very wrong.

The new money for social housing provides work for builders and other tradespersons, and we get a serious amount of new housing that stays affordable. Excellent!

Contrast those outcomes to the first package's boost to the First Home Owners Grant: an inducement to first home buyers to keep spending too much on housing. It will eventually fail in its intended outcome - to keep house prices high - but not before these first-time buyers have borrowed a lot and handed it all (plus the grant) over to the seller. (I wonder how much thanks these buyers will give the Government in 12 months time, as prices fall further.)

Anyway, a round of applause for today's announcement. Well done!



(Bravo!)

House prices and 'saving'

The good news about house prices (see yesterday's post) is reported again today, with the usual daft crying and carrying on. I won't go over that again, but one particular bit of reportage has particularly nettled me.

Clancy Yeates in the Herald characterises falls in house prices as 'eroding the wealth households have stashed in bricks and mortar.'

Wealth stashed away in bricks and mortar conjures images of gold bullion in the wall cavities, but it's actually not too bad a description of the strategy pursued by many in the housing market. Let's be clear, though: while there is a degree of literal truth in this description (some households really have bought more bricks and more mortar and built great big houses), the 'stashing of wealth' is figurative. What households have done is spent a lot on housing – they've paid higher prices – and they call this 'wealth' because they think some other household will come along later and pay even more.

Yeates goes on:

The slowing property market is welcome news to first home buyers, but it also lowers the net wealth of property owners because many households put most of their savings into their home.

Okay, I have to draw the line at describing this strategy as 'saving'.

Spending lots of money – that isn't saving.

Borrowing lots of money from the bank to do so – isn't saving.

Paying lots of interest on all that borrowed money – isn't saving.

Boo to Clancy Yeates and everyone else who tries to bestow dignity upon house price speculation by calling it 'saving'.


(Boo!)

Minggu, 01 Februari 2009

House prices fall... good!

The ABS has today released its house price index figures, showing a fall of 0.8 per cent in the national index for the December quarter, and 3.3 per cent for the year to December. In Sydney, house prices fell 0.3 per cent for the quarter, and 4.1 per cent for the year.

Well, that's some good news, isn't it? I know, it's not that much, but it's a start.

And yet... everywhere this is being reported like it's a bad thing, with much wailing and gnashing of teeth. In the Daily Telegraph you can read about the cities that have been 'worst hit' by the declines in prices. House price falls are 'gloomy news' at the Sydney Morning Herald. At the ABC, an economist laments 'unfortunately... households are in for a pretty tough time in 2009.'



(Bambi's mother. Media reports suggest she was killed by falling house prices.)

Households might be in for a tough time, but not because houses are less expensive.

Let's get back to basics.

Less expensive housing means more people can buy more of it.

It means persons who would like to buy a house for their own shelter are better able to do so.

It means persons who would like to buy a house and let it to someone else, and enjoy the income so produced, are better able to do so.

Less expensive housing = good thing.

But what about those persons who have already paid for their housing, and paid too much?

Well, if you bought it in order to live in it, you shouldn't feel too bad. The shelter it provides you is still just as good as it always was. If you sell it you might not get as much as you had hoped, but then again your next house isn't going to cost as much, so it evens out. Borrowed too much in order to buy it? That's unfortunate, but it is a bit rough to expect that someone else will come along and cover your interest payments by paying even more than you did.

And if you bought it not to live in it, nor to derive an income from it, but instead just to sell it again for a higher price, well, too bad. That's speculation for you. Borrowed too much in order to buy it? Again, too bad. Frankly, the housing market is better off without you.