Reserve Bank Governor Phillip Lowe is right. We must exploit this period of low interest rates to invest in infrastructure that provides a sound, long-term economic foundation for our future.
This infrastructure is housing. And for all Australians – rich or poor.
The economic health of our cities is at crisis point due to the dire shortage of affordable, social and public housing.
Housing for all was seen historically, by visionary governments, as a fundamental requirement in building a prosperous country.
Now, it is seen purely as a welfare issue – a view that distorts the central role that stable housing plays in the life of an individual.
Without stable housing, a person’s ability to contribute economically to society is greatly curtailed.
Without a stable and safe place to call home, how can an individual form a productive life?
How can they work, study or raise a family properly?
Shelter is a fundamental human need – not a human right – and if it is not provided, we suffer unintended consequences, both social and economic.
Studies have shown that homelessness is the catalyst for myriad issues, including physical and mental health problems, interpersonal violence, increased policing, justice requirements and long-term welfare dependency.
It becomes an expensive economic burden to society as a whole, because these costs multiply over years, and so it’s actually cheaper to fix the problem at its root.
Simply put, people need to be housed. Whether they are rich or poor.
Research across the world has shown that “housing first” approaches to tackling the problems caused by homelessness not only improve the lives of those suffering from housing insecurity, but are the most cost-effective.
For every dollar spent on housing people, there is a multiplier effect on the economy – as it means less money is spent on managing the consequences of homelessness, and more revenue is generated by the increase in workforce participation.
Analysis by SGS Economics indicates providing public, social and affordable housing in the right locations offers communities a cost- benefit ratio of 7:1.
What other kind of investment offers a seven-fold return in this era of record-low interest rates?
By understanding the central role that stable housing plays in the productivity of an individual, and by recognising it as key economic infrastructure, the business case for building more public housing becomes very clear and compelling.
The goal is to ensure everyone has somewhere they can afford to call home. The value proposition is becoming more obvious every day.
We can choose to see this simply as a set of problems, and keep hoping for the right band-aids to be applied where the wounds are most obvious.
Or we can act bravely and with vision, and recognise this crisis as an opportunity to set up a framework for the future, by creating new financing instruments, and new development and construction approaches that are scalable nationwide.
The problem is so significant that governments cannot fund it alone.
But the private sector needs the appropriate financial settings and frameworks in place to achieve the required returns relative to the risk.
In the US, there is an entire property-sector asset class around social and affordable housing. We need to establish that here.
As well as addressing the long-term economic impact of the housing crisis, the investment will generate jobs in the construction sector, which is the nation’s largest employer.
And it will encourage innovations in prefabrication, which would in turn create jobs for the embattled manufacturing sector.
We have everything to gain, and it all starts with changing our perspective and rising to the challenge.
But there is no time to waste. We need to pull together and ensure that every Australian, no matter their economic circumstance, has a place to call home.
And as our RBA governor has said, the time to act is now.
If we aspire to be an innovative, multicultural and inclusive society, we must provide housing for all our people. Whether they are rich or poor.
Otherwise, we are passing on to future generations an economic time-bomb.
Robert Pradolin is the former general manager of Frasers Property Australia and founder of Housing All Australians Limited.