HECS and Housing: United Against the Youth

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.


Tom Hall

The author Tom Hall

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