The Menzies Liberal Government 1949-1966 has been widely credited by some commentators for the rise in home-ownership that occurred in the 1950s and 1960s. Indeed, there was a sharp rise in the home-ownership rate from 52% in 1947 to a peak of 73% in 1966 (see Table below), and this was led by a sharp rise in home-ownership amongst younger households. Then presumably, whatever the Menzies Government did, should give us a blueprint for reversing the subsequent decline.
The only problem with that is that, while the Menzies Government was an advocate of home-ownership, it is not clear that any of its policies might actually explain the observed lift in home-ownership. There were concessional war service home loans given under the War Service Homes Act 1918 but this scheme had not generated a lift in home-ownership after WW1 and was not of scale to explain the rise. And the Government owned the Commonwealth Bank which was a major lender but again, while it was lending money to home buyers, it is not clear that the Bank was doing anything which might explain the rise in home-ownership.
The real story behind the rise in home-ownership in the period 1947-1966 was a policy failure, namely rent controls. This was not a policy of the Menzies government. Indeed, one of the first acts of the Government on election in 1949 was to very sensibly abolish price and rent controls on housing.
As also occurred in the US and UK during WW2, the Curtin Labor Government imposed rent (and price) controls on housing in 1939 with the well-intentioned objective of protecting the families of servicemen overseas. But once the War was over, the controls were continued by the Chifley Labor Government. While then abolished by Menzies, State governments instituted their own rent controls and then only slowly abolished them over the course of the 1950s and in some cases lingered into the 1960s.
A significant feature of the period 1939-1953 was high inflation and, with rents fixed at nominal 1939 levels, there was a very sharp fall in real rents. As with all controls, it created a group of winners – those established renters enjoying the low rents – and losers, predominantly new households who could find nothing to rent. Landlords were also losers and exited the market, leading to a decline in the supply of private rental housing. The contraction in rental supply - only partially offset by government investment in public housing - at a time of strong growth in demand led to a forced rise in home ownership, led by those young households unable to enter the rental market.
This was a period when land was relatively inexpensive so households did not need much capital to acquire a block of land (now there is a thought). There were also few building regulations and Dingle (2000) estimated that over one-third of all new houses constructed in the 1950s (including my parent’s first house in Adelaide which still stands) were owner-built. Families often lived in a small shed while building their new home and later converted this shed into a garage (another policy solution!).
The reason for reflecting on history is that policies, in this case rent controls, often have good intentions. But the policy outcome can be very different to what is intended.
Ironically, while failed rent controls made life tough for the new households starting out in the 1950s, things turned out well for them later but in part courtesy of subsequent new government policies which had good intentions but also had the unintended effect of driving up the price of land and housing.
So what do we learn from history? Perhaps, not as much as we should.
Dr Nigel Stapledon
For those interested, this history and other issues are discussed in the author’s article:
Stapledon, N. D. (2016) “The Inexorable Rise in House Prices in Australia Since 1970: Unique or Not?” The Australian Economic Review, Volume 49, Number 3.
Table: Owner-occupation Rates by Age Group 1911-2014
 Dingle, T. 2000, ‘Necessity the mother of invention.’ In: Troy, P. (ed.) ‘A History of European Housing in Australia’ Cambridge University Press pp 57-76. The post-War period also featured a general shortage of housing, a result of low growth in housing stock in the 1930s Depression and during the war lagging the growth in population. This was also a factor in the owner-built housing in this period.
About the author:
Dr Nigel Stapledon Chief Advisor
Nigel has a PhD in Economics from UNSW and a Bachelor of Economics with Honours from the University of Adelaide. He started his career in Canberra, where he worked in the Commonwealth Treasury, following this he worked at Westpac where he was Chief Economist. Nigel has been at UNSW Business School since 2003 where he completed a PhD on the long-run history of house prices in Australia. Nigel is a regular commentator in the media on macro-economics and housing., contact Nigel on 02 9221 5211 or email@example.com