News from the front desk No 327 – On the housing affordability crisis and radical solutions
23 February 2017
There’s definitely been some strange solutions proposed this week regarding how those locked out of the housing market can get a leg up.
The most farcical has been from federal Liberal MP Michael Sukkar – the man appointed assistant minister to the treasurer and tasked with developing housing affordability solutions. The first step to owning a house, he said, was to get a highly paid job, mirroring similar “advice” from former treasurer and cigar aficionado Joe Hockey.
If only the government’s call to get better jobs were so simple. Though if it were, we’d all have gone out and got them (would they still be considered highly paid if we all had them?), driving up demand and pushing prices even further through the roof.
Sukkar unfortunately had plenty of competition for the most foolish suggestion. One “creative” Nationals MP, Andrew Broad, said renters with a clean three-year rental history should be able to buy a house without even having to put down a deposit. Banks will love that one.
Questionable Aussie icon Dick Smith put in his two cents, saying it was the fault of all those bloody immigrants.
“The main point that’s driving our unaffordable housing is about 200,000 immigrants coming in a year,” he said.
And yet another Coalition suggestion The Australian says is being seriously considered is allowing young people to draw down their superannuation for a deposit on a house – another idea Mr Hockey had previously put forward, and which also appears on One Nation’s policy page (you’d think they’d be gunning for Dick’s policy).
It was immediately slammed by Industry Super Australia, whose chief economist Dr Stephen Anthony said it was simply “bad policy”.
“This could reduce retirement savings and drive up housing prices while doing nothing to address supply,” he said.
“In the housing affordability debate, the focus should be on land release, regulation and tax subsidies that fuel investment in existing property rather than new buildings.”
So what’s with the rise in farcical housing affordability solutions?
According to University of Sydney urban studies lecturer Dr Dallas Rogers, governments are hamstrung when it comes to acting on affordability.
“They want to be seen as doing something about the housing affordability problem but have few options available,” he told The Fifth Estate.
Why? Because they don’t want to address the heart of the issue, which Rogers says is housing being treated as an investment class rather than as a place for people to live.
As well as a cultural shift in our understanding of housing, at the policy level what’s needed is involved, integrated and complex reform over the long-term – in other words outside the election cycle. So it gets thrown in the too-hard basket.
“This is a problem that’s been a long time in the making, and it’s going to take a long time to unmake,” Rogers says.
So we’re left with half-baked solutions that make it sound like the government is acting.
These solutions, however, can unfortunately “resonate with people in the public”, Rogers says.
“They make sense to people. They’re intuitively sound.”
It’s only when we look more closely that their rationale evaporates.
Though it’s not like we haven’t been provided with solutions to counter some of the subsidies that fuel investment in existing property at the expense of people who actually want to own and live in a home.
Labor has committed to limiting negative gearing to new construction only, and halving the 50 per cent discount on capital gains tax to 25 per cent. Reforming capital gains tax, according to the Australian Financial Review, was also on the table for the Coalition, before an impressively swift backflip.
Many believe the reason for the swiftness of the backflip, and the firm stance against negative gearing reform, is due to the power of property lobby groups in the debate.
Opposition to tax reform “unwinnable”
Former policy manager for the Property Council of Australia and now ACIL Allen consultant Mendo Kundevski told The Fifth Estate opposition to tax reform was an “unwinnable position”.
“Proponents backing the current system cannot win on an issue that puts systemic pressure on younger generations,” he told The Fifth Estate. “They’re backing a loser.”
He says the system as it stands backs older investors over the young.
“Young people are getting locked out of the Australian dream. The system we have in place serves older generations fine, but it doesn’t back younger generations.”
Kundevski says what needs to happen is some “quick adjustments” to help incentivise home ownership for young people while also looking at long-term reform of planning and taxation systems at both a federal and state level – for example, gradually reforming negative gearing plus much higher stamp duty concessions for first home buyers.
“We need to get young people’s feet in the door.”
Over the long-term he says the whole suite of state and federal taxes need to be reformed.
Rogers agrees that the property lobby has a “loud voice”, but says its argument is also representative of the many people who have “a lot of capital tied up in their home” and have a lot to lose should a measured approach not be taken.
“But there is a growing counter voice of millennials that have no chance of getting into the housing market,” he says.
As it stands, “wealth transfer” from parents is one of the only ways younger generations can get into the market.
“The bank of mum and dad is a very inequitable way of securing housing,” Rogers says.
The young are crying out for help and are being provided with nonsense solutions. Our governments would be wise to look to the UK and US to see what happens when people are locked out of economic opportunity.