The Senate Inquiry into Housing Affordability has made some bold but toothless recommendations. Some of the thinking is good, some of it is just a bit fuzzy-headed.
The Senate published its Inquiry into Housing Affordability on Saturday. And look, I haven’t read it all (there are 496 pages!) But I did take a look at the Executive Summary (because, why yes, I’m an executive).
Some of it isn’t bad, but the recommendations are Woollies isle of wet lettuce – with suggestions that the government should maybe look at issues a bit more. Do a bit more research, or consultation or whatever.
The good stuff – getting rid of stamp duties and removing supply bottle necks – is spot on, but just isn’t a Federal issue. Talk is cheap.
An agreement to explore shared equity arrangements and to revisit NRAS also has promise, but there’s not much detail yet.
Anyway, I think it might be easier to have a look at what they said, and I’ll offer some thoughts as we go.
In this report, the committee underscores the importance of affordable, secure and suitable housing as a vital determinant of wellbeing. But, based on the evidence, the committee finds that a significant number of Australians are not enjoying the security and comfort of affordable and appropriate housing—that currently Australia’s housing market is not meeting the needs of all Australians.
Aw, I feel all warm. Like Justin Beiber gave me a kitten.
Sustained growth in median housing costs above the rate of median household income growth in recent decades has made it increasingly difficult for a growing proportion of Australians to afford housing that is safe, secure and appropriate to their needs.
Ok, maybe they’re being lazy, but you can’t compare house prices to income without factoring in changes to the interest rate environment. Houses are worth more relative to incomes, but the interest on loans is a lot less than it used to be, so housing serviceability is about where it always was. If this is your measure of ‘affordability’ then you’ve already missed the point.
Added to the general decline in housing affordability, and indeed compounding the trend, the stock of affordable housing—that is, housing appropriate to the needs of low- to moderate-income households—has failed to keep pace with demand in recent decades.
Really? Where’s the evidence for that? And what does it even mean? If you just asked people if they wanted cheaper housing, who would say no? We all want to pay as little as possible. The question is whether they can. And I haven’t seen any evidence to say that they can’t.
The committee does not believe the issue of housing affordability in Australia is rightly categorised as either a ‘supply-side problem’ or a ‘demand-side problem’. With this in mind, it is clearly evident that supply is currently not keeping pace with demand in the housing market. In this context, policy interventions that add to demand without addressing or at least accounting for supply-side constraints risk inflating house prices and exacerbating affordability problems.
No? Then how should it be categorized? A raw-materials problem? A lack of motivation problem?
But the rest I agree with. You can’t look at demand without looking at supply, and on the supply front Australia is dragging the chain, and the price of housing in Australia reflect this.
Worsening housing affordability is reflected in declining home ownership rates. This decline is troubling for a number of reasons, not least because home ownership can be an important means for people to achieve financial and social wellbeing. Moreover, high rates of home ownership also provide broader economic and social benefits to the community. As such, while the committee believes governments should work to improve affordability outcomes for all types of housing tenure, it considers it appropriate for governments to promote home ownership.
This all seems difficult to argue with, until you remember that homes that aren’t owned by owner-occupiers are owned by investors. So increasing home-ownership means decreasing home-investorship – talk that makes me nervous.
I forget the exact stats. Ownership has fallen from something like 70 to 60% in a generation – actually I think even that’s an overstatement. And it sounds bad, but it must also be true that investorship has gone from 30 – 40% of the population. More people are seeing the power of property investing. Good on ‘em.
But I do agree that governments have a role to play in helping people understand the complexities of the property market. I reckon we get Dymphna Boholt to develop a unit for high-school students. I’m sure she’s not busy…
The committee makes a range of recommendations directed primarily toward improving home purchase affordability. They include state governments phasing out conveyancing stamp duties…
What? Did I hear that right? The government wants to kill stamp duties!?! You beauty!
But then you remember that this is the Federal Government talking, and stamp duties are a state-based tax. And right now, stamp duties are holding up the budgets in NSW and Victoria.
Talk is cheap. I’ll put that in the “believe it when I see it” category.
But wait, there’s more.
…, to be achieved through a transition to more efficient taxes, potentially including land taxation levied on a broader base than is currently the case.
Um, hang on a sec…
…a number of recommendations are made with the intention of ensuring land supply, urban planning and zoning processes have a positive effect on housing affordability.
There’s a fair bit of waffle after this. They reckon the government should look into negative gearing and the capital gains tax a bit more, without saying what they reckon one way or the other.
The shared-equity proposals are interesting, and I’d like to hear more. And I think there is scope for NRAS 2.0 – one which tightens up the scheme and locks out the rorts.
But all in all, there’s nothing too wild or woolly in any thing I’ve seen. We’re still 18 months out from an election.
My bet is the pollies just hope it all goes away.
How would you tackle housing affordability?
Would you abolish stamp duty?