An Australian Senate committee on affordable housing produced 40 recommendations in a report issued on Friday.
At no point in that list has the committee considered the influence of credit policies (including grant schemes) on affordability. Nor has it mentioned foreign buyers, whose purchases of existing housing have been curtailed, whereas in New Zealand they are free to trade.
The economic references committee said it didn’t believe affordability was rightly categorised as a supply-side or a demand-side problem, though it was clear supply wasn’t keeping pace with demand: “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.”
The line of thought through the recommendations is to support people who can’t afford to buy – precisely the intervention the committee warns against.
Among the recommendations directed primarily toward improving home purchase affordability, the committee included state governments phasing out conveyancing stamp duties, to be achieved through a transition to more efficient taxes, potentially including land tax levied on a broader base than is currently the case.
The committee directed other recommendations at improving the efficiency, effectiveness & equity of infrastructure funding arrangements, which can have a strong influence on the cost of new housing. Similarly, it made a number of recommendations with the intention of ensuring land supply, urban planning & zoning processes have a positive effect on housing affordability.
I’ve been surprised at the way Australian governments, federal & state, have waved grants to buyers of first homes in the air as a magic solution. The committee commented: “Evidence indicated that direct grants to home owners, including First home owner grants, need to be targeted carefully in order to be effective. While the committee suggests that First home owner grants might need to be more tightly targeted, it also believes that shared equity programs are a promising means of helping more Australians become home owners, and consideration should be given to expanding such programmes.
“Equally important, the committee recommends that programmes designed to help older Australians ‘age in place’ when they want to, or downsize (or ‘rightsize’) to meet their needs, should be explored.”
The committee said much of the evidence it received concerned the possible effect on home purchase affordability of existing tax arrangements for investor housing, in particular negative gearing & the capital gains tax discount.
The committee has recommended that the Federal Government investigate the effect and consider if alternative approaches would help improve affordability.
It said “the increasingly tight & expensive private rental sector” was locking people out of affordable & appropriate housing: “This situation indicates market failure and suggests that market solutions to low cost housing will simply not emerge naturally, that there is a clear need to find ways to attract private investment into low cost & social housing. But currently, without government incentives, affordable housing does not tend to appeal to private investors.
Among the committee recommendations (with recommendation number) are:
7, state & local governments investigate tax increment financing & other innovative mechanisms to fund infrastructure for new housing developments
9, the federal government reinstate the national urban policy & major cities unit to drive affordability policy & outcomes
10, the federal government consider developing a long-term strategy to regenerate urban centres & transport corridors
11, realise potential use of government land for affordable housing under various ownership models
12, a parliamentary inquiry into the prefabricated housing industry to development a comprehensive approach to prefabrication & insulated panels
24, the federal government lift the ratio of public housing, and
40, consider introducing housing supply bonds, using AHURI (Australian Housing & Urban Research Institute) research as the starting point, and establish a housing supply financing taskforce.
Negative gearing & capital gains tax feature at recommendation 13. The committee recommends a study of their influence and on alternatives.
Link: Australian Senate, affordable housing report
Attribution: Senate affordability report.
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