Why high house prices are a problem for everyone
But it’s not just a problem for first-time homebuyers, their parents, and renters who would like to buy but can’t.
Falling homeownership rates risk deepening social divides and could increase the burden on taxpayers to help retired renters who cash in their supers wisely enough, buy a modest home and collect the pension of old age.
What could help?
The survey’s recommendations are strongly focused on increasing the supply of new homes to keep pace with a growing population and ending competition for scarce homes driving up prices, a task that the report said. experts, could take a decade to move the needle.
For example, higher density housing close to public transportation, combined with better infrastructure for local communities. Federal incentive payments to state and local governments to streamline planning approvals and increase supply. Also, use the retirement pension as collateral for a home loan and replace stamp duty with property tax.
The recommendations were so controversial that Labor members of the committee released a dissenting report that highlighted their party’s policy of a $10 billion Australian Housing Fund to build social and affordable housing.
Independent economist Saul Eslake said the recommendations could be useful over an eight- to 10-year period as constraints on new supply are an issue for housing affordability, but disputed the scope.
“While there are things that can usefully be done in this area, trying to solve the housing affordability issue solely from the supply side is like being in a boxing match with one hand. tied in the back,” said the director of Corinna Economic Advisory.
“Government policies that have served to inflate demand have also contributed to deteriorating housing affordability and declining home ownership.”
He was wary of adding super savings to buyers’ deposits, but supported an end to stamp duty and a faster planning process. He would also like to see all subsidies for first-time homeowners scrapped, an end to the negative gear tax break and a rollback of the capital gains tax cut – a wish list he know unlikely.
“It’s really tough. And yet, if we don’t, we’ll see a growing wealth gap between young and old, and our retirement income system will be at significant risk because our Retirement income rests on an unstated but nonetheless crucial assumption that the vast majority of retirees will have near-zero housing costs,” he said.
In other words, a growing proportion of people who have not yet reached retirement age will not become homeowners or have not paid off their mortgage by retirement age, will use their super for housing and will become more dependent old-age pension, he said.
Grattan Institute economic policy program director Brendan Coates also backed the supply-side recommendations, after submitting evidence to the inquiry that building 50,000 more homes a year for a decade could cause prices and rents to fall by up to 20% compared to what they would have been. been otherwise.
“The work showing that supply is an issue is quite robust,” he said. “This is arguably the biggest constraint on housing affordability.
“Unfortunately, the report denies the role of negative gearing in reducing home ownership rates in Australia.”
Reforming negative gearing tax breaks and capital gains tax would have a modest impact on prices, but a larger impact on homeownership, as it would reduce the number of investors that first-time home buyers have to compete with at auction, he said.
The super-housing plan should be targeted, he said, adding that the bottom 20% of people aged 25 to 34 generally have virtually no super.
“Fiscal measures would move the needle quite quickly,” he said.
“Things like stamp duty reform, land use planning – they will have a big long-term impact, which is why you should start them now.”
He says reforms to both supply and taxation are needed, on an issue too important for partisanship.
“Falling homeownership rates risk transforming Australian society – if you see homeownership falling among the poorest Australians, a growing division of housing between haves and have-nots, that will have repercussions that will last for decades,” he mentioned.
“Owning your home is the best guarantee of avoiding poverty in retirement.
“We have a ticking time bomb of growing retirement poverty among tenants and that is the big risk, and that is why we need to act urgently now.”