The Rudd Government has moved to address growing mortgage and rental stress across Australia.
It has acted where the former Howard Government virtually sat on its hands for years.
Tim Colebatch in The Age today looks at some of the reasons for the housing crisis and Federal Labor's response.
What has gone wrong? There are many culprits, but the key ones are:
- Tax breaks for housing investors have lured more than a million Australians to invest in houses or flats, renting them at a loss, using the losses to reduce their tax (known as negative gearing), and then relying on capital gains, which are lightly taxed, to make the investment pay. Last year alone, housing investors borrowed $75 billion to buy existing houses, flats and units, up from $25 billion a decade ago and $2.5 billion 20 years ago. Investors' share of home lending, excluding refinancing, has doubled from 20% in the 1980s to 40% over recent years. That is a huge change in the market, and much of it has been at the cost of first home buyers. Their share of new lending has shrunk from 19% to 14% in that time. People without deep pockets now have to keep renting rather than buy.
- Local opposition to redevelopment of inner and middle suburban areas has led to serious shortages of supply, relative to the demand from people wanting to live close to the city. Land is finite, and when buildings can't go up, prices go up.
- On the outskirts, shortages of serviced land in some cities, coupled with heavy state government charges to supply infrastructure, have been blamed for driving prices up. They certainly help explain why an outersuburban block in Sydney costs much more than in Melbourne, but it is not clear that they explain why prices have soared in inner and middle-suburban areas.
- The Commonwealth and state governments have largely abandoned their former role as financiers and builders of new housing. In the booming 1950s, they built 20% of all new homes. Now they build 2%, and no one has picked their role as a supplier of affordable housing. No wonder Kevin Rudd says the issue of housing affordability is now "at a critical point". And it is likely to get worse.
Labor's central promises are:
- The national rental affordability scheme, aimed at reducing rents and increasing housing supply. This will offer $500 million over five years in tax breaks for investors who build rental housing, and then rent it out at 20% below market prices for the area. Yesterday Rudd reaffirmed this, and extended it to promise a second $500 million over the next five years (or from 2011-12, if the first tranche is used up by then).
- First home saver accounts, aimed at supporting aspiring buyers who have the discipline to save. Would-be buyers who save 10% of their earnings each year for five years will receive government contributions of up to $5000 towards their deposit.
- The housing affordability fund, aimed at reducing the cost of new blocks by investing $500 million to help states and councils fund the provision of infrastructure. Rudd announced yesterday that the first slice will provide $30 million to provide online services by which you can track the progress of your application for planning approval.
- Release surplus Commonwealth land for new housing.
From 2000 onwards under Howard and Costello the First Home Buyers scheme was shamelessly rorted by the wealthy, and on the NSW North Coast we have seen developers push inappropriate lot development on the spurious grounds that housing built would be exclusively for the aged or disabled. So what is to stop developers ripping-off both the Commonwealth and local communities under these new schemes? Not much I expect.
It is rather disappointing that there is so little emphasis placed on public housing by this new government, without which there is no balance in social policy.
After all, public housing is a long-term solution for low-income families and the proposed tax breaks for investors will only guarantee rental housing for ten years before those houses, flats, units, built under the new scheme will be free to come onto the real estate market.
New Federal Housing Minister, Tanya Plibersek, needs to consider the possibility that jumping into bed with the private sector to ease housing affordability may be like swimming with a hungry crocodile - a rash decision quickly regretted.