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Housing Inquiry A Wake Up Call for ‘Aussie Dream’

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The Coalition government has blamed planning restrictions, “ballooning” developer contributions and stamp duty for Australia’s housing affordability crisis.

The Standing Committee on Tax and Revenue into housing affordability and supply has handed down 16 recommendations.

Standing Committee on Tax and Revenue chair Jason Falinski said homes should be accessible and affordable as the country has more room for homes than the South Pole has for penguins.

“We have one of the least-densely populated countries in the world with some of the highest average weekly earnings, and the highest minimum wage in the world,” Falinski said.

“Yet, by some measures, our five largest cities are all in the 25 least affordable markets in the world.”

The chair also fired shots at New Zealand’s handling of its affordability crisis by increasing interest rates, which Falinski described as “lazy”, making the entire ecomony suffer rather than dealing with underlying issues.

However, Falinski denied tax concessions were a major factor contributing to high prices placing the blame on state governments planning restrictions and supply.

“To those who point to the capital gains tax concessions of 2001 as setting off a wave of investor activity, there is an obvious counter point; if true, which appears to be the case, this should have seen an equal wave in new housing,” Falinski said.

The committee believed the benefits of the 2001 policy should provide lower rents, higher housing supply, diversity of ownership and the efficiency of the tax system, outweigh the nominal impact it has on housing prices.

There were also four pages of dissenting report by the Labor members of the committee—Julie Owens, Ged Kearney and Matt Thistlewaite.

They outlined the report's narrow focus on supply as the answer to fix all issues and that plenty of evidence had been rejected or ignored by the inquiry.

They said the current system of regulations, costs taxes and delays shared across all levels of goverment was a “spaghetti bowl” which would not be addressed by simply “tweaking the status quo” as these recommendations would do.

Quick look: recomendations to improve housing affordability

1State and councils should increase density while offereing community infrastructure incentives9State and territory governments replace
stamp duty with land tax.
2Federal goverment to incentivise a reduction in planning restrictions and administration policies10Conduct a review into the land tax transition.
3Australian government should reward states and councils for delivering more supply and affordable housing.11Work with state and councils to reform developer contributions with either a value capital model or changes to the way the contributions are used. 
4Adopt inquiry into homelessness recommendations12Review impact of taxes and regulations on build-to-rent housing.
5Reward states and councils for delivering more critical housing supply.13Continue to support the the Australian Prudential Regulation Authority standard to manage institutions lending for housing.
6Federal government should implement schemes for private sector parnerships on discount-to-market and rent-to-own homes14Ensure house prices are not a specific objective of the Reserve Bank of Australia's monetary policy. 
7Allow first home buyers to use superannuation as security/collateral15Implement mechanisms led by National Housing Finance and Investment Corporation to get up to date population forcasts, housing approval and completions data
8Make no change to current policy regarding negative gearing.16Support NHFIC consessional loans to infrastructure projects and community housing providers.

^Source: The Australian Dream: inquiry into housing affordability and supply in Australia by the House of Representatives Standing Committee on Tax and Revenue, 2022.

According to the inquiry, planning restrictions were responsible for 67 per cent of the cost of housing.

There was also further pressure placed on replacing stamp duty with a broad-based land tax as proposed by the NSW government last year. 

Incentives for rent-to-own homes, community housing along with rewards for states and councils for delivering more supply were also recommended.

Australia's home ownership for people under 40 is at its lowest level since 1947 and is expected to worsen.

The chair divided the submissions from governments, peak bodies, industry, academics and the public into two groups and said “reconciling these two tribes [had] proven impossible”.

There were the academics and planners who blamed the tax system turning housing into a speculative asset and those who believed administration and government intervention was the problem.

PCA chief executive Ken Morrison said the report laid out some commonsense solutions to dealing with the “complex and wicked” problem of housing affordability.

“We warmly welcome the recommendations that suggest the federal government could encourage or require better planning systems at the state and local levels, through financial incentives, infrastructure support or cash grants.

“This has been a successful and collaborative model to achieve difficult microeconomic reform outcomes in the past and it makes sense to apply this to the challenges of housing supply and affordability.

“The report also recognises the potential of build-to-rent housing to provide quality rental accommodation and an additional form of housing supply and we support the recommendation to have treasury conduct a further detailed review into the benefits this could bring.”

PIA chief executive David Williams said the report was a missed opportunity and the country needed a nationally coordinated approach to manage growth, population and housing.

“Many of the recommendations in this report simply outline good planning practice,” Williams said.

“If the federal government wants to partner more closely with local and state government to strengthen planning, we welcome that.

“Unfortunately, this report fails to provide a coherent blueprint for solving Australia’s housing affordability crisis and is more focussed on playing a blame-game rather than understanding the issues in our housing market.”

Prosper Australia director of advocacy Karl Fitzgerald said the report was unsurprising and written as a “nothing to see here, all we need is more power to control supply” free pass.

“The fallacy that taxes make up close to half the cost of a home was repeated in this inquiry,” Fitzgerald said.

“We have recently analysed this and found that such costs account for 19.4 per cent of a housing cost, not half. 

“We support the calls for replacing stamp duty with land tax and hope that treasury, in following the recommendation, analyses the transition costs.

“The report recommendations highlight a tinkered approach rather than addressing the fact that housing has turned into a financial asset class.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/inquiry-gives-wake-up-call-to-aussie-dream-prospects