A proven scheme to help first home buyers bridge the deposit gap and a suite of measures to address using supply are at the centre of the Property Council’s plan “Fixing Housing Affordability”.
Broadly, the plan identifies 10 areas to tackling rising house prices:
- Crank up housing supply, diversity, and choice
- Make housing cheaper to produce
- Incentives to spur reform
- Bridge the deposit gap – Keystart low deposit home loans
- Remove barriers to downsizing
- Don’t play with negative gearing
- Institutional investment in ‘build to rent’ housing to give more choice for renters
- Location matters – densities around transport hubs and corridors
- Phase out stamp duty
- Re-establish the National Housing Supply Council
“We believe in getting Australians into housing – because home ownership is the way Australians can build financial security and build deep connections to their local community. Maintaining high levels of home ownership is important to our economy and our society”, said Ken Morrison, Chief Executive of the Property Council of Australia.
“For twenty years we have had a logjam of costly regulation, poor planning decisions and excessive taxation across all levels of government. This has driven up construction costs, impeded supply, and resulted in the dramatic increase in house prices in our major cities.
“Australia is benefiting from population growth, record low interest rates, and relative economic prosperity, but getting so many other policy settings wrong has made affordability worse.
“Fifteen years ago, average dwelling prices were 4.3 times average wages, now it is 6.9 times average wages. Likewise, in 2001, it took 86% of an average householder’s annual income to pay the deposit on an average house. By 2016, this had risen to 139%.
“This affordability cauldron has taken years to develop, and it will take a concerted effort over many years to unwind.
“Fundamentally we need policy settings that help Australia build enough houses to match our growing and changing population.
“Our plan seeks to support housing construction, broaden housing choice, reduce unnecessary construction costs, incentivise the states to undertake planning reform, induce institutional investment in new rental stock, and help first home buyers bridge the deposit gap.
“Keystart is a Western Australian program that provides low deposit home loans for owner-occupiers looking to access the market. So far, over 85,000 people have used it to secure home ownership. It is a rigorous scheme based on a strict risk assessment of rental and employment history. The program works with defaults below the market average and it allows borrowers to migrate to conventional bank loans.
“We have to reduce transaction costs which lock people into homes that don’t suit them and are a big drag on the economy. In a city like Sydney, typical stamp duty bills exceed $70,000.
“As well, pensioners are discouraged from downsizing because of the way the pension assets test is configured. Some small changes to the downsizing rules could see tens of thousands of family homes enter the market.
“We believe there are some fundamental steps that can be undertaken that will start the ongoing work of addressing housing affordability. These include creating a national incentive framework for planning reform, concerted effort on red-tape reduction, reviewing and updating the planning instruments in our major cities, the rollout of Keystart and the re-establishment of the National Housing Supply Council.
“The current arrangements for negative gearing underpin the settings for Australia’s rental market. Over 1.2 million rental properties are negatively geared and it is an established tool that can contribute to a deep pool of rental properties.
“Housing is a $6 trillion asset class and government must tread carefully otherwise it runs the risk of undermining the flow of jobs and investment throughout the economy.
“Too much of the housing affordability debate has misdiagnosed the problems, focused on measures that won’t do anything to fix affordability, or set out to blame scapegoats for political convenience.
“Continued investment in housing supply is vital. We must be vigilant against poorly-thought through initiatives that don’t tackle this issue.”
Mr Morrison said while the housing affordability debate had been divisive, there were important areas of common ground across the political spectrum.
“There is an opportunity to forge consensus on measures to incentivise the states to reform planning systems, bridge the deposit gap, encourage UK style ‘build to rent’ investment, and remove barriers to downsizing. All of these initiatives are part of the solution.”