Scott Morrison Has Finally Announced A Housing Affordability Policy, But Will It Work?
After a full week of raging debate about smashed avocados and the lack of affordable housing, the federal government has finally decided to step into the ring and announce new policies to tackle skyrocketing house prices.
The federal Treasurer, Scott Morrison, will use a speech today to acknowledge there is a housing affordability issue for most Australians (thanks mate) and call on the states and territories to do something about it. A brave, courageous move right there from Scotty.
In the speech Morrison will argue that “Buying a house without a dual income has become an almost unreachable goal.” Which is true. But so far the Coalition has refused to crack down on generous negative gearing tax concessions that have made housing a lucrative investment for those with cash, and helped drive up property prices. So what are they actually planning on doing about it?
“Let’s Blame The States!”
Instead of tackling negative gearing, Morrison is shifting the blame onto the states. He wants state governments to weaken planning regulations and boost the supply of new housing, in an attempt to slow down housing price growth. There’s just one problem. The evidence so far suggests that increasing supply isn’t a quick-fix solution to improving housing affordability.
Since 2011 housing supply has boomed. The number of completed dwellings (which includes houses and apartments) has increased by 85 percent, but prices have still gone up by 40 percent. Plenty of experts have argued that relying on an increase in supply won’t fix the housing affordability crisis, yet it’s the only solution offered up by the federal government.
Part of the issue is that the wrong kind of houses are being built. A recent NSW government study found that 20 years worth of housing supply was “locked up” in the spare bedrooms of older couples who’s children had moved. But because there wasn’t enough housing appropriate for seniors being built, there was little incentive for them to move out and make their houses available for younger people.
What Are The Other Options?
Increasing housing supply is one way to try and address the affordability crisis, but on its own it’s unlikely to fix anything. Other solutions include cracking down on lending to property investors. Most of Australia’s major banks have stopped lending money to foreign investors, making it more difficult for potential buyers from overseas to compete against Australians in the housing market.
But local property investors still have a massive leg-up in the form of negative gearing and capital gains tax concessions. These policies benefit the wealthiest Australians and make housing a more lucrative investment, squeezing out first home buyers.
Most housing in Australia is being bought by investors, while the proportion of first home buyers has fallen to its lowest level in more than a decade. The numbers point to a real problem in the housing market and it’s one that won’t be fixed by Scott Morrison shifting the blame onto the states, or refusing to consider a wide range of policy options.
If Morrison and the government want to get real about housing affordability they need to look at ending the generous tax concessions for investors and consider actually building affordable housing.