Extract from The Guardian
The more you consider the treasurer’s advice, the more questions it
raises. Does he think housing affordability is a problem or doesn’t he?
Joe Hockey’s less-than-helpful advice to would-be homeowners on
Tuesday that they just need to “get a good job that pays good money”
wasn’t just out of touch, it didn’t make sense.
Just like his infamous remark last year about the poorest people either not having cars or not driving very far, the “get a good job” line was out of touch and politically inept. And, like the previous gaffe, the more you look at it, the more questions it raises.
Does the treasurer think housing affordability a problem or doesn’t he?
With prices skyrocketing, more people now borrowing for investment properties than for houses they want to live in and Sydney mortgages for first homebuyers at record lows, most people think it is. Hockey thought so too in April, when he emerged from a meeting with state treasurers to announce a new “housing affordability taskforce”.
“We had a further discussion on housing in Australia and we are particularly alarmed at the inability of young people to be able to access the housing market in a way they previously have been,” he said at the time.
But when the ALP raised housing affordability and fears of a Sydney housing “bubble” the government accused the opposition of wanting houses to be worth less, or as Hockey put it on Wednesday to “smash house prices”. If housing affordability is a problem then, however a policymaker chooses to address it, surely the outcome is for house prices to increase at a slower rate – ie for houses to be worth less than than if nothing was done. So is it a problem, Joe, or isn’t it?
If it is a problem, does getting a good job solve it?
With house prices in Sydney rising five times faster than wages growth over the past two years and homeowners in the city already paying on average 35% of their income on mortgage repayments, often it would not. Especially if the good job is one that doesn’t come with particularly good pay, like those of many essential service providers.
If it is a problem, is increasing supply in Sydney and Melbourne the government’s only answer, how would ministers do that exactly and what other possible solutions are they ruling out?
Hockey says the government is “doing everything we can to help make housing more affordable for new entrants” and points to the state taskforce set up in April. But according to a spokesman for the taskforce chair, the Victorian treasurer Tim Pallas, it has no terms of reference and has not yet met.
“Solving the issues associated with housing affordability is far more complex than a higher paid job,” Pallas says. He’ll report back to other treasurers in August on ideas, including the possible release of more commonwealth defence land.
Supply in Sydney is already improving, with 39,000 new dwellings approved last year. But this hasn’t taken the heat out of the market.
The government is also talking up its dob-in-your-neighbour “crackdown” on foreign investors illegally buying in Australia, but its own parliamentary inquiry into that issue found in its 2014 report that foreign investment was “not causing market distortions”.
Meanwhile, Hockey rules out changing negative gearing because he says rents will go up. But if he did it the right way, the government could keep a lid on rents, reduce the rate of house price rises and increase housing stock.
“If you change negative gearing in a market like Sydney, which has very low vacancy rate, you are going to push up rents, which will have a horrendous impact on some of the lowest income families,” Hockey said on Wednesday.
If the government abolished negative gearing altogether, he’d be right – rents would go up because investors would have to rely entirely on rental returns rather than also factoring in the tax breaks.
But the policy backed by the Greens, and also on Labor’s radar as a result of its housing affordability discussion paper, proposes keeping negative gearing for existing investment properties and for investors buying newly built properties, but removing it from investments in existing housing stock. According to a report by the McKell Institute this would ensure there was no upward pressure on rents and would also stimulate investment in new housing supply. Win, win. And the parliamentary budget office estimated the Greens’ plan would save $4bn a year. Win, win, win. Why would a treasurer think that was a bad idea?
For now the gaps in Hockey’s reasoning are taking a back seat to his propensity for gaffes. The Coalition’s political strategy since this year’s budget has been to portray itself as the party for ordinary workers wanting to “get ahead” and “have a go” and Labor as the party proposing “tax grabs” so they can pay out more on welfare. Two days of angry backlash and of ministers – earning more than $360,000 a year – reminiscing about how tough it was when they bought their first house back way in the day is not exactly what you’d call “on message”.
Voters might prefer to know whether the government has a policy to actually make a difference to their chances of ever “having a go” at owning a home.
Just like his infamous remark last year about the poorest people either not having cars or not driving very far, the “get a good job” line was out of touch and politically inept. And, like the previous gaffe, the more you look at it, the more questions it raises.
Does the treasurer think housing affordability a problem or doesn’t he?
With prices skyrocketing, more people now borrowing for investment properties than for houses they want to live in and Sydney mortgages for first homebuyers at record lows, most people think it is. Hockey thought so too in April, when he emerged from a meeting with state treasurers to announce a new “housing affordability taskforce”.
“We had a further discussion on housing in Australia and we are particularly alarmed at the inability of young people to be able to access the housing market in a way they previously have been,” he said at the time.
But when the ALP raised housing affordability and fears of a Sydney housing “bubble” the government accused the opposition of wanting houses to be worth less, or as Hockey put it on Wednesday to “smash house prices”. If housing affordability is a problem then, however a policymaker chooses to address it, surely the outcome is for house prices to increase at a slower rate – ie for houses to be worth less than than if nothing was done. So is it a problem, Joe, or isn’t it?
If it is a problem, does getting a good job solve it?
With house prices in Sydney rising five times faster than wages growth over the past two years and homeowners in the city already paying on average 35% of their income on mortgage repayments, often it would not. Especially if the good job is one that doesn’t come with particularly good pay, like those of many essential service providers.
If it is a problem, is increasing supply in Sydney and Melbourne the government’s only answer, how would ministers do that exactly and what other possible solutions are they ruling out?
Hockey says the government is “doing everything we can to help make housing more affordable for new entrants” and points to the state taskforce set up in April. But according to a spokesman for the taskforce chair, the Victorian treasurer Tim Pallas, it has no terms of reference and has not yet met.
“Solving the issues associated with housing affordability is far more complex than a higher paid job,” Pallas says. He’ll report back to other treasurers in August on ideas, including the possible release of more commonwealth defence land.
Supply in Sydney is already improving, with 39,000 new dwellings approved last year. But this hasn’t taken the heat out of the market.
The government is also talking up its dob-in-your-neighbour “crackdown” on foreign investors illegally buying in Australia, but its own parliamentary inquiry into that issue found in its 2014 report that foreign investment was “not causing market distortions”.
Meanwhile, Hockey rules out changing negative gearing because he says rents will go up. But if he did it the right way, the government could keep a lid on rents, reduce the rate of house price rises and increase housing stock.
“If you change negative gearing in a market like Sydney, which has very low vacancy rate, you are going to push up rents, which will have a horrendous impact on some of the lowest income families,” Hockey said on Wednesday.
If the government abolished negative gearing altogether, he’d be right – rents would go up because investors would have to rely entirely on rental returns rather than also factoring in the tax breaks.
But the policy backed by the Greens, and also on Labor’s radar as a result of its housing affordability discussion paper, proposes keeping negative gearing for existing investment properties and for investors buying newly built properties, but removing it from investments in existing housing stock. According to a report by the McKell Institute this would ensure there was no upward pressure on rents and would also stimulate investment in new housing supply. Win, win. And the parliamentary budget office estimated the Greens’ plan would save $4bn a year. Win, win, win. Why would a treasurer think that was a bad idea?
For now the gaps in Hockey’s reasoning are taking a back seat to his propensity for gaffes. The Coalition’s political strategy since this year’s budget has been to portray itself as the party for ordinary workers wanting to “get ahead” and “have a go” and Labor as the party proposing “tax grabs” so they can pay out more on welfare. Two days of angry backlash and of ministers – earning more than $360,000 a year – reminiscing about how tough it was when they bought their first house back way in the day is not exactly what you’d call “on message”.
Voters might prefer to know whether the government has a policy to actually make a difference to their chances of ever “having a go” at owning a home.
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