Housing
affordability remains an absolutely red hot political issue as well as a
complex policy one. It requires a government willing to embrace, as
Malcolm Turnbull suggested back in September 2015,
“a style of leadership that respects the people’s intelligence, that
explains these complex issues”. And for a brief shining moment this week
it seemed that was about to happen; but within hours the darkness and
normal procedures returned.
The complexity of housing affordability was highlighted this week in a speech by the Reserve Bank assistant governor, Luci Ellis.
Speaking at the Australasian Housing Researchers Conference, Ellis suggested that compared with other nations, housing affordability in Australia was “somewhere around the middle of the pack”. She also pointed out that changing social factors such as people marrying and starting families later in life could be a reason why fewer people in their early 20s own houses than in the past.
But her speech, which attempted to dampen the notion of a housing affordability crisis, showed that there has been a significant increase in the level of first-home buyers who are receiving help for financing from family and friends – up from 10% of first-home buyers in 2000 to now just below 15%.
Her speech, while providing some useful data, was also a bit odd. It rather beggars belief that someone from the RBA could talk about housing affordability and not even mention “Sydney”. When the RBA began cutting rates in November 2011, the average new mortgage in New South Wales was $26,000 more than the average for the nation; now it is $67,000 larger.
It says something about the complexity of the issue that even
presenting national figures can present a massively distorted picture.
The issue is even more complex once you also factor in the issue of renters.
Ellis suggested the issue of renter security needed greater focus from policy makers given the data suggested that nearly 40% of renters were moving more than 3 times within a 13-year period.
Such concerns certainly appear warranted on the back of a survey of renters also released this week by Choice.
While the survey found around two-thirds of renters moved of their own accord it also found that 83% of renters in Australia have no fixed-term lease or are on a lease less than 12 months long and a stunning 20% of renters are on “a month-to-month ‘rolling’ lease”.
Good luck trying to save for a deposit when you are worried that within the year you will have to look for another place to rent and then pay for moving.
And this week, the CEO of the Commonwealth Bank, Ian Narev, also noted the complexity of the issue when he told ABC’s Fran Kelly that rather than just rule in or out one measure, it is “important we look at all supply side and demand side characteristics”.
Narev argued that we “should be taking an integrated look at housing supply and demand”.
While the supply side of housing is mostly a local and state issue, the federal government has a big say over demand – through it taxation arrangements that encourage property investment.
Usually negative gearing is tarred as the reason for the bonfire that is housing affordability; but negative gearing is just the fuel – the 50% discount given for capital gains tax is the match.
The discount was introduced by Howard and Costello in 1999, and quickly caused negative gearing to become one of the biggest strategies for reducing taxable income and equally quickly led to a surge in property investment and housing prices in the early-mid 2000s.
The ALP went to the last election with a plan to reduce the discount to 25%. At the time Malcolm Turnbull and Scott Morrison lambasted the measure, but provided nothing in its place other than talk of working with the states to improve supply.
And yet a surprise occurred this week when in response to signs that the government measures to cuts welfare spending lacked the required support to pass the Senate, Scott Morrison alluded to the fact that taxation revenue would instead have to rise.
After years of ignoring the revenue side of the budget it appeared finally the government was embracing both sides of the budget.
And even better it appeared it was also embracing both sides of the housing affordability issue.
On Thursday the AFR’s Phil Coorey wrote that the government was exploring reducing the capital gains tax concessions – chiefly, reducing the 50% discount.
This shift was both welcome from a policy sense and also a political one. While the easy response would be that the government was doing a “backflip”, it would also have given the government a perfect opportunity to make an intelligent argument on the back of well-developed policy.
Advocacy, not slogans.
But no.
By early morning the finance minister Mathias Cormann had suggested the story was wrong and in question time the prime minister, while conceding the government had been modelling capital gains tax changes, repeatedly ruled out any changes – stating “the government has no intention or plan to change capital gains tax or negative gearing”.
Well it was nice while it lasted.
And in some ways the government has progressed. Last December it took the government nearly two days to rule out an equally sensible and complex policy measure of an emissions intensity scheme after Josh Frydenberg suggested it would be examined in the government’s climate change review.
This Thursday it took less than the time between breakfast and lunch to knock the policy on its head.
So much for respecting people’s intelligence.
The complexity of housing affordability was highlighted this week in a speech by the Reserve Bank assistant governor, Luci Ellis.
Speaking at the Australasian Housing Researchers Conference, Ellis suggested that compared with other nations, housing affordability in Australia was “somewhere around the middle of the pack”. She also pointed out that changing social factors such as people marrying and starting families later in life could be a reason why fewer people in their early 20s own houses than in the past.
But her speech, which attempted to dampen the notion of a housing affordability crisis, showed that there has been a significant increase in the level of first-home buyers who are receiving help for financing from family and friends – up from 10% of first-home buyers in 2000 to now just below 15%.
Her speech, while providing some useful data, was also a bit odd. It rather beggars belief that someone from the RBA could talk about housing affordability and not even mention “Sydney”. When the RBA began cutting rates in November 2011, the average new mortgage in New South Wales was $26,000 more than the average for the nation; now it is $67,000 larger.
The issue is even more complex once you also factor in the issue of renters.
Ellis suggested the issue of renter security needed greater focus from policy makers given the data suggested that nearly 40% of renters were moving more than 3 times within a 13-year period.
Such concerns certainly appear warranted on the back of a survey of renters also released this week by Choice.
While the survey found around two-thirds of renters moved of their own accord it also found that 83% of renters in Australia have no fixed-term lease or are on a lease less than 12 months long and a stunning 20% of renters are on “a month-to-month ‘rolling’ lease”.
Good luck trying to save for a deposit when you are worried that within the year you will have to look for another place to rent and then pay for moving.
And this week, the CEO of the Commonwealth Bank, Ian Narev, also noted the complexity of the issue when he told ABC’s Fran Kelly that rather than just rule in or out one measure, it is “important we look at all supply side and demand side characteristics”.
Narev argued that we “should be taking an integrated look at housing supply and demand”.
While the supply side of housing is mostly a local and state issue, the federal government has a big say over demand – through it taxation arrangements that encourage property investment.
Usually negative gearing is tarred as the reason for the bonfire that is housing affordability; but negative gearing is just the fuel – the 50% discount given for capital gains tax is the match.
The discount was introduced by Howard and Costello in 1999, and quickly caused negative gearing to become one of the biggest strategies for reducing taxable income and equally quickly led to a surge in property investment and housing prices in the early-mid 2000s.
The ALP went to the last election with a plan to reduce the discount to 25%. At the time Malcolm Turnbull and Scott Morrison lambasted the measure, but provided nothing in its place other than talk of working with the states to improve supply.
And yet a surprise occurred this week when in response to signs that the government measures to cuts welfare spending lacked the required support to pass the Senate, Scott Morrison alluded to the fact that taxation revenue would instead have to rise.
After years of ignoring the revenue side of the budget it appeared finally the government was embracing both sides of the budget.
And even better it appeared it was also embracing both sides of the housing affordability issue.
On Thursday the AFR’s Phil Coorey wrote that the government was exploring reducing the capital gains tax concessions – chiefly, reducing the 50% discount.
This shift was both welcome from a policy sense and also a political one. While the easy response would be that the government was doing a “backflip”, it would also have given the government a perfect opportunity to make an intelligent argument on the back of well-developed policy.
Advocacy, not slogans.
But no.
By early morning the finance minister Mathias Cormann had suggested the story was wrong and in question time the prime minister, while conceding the government had been modelling capital gains tax changes, repeatedly ruled out any changes – stating “the government has no intention or plan to change capital gains tax or negative gearing”.
Well it was nice while it lasted.
And in some ways the government has progressed. Last December it took the government nearly two days to rule out an equally sensible and complex policy measure of an emissions intensity scheme after Josh Frydenberg suggested it would be examined in the government’s climate change review.
This Thursday it took less than the time between breakfast and lunch to knock the policy on its head.
So much for respecting people’s intelligence.
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