Incentive payments can help keep home ownership within reach

Competition-style payments that reward the states for increasing housing supply and easing housing stress are on the horizon, as Treasurer Scott Morrison sets his sights on housing affordability.

In a thoughtful address on Monday, the Treasurer argued that “the most important factor behind rising prices has been the long running impediments to the supply side of the market”.

Pointing to supply-side constraints – including regulation, insufficient land release, taxes, infrastructure, geographic constraints and public attitudes towards urban infill – Morrison said housing affordability was a complex issue.

More needs to be done, he said, to ensure these “roadblocks” to increased supply are removed.

Pointing to the Harper Competition Policy Review, which identified regulatory impediments across the economy that restrict competition and reduce productivity, the Treasurer said he would explore incentives for state governments to modernise their planning regimes and release more land.

The Property Council’s chief executive Ken Morrison has welcomed the Treasurer’s commitment.

“Tackling housing affordability is a social challenge, an economic challenge and vital if we are to continue to be one of the most egalitarian nations in the world”, Morrison says.

In April, the Property Council released A Federal Incentives Model for Housing Supply, prepared by Deloitte Access Economics and detailing how governments could work together increase supply and ease housing stress.

The work was led by Professor Ian Harper, then at Deloitte Access Economics, who also chaired the government’s Competition Policy Review.

“The research shows that incentive payments could unlock $3 billion in economic benefits and ease the pressure on housing prices,” Ken Morrison says.

“For the incentive payments to work, the system developed with the states and territories will need to set targets, make someone responsible, model the benefits, link payments to action and involve all levels of government.”

Ken Morrison says the Treasurer’s announcement “is about making systemic changes to planning systems that are not coping with the demands of our growing modern cities.

“All too often clunky planning systems strangle projects in excessive red tape and delays and in turn, hinder economic growth and housing supply.

“Australia’s housing supply gap stands at more than 200,000 homes and the Turnbull Government’s announcement is a first step towards addressing this gap.”