Kick-starting competition on housing affordability

Kick-starting competition on housing affordability As a national report finds less than half of all Australians will own a house within just a few years, a competition-style payments system could address chronic housing affordability issues.The Household, Income and Labour Dynamics in Australia (HILDA) Survey, undertaken by the Melbourne Institute at the University of Melbourne since 2001, has found just over half, or 51.7 per cent, of Australians aged 18 or over own a home, down steeply from 57 per cent in 2002.The report’s authors predict that less than half of all Australian adults will be home owners within just a few years.”Sliding home ownership is a damning report card on the collective failure of governments to act,” says the Property Council of Australia’s chief of Policy and Housing, Glenn Byres.”It’s a problem that has crept up on everyone – but it shouldn’t have. We’ve been seeing escalating house prices for some time, but insufficient levels of attention from federal and state governments.”Byres says Australia needs a suite of measures that both federal and state governments can collectively action.The Property Council recently commissioned Deloitte Access Economics to investigate whether incentive payments, previously used to boost competition in the 1990s, could address housing affordability.A Federal Incentives Model for Housing Supply found such a system was a feasible way to achieve reforms and improve housing affordability.One of the key recommendations of the report is to “make someone responsible” for housing affordability.”Around Australia, there isn’t singular responsibility for housing affordability and supply anywhere in any government. One part of government is responsible for the tax system, another for planning and land release, but no one is in charge of housing affordability. This needs to change,” Byres says.Another recommendation is to link payments to action.”It’s not enough to make plans. Incentive payments should only be made when state governments meet targets that represent step change – fixing planning blockages and cutting red tape to increase supply. The success of these reforms must be measured, with payment based on real-world outcomes.”Byres says state governments also need to “end their unhealthy dependence on stamp duty”, which adds up to $60,000 over the life of an average mortgage.Deloitte estimates that the potential gains from improving housing planning could be as much as $3 billion a year, due to increased workforce participation, reduced congestion and higher productivity in the construction sector. But the implications for society stretch far beyond productivity. The HILDA report finds that the single most important asset component in household wealth is the family home, accounting for 43 per cent of the value of household assets in 2014.”Home ownership has always been the biggest single financial commitment that Australians will make in their lifetimes – and the biggest source of financial security as they head into retirement,” Byres adds.”Without taking action to address housing affordability, the great generational divide will continue to grow, and young people will be locked out of the market and restricted in their capacity to build wealth for retirement. “People won’t be able to afford to live where they work, which has massive implications for national productivity, congestion and quality-of-life. “Housing affordability is really about the economic prosperity of our future nation.”Download A Federal Incentives Model for Housing Supply.