Property Council launches plan to fix housing affordability

Fixing housing affordabilityA scheme to help first home buyers bridge the deposit gap, measures to boost supply and a new build-to-rent asset class can fix housing affordability, says the Property Council.Speaking about the Property Council’s new ‘Fixing Housing Affordability Plan’ at a lunch hosted by the Committee for Economic Development Australia last week, Property Council national president Susan Lloyd-Hurwitz said housing affordability was the backbone of national economic and social policy.”It represents safety, security, shelter, the ability to maintain a job, our connection to community, to our neighbourhoods, our tribal colours, opportunities for our children, and our retirement nest eggs”, Lloyd-Hurwitz says.According to Lloyd-Hurwitz, the key areas of policy focus, outlined in the Property Council’s strategy, can tackle the problem. These include:Planning reform taxes and levies, faster release of land, faster approval processes and moreReinstating the National Housing Supply Council to provide housing data that can inform good policyApplying state learnings nationally, particularly on stamp duty concessions and deposit schemes like Western Australia’s KeystartGovernment support for insurance , financing and rental assistanceThe creation of an institutional build-to-rent sectorA rethink on taxes imposed on new supplyThe Property Council says two decades of costly regulation, poor planning decisions and excessive taxation across all levels of government have driven up construction costs, impeded supply, and resulted in the dramatic increase in house prices in our major cities.Fifteen years ago, average dwelling prices were 4.3 times average wages, now it is 6.9 times average wages. In 2001, it took 86 per cent of an average householder’s annual income to pay the deposit on an average house. By 2016, this had risen to 139 per cent.Lloyd-Hurwitz told the CEDA audience that the “single most powerful lever” at governments’ disposal is supply.”Dwelling completions are at a 40 year high in Sydney, but remain well short of the 36,000 needed each year to achieve the Greater Sydney Commission’s target of 725,000 new homes by 2036.”The fundamental drivers of rising house prices, particularly in Sydney, are firstly insufficient and slow supply that is not keeping pace with population growth, and secondly the tax burden imposed on new supply.”Up to per cent of the cost to the customer of a simple block of land can be attributed to baked-in taxes, charges and regulatory costs,” she said.Stamp duty is a substantial hurdle to homebuyers and dampens transaction activity, locking people into housing that is not appropriate for their needs. But transitioning away from stamp duty is not simple. “At $8 billion, it is the state government’s single largest source of revenue.”Lloyd-Hurwitz argued that a build-to-rent sector could deliver “large scale, affordable, well-managed rental stock to the market” and “would provide another viable secure housing choice”. “There’s plenty of institutional money ready to invest in this new asset class, but in its infancy it needs support from state and federal government through targeted incentives to help induce institutional-scale capital.”Property Council chief executive Ken Morrison said that transaction costs must be addressed, as they lock people into homes that don’t suit them and are a big drag on the economy. “In a city like Sydney, typical stamp duty bills exceed $70,000,” he explains.Morrison says governments need to help first home buyers bridge the deposit gap. Pointing to Keystart, a Western Australian program that provides low deposit home loans for owner-occupiers looking to access the market, Morrison says “more than 85,000 people have used it to secure home ownership.”The Property Council adds that changes to current negative gearing arrangements will not fix the problem.”Negative gearing underpins the settings for Australia’s rental market,” Morrison says. “More than 1.2 million rental properties are negatively geared and it is an established tool that can contribute to a deep pool of rental properties.”Housing is a $6 trillion asset class and government must tread carefully otherwise it runs the risk of undermining the flow of jobs and investment throughout the economy,” he says.”There is an opportunity to forge consensus on measures to incentivise the states to reform planning systems, bridge the deposit gap, encourage UK style ‘build-to-rent’ investment, and remove barriers to downsizing. All of these initiatives are part of the solution,” Morrison concludes.