Australians are searching desperately for a cure-all to the housing crisis.
Low vacancy rates and high demand are driving rents through the roof, climbing interest rates are draining mortgage holders’ savings, and for many, the Australian dream is drifting out of reach as house prices continue to soar.
With the population continuing to grow, Australia needs at least 1.2 million dwellings over the next five years.
Experts warn no single proposal can disentangle the planning mess overnight.
Housing is a shared responsibility between federal, state and local governments, which means there are both overlaps and limits on the measures each jurisdiction can take.
Different cohorts within the Australian population also have distinct housing needs.
Michael Fotheringham from the Australian Housing and Urban Research Institute said there was no silver bullet.
“Silver bullets kill mythical creatures, the housing crisis is real,” Dr Fotheringham told AAP.
Political parties and the Property Council of Australia have thrown their hat into the ring with ideas inspired by history or other nations.
HELP TO BUY
Under part of Anthony Albanese’s plan, the Commonwealth would contribute 40 per cent of the purchase price of a new property, or 30 per cent for an existing one, allowing tens of thousands of first homebuyers to enter the market with as little as a two per cent deposit.
Shared equity schemes have proven successful across the nation.
In West Australia, nearly 2000 low and middle income earners have become homeowners thanks to the Shared Home Ownership Initiative – where the government funds up to 30 per cent of the purchase price of a new home.
A similar South Australia scheme helped more than 2000 people buy a house during the 2022/23 financial year.
The Greens have blocked Labor’s proposal in federal parliament, claiming the scheme would help too few people while fuelling inflation.
But modelling done by the Grattan Institute found it would raise prices by about 0.016 per cent, which would add $113 to the purchase price of a $700,000 home.
The institute’s economic policy program director Brendan Coates said it made sense to keep the initial number of available places low while the scheme was set up.
Help to Buy could be improved by better targeting those who wouldn’t otherwise break into the market, he said.
Under the proposal, individuals who earn less than $90,000 or couples who earn at most $120,000 are eligible.
These income thresholds are about $20,000 more than those outlined in similar state schemes, and mean up to 75 per cent of individuals and 39 per cent of couples could be eligible.
“The risk is it becomes a lottery because many more people are eligible than the 10,000 places available each year,” Mr Coates said.
The government also more broadly has committed $25 billion to build tens of thousands of social and affordable housing.
PUBLIC PROPERTY DEVELOPER
The Greens have suggested establishing a government-run public property developer that would compete with the private market.
Under the minor party’s $28 billion policy, a public developer would oversee the building of 610,000 houses over the next decade before they are sold for just more than cost to first home buyers or rented at a maximum of 25 per cent of a household’s income.
About 427,000 of the dwellings would be earmarked for the rental market, and a fifth would be allocated to the bottom 20 per cent of earners.
The rest of the homes would be available to sell and any applicants would not be means tested.
The plan was inspired by nations like Singapore, where 80 per cent of residents live in publicly owned and governed housing.
While housing experts have acknowledged the ambition of the proposal, they aren’t confident it could be replicated in Australia.
In Singapore, the government obtained land for public development through compulsory acquisition allowing them to pay cheap rates.
“You could appropriate private property and not compensate people fully,” Mr Coates said.
“It just wouldn’t work here.”
The Greens would be paying market rates for land, making their plan significantly more expensive, and its plan could cost as much as $50 billion over a decade, Mr Coates said.
Hal Pawson from the University of NSW’s Futures Research Centre said the Australian government previously held a major role in producing housing.
After World War II, the federal government provided cheap loans to states and led to an explosion of public housing stock throughout the 1950s and 1960s.
Professor Pawson said the government should do more to add downward pressure to rents and house prices.
“Market forces can’t be relied upon to do government spending,” he said.
SUPER HOME BUYER
The federal opposition wants to let Australians withdraw up to 40 per cent of their retirement savings – to a maximum of $50,000 – to buy their first home.
However, many young Australians do not have much money in super, so it would not benefit one of the biggest cohorts left behind by the housing crisis.
Dr Fotheringham also warned this could push up house prices and trash retirement incomes.
As the number of people retiring with a mortgage continues to grow, they would be forced to spend more of their superannuation on paying off their houses, putting them at financial risk.
“The benefit of home ownership will be lost because they’ll be forced to sell,” he said.
“That’s when you get people selling at a loss.”
According to Dr Fotheringham, the biggest problem with the coalition’s plan is its laser focus on home ownership which omits renters.
“You’re saying a third of the population don’t matter or you’re somehow going to magically make them homeowners,” he said.
PROPERTY COUNCIL PROPOSALS
While many of the political parties’ plans attempt to increase public control over housing, the Property Council of Australia prefers a different route.
Its nine-point wish list includes improvements to planning systems that prevent the construction of dense housing in desirable areas, building dwellings specifically for the rental market and addressing regional areas.
Chief executive Mike Zorbas also recommends governments “stop randomly increasing taxes” on new projects, claiming they made up 20 to 40 per cent of the cost of a home, a figure disputed by experts.
Many of the taxes that apply to property development are not built into the purchase price of a home.
Instead, they are generally borne by the landowner that sells to a developer.
INVESTMENT PROPERTY PERKS
The property council support housing tax breaks like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by Australians who sell assets that have been owned for 12 months or more.
Labor went to two elections promising to scrap negative gearing on properties purchased after a certain date, but the party dumped the policy in 2019 and has not revisited it.
Prof Pawson said the “indefensible” policies benefited existing home owners at the expense of first home buyers.
Mr Coates agreed the tax breaks needed to be reformed and said scaling them back could boost home ownership by up to five per cent.
This would need to be done carefully Dr Fotheringham said.
Scaling back taxes by the number of houses owned could force property investors to evict their tenants and sell.
Some argue renters could then buy the properties, but Dr Fotheringham said this argument assumed the only barrier to buying a home was availability.
Instead, the government could introduce a cap on property-related tax deductions over time while reducing the capital gains tax discount to avoid a sudden change that would reduce rental supply.
The Albanese government’s 10-year housing strategy is still in the works.
Slated for release in 2024, experts will look to the government’s national housing and homelessness plan for a long-range vision.
By Kat Wong in Canberra
