Strengthening communities, supporting families and social inclusion.
My idea, my dream, for 2020 is that “houses be recognised in our society first and foremost as homes, as a basic necessity, rather than primarily an investment commodity.”
Over the last several decades in Australia, houses and other forms of dwellings have become investment commodities – a source of wealth for families fortunate enough to own one or several – rather than homes and a vital contributor to personal security for all Australians.
The cause of the current Housing Affordability Crisis is multi-factorial. Misaligned Government policies have played a very significant role. Foremost amongst these policies are the significant incentives for property investors via the taxation system, including offsetting losses against other income (negative gearing), capital gains tax concessions, and the newest form, leveraged investing via a warrant-type arrangement within a self-managed superannuation fund (with all of the tax benefits involved).
These taxation concessions provide investors with far greater purchasing power than the typically younger first home buyer. Home buyers are consequently priced out of the market. Moreover, higher house prices lead to escalating rental prices, a major factor in the recent surge in homelessness.
The taxation incentives lead to a higher proportion of existing property being rental properties. But the current massive undersupply of housing, estimated to be running at 25-35,000 dwellings annually, following an extended period of credit expansion for housing investment, proves that the incentives are misdirected into existing housing exacerbating a bubble in prices.
Over the medium term, our housing markets must be freed from these distortions so that they are valued fairly for their intrinsic worth as homes to Australians. In the short term, the distortions must be realigned to address the problems that they have in part created.
In the first stage, I propose that all of the taxation incentives be permanently removed from established housing. This will remove the speculative demand for existing housing and will allow more home buyers to enter the market. Long term investors will again become active based on the fundamentals of improving rental yields following a realignment of house prices rather than rental prices. For a period of 5 years, the investor tax incentives should be applied only to newly constructed housing. At his point there should be an assessment of whether the policy needs to be continued to further increase supply, or discontinued to prevent an oversupply of housing.
The RBA (Richards, “Some Observations on the Cost of Housing in Australia”) has clearly stated that it is the high income earners that have benefited from house price increases, while people on low incomes have suffered. For affordable housing to be a realistic goal for 2020, a prerequisite for strong, inclusive communities and cohesive working families, “houses” must once again be viewed as homes, a safe, happy and secure place for all Australians, not an ATM or a means of accumulating wealth.
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