Treasurer clears path towards a national housing affordability policy: will it be the right one?

10 April 2017

ACOSS today welcomed the breaking of a long silence on national housing affordability policy, and the Treasurer’s commitment to making affordability for people with low incomes and homeless people a priority. It’s vital that the Government now chooses the right path to housing reform.

“Reforms to housing tax concessions are essential”

We agree absolutely that improving affordability for renters on low incomes is key.

The Federal Government has four vital roles to play to make housing more affordable:

  1. Removing tax distortions that have contributed to excessive growth in housing costs;
  2. Re-invigorating growth in social, affordable housing for people on the lowest incomes;
  3. Sparking growth in affordable housing for middle income earners; and
  4. Improving the incomes of people relying on the lowest social security payments (especially the Newstart Allowance and Rent Assistance) so that they can afford not only decent housing, but a decent life for themselves and their families.

Today, we welcome the Government’s commitment to expanding social housing, including the bond aggregator idea to make low cost finance available to community housing providers. The Government will need to put flesh on the bones of this policy both before and after the budget, starting with a bold but achievable goal for expanding social housing. Closing the ‘financing gaps’ is vital to ensuring the sustainability of this new investment by State governments and community housing services. This requires an ongoing funding commitment to States from the Commonwealth, higher rent assistance payments, and a direct incentive for new private investment in social and affordable housing. Both the Commonwealth and States must be clearly accountable for the growth of social housing. If the financing gap is not addressed, it will be low income renters who face the greatest risks.

We share the Treasurer’s goal to bring community housing up to scale, but one of the biggest barriers to achieving this goal is our low levels of social security payments, especially Newstart and Rent Assistance, which is just one quarter of the value of the UK’s housing benefit. If we want to the increase the capacity and sustainability of community housing, we must raise the adequacy of incomes of their tenants.

For people on low incomes, the Government needs a major reversal. It has cut over $15b in social security, with single parents and their children hurt the most. People unemployed have been left behind, and targeted for even harsher treatment. Adequate incomes is half of the affordability equation, and, for people on low incomes, social security is an essential part of that picture. The relentless drive to find ‘savings’ from people on low incomes must stop, with basic incomes restored to levels of decency.

Broader economic policy settings, especially tax treatment of property investments, impact on housing affordability for both low and middle income earners. The reality is that the Government must confront vested interests that benefit from our stratospheric growth in housing costs. We must abandon tax and other policies that merely add fuel to the fire rather than cooling things down.

“Reforms to housing tax concessions are essential,” said ACOSS CEO Dr Cassandra Goldie. “Negative gearing and the tax break for capital gains don’t improve housing affordability; they make it worse by fuelling home price booms like the one in Sydney right now. Less than one tenth of negatively geared housing investments are for new properties; the other nine tenths bid up the price of existing housing.

“These tax breaks also make it more difficult for the Reserve Bank to manage the economy. Over-heating in housing markets is making it harder for the Reserve Bank to cut interest rates when this is needed. The tax breaks are feeding a fire which the Reserve Bank and APRA are trying to put out.

“It’s not your average ‘mum and dad investors’ on middle incomes who are benefitting from the generous tax concessions that have allowed two thirds of individual rental property investors, or 1.2 million people, to report tax-deductible ‘losses’ of $14 billion in 2011.

“The reality is that half of all rental housing investor debt is raised by the top 20% of households. So they receive the lion’s share of tax deductions through negative gearing.”

The Treasurer is right to say making housing affordable for all will take time. As well as laying these foundations for affordable housing in the Budget, the Government must avoid taking action that makes the problem worse. Allowing access to super specifically for housing is a bad idea. The benefit will flow directly to vendors.

Easing the pension assets test for people who sell their homes only entrenches the growing inequality between older people who already own their homes and those who struggle in the private rental market. It would be unconscionable to further support the present cohort of home owners without improving Rent Assistance for all who rely on social security payments.

Contact:  Australian Council of Social Service, 0419 626 155

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