A fairly major issue that is affecting increasing numbers of Australians, has an enormous capacity to affect all our lives in the coming years due to its impact on the stability of society as a whole, and is getting worse month to month, has of course barely been raised in the election campaign at all, and when it was raised it was only in the most superficial, non-serious manner. In fact, it is probably the most urgent issue facing Australians under 30, but the big parties have just cynically used it to bash each other in relation to their existing policy platforms.
I am talking, of course, of housing affordability.
Now, I know that the solution I suspect is necessary – driving the investors back out of the market by, for example, restoring CGT to before-Howard levels for investment properties (NOT primary residences) – is not immediately politically saleable. But neither do the big parties’ present policies have buckley’s of helping. The first home owner’s grant simply increases house prices by more than the grant (due to the greater borrowing power it provides). The Liberals’ whinging about it being due to immigrants is simply cynical buck-passing: house prices didn’t spike suddenly after a sudden influx of new immigrants. They spiked shortly after the CGT was halved and the first home buyer’s grant implemented. We could cut the number of immigrants tomorrow (with the resulting extra suffering and hardship caused to them and the damage to our economy caused to us) and houses would continue to be unaffordable for almost everyone now entering the market. The claim that it can be blamed on land taxes and stamp duty is absurd – you could abolish those tomorrow and people would still bid up to the limit the banks allow them. As for releasing more land – well, that would help, but it wouldn’t solve the problem, which is that those without houses cannot realistically compete with those who already have equity in this inflated market, the investors.
Anyway, this post isn’t about convincing you what I think the answer must be. It’s about one thing: the issue being back seriously on the parliamentary agenda. This needs to be looked at urgently. The various excuses and rationales offered by self-interested parties (obviously people like real estate agents and banks are quite happy with an inflated market and couldn’t care less how much it harms the next generation) and those who think they’re benefiting from the inflation but really aren’t (baby boomers whose house is now worth more on paper, which is just as well because they’ll be having their adult children staying with them for a very long time) need to be given a fair hearing and properly assessed. The various solutions offered need to be studied properly by people who have the power and resources to get proper answers. The Senate looked at the issue in 2008, but nothing has been done since then. None of its recommendations were implemented by government.
The solutions may be complicated, and they may well not be what seems obvious to a thirty-something barrister who is far from an expert in either housing or tax policy. But whatever they are, they need to be found, and soon. It’s a self-perpetuating problem: the longer it lasts, the more entitled the short-term beneficiaries will feel about their windfall, and the more difficult it will be to reverse the trend.
Even if it was only mentioned superficially in the recent campaign, it should be a priority for this parliament. Particularly in any tax policy review.
UPDATE: The Government’s response to the 2008 Senate Select Committee was published in October 2009. In it, it promises to continue to allocate public money in ways that exacerbate the problem (eg the FHOG, cuts to duties) but look like they’re helping first home buyers, whilst actually only transferring public money to existing owners that they can then use to further price out homebuyers.
The significant issue, that of reviewing CGT and negative gearing, was simply referred off to a tax review to take place at some point in the future, when the Government will completely ignore the recommendations and sit on its hands while the crisis worsens.