Treasurer Makes Housing a Budget Priority

Housing affordability is set to be a priority for the upcoming federal budget according to a speech made by Treasurer Scott Morrison which has been welcomed by the social sector.

In key pre-budget address Morrison told the Australian Housing and Urban Research Institute (AHURI) on Monday that there were “few more important public policy issues than housing” but he warned there was no “silver bullet” to fix the issue.

He said the budget on 9 May would use “a scalpel, not a chainsaw” to tackle the issue of affordability.

“Our policy response must be careful, it must be calibrated, less we spark a negative housing shock that would undermine our economic confidence, that would negatively impact household consumption and would retard economic growth,” Morrison said.

He used his speech to lay out Australia’s housing affordability problems and said the housing market was part of a continuum “ranging from homeowners, to renters, to social and affordable housing, and regrettably homelessness.”

But he continued to criticise the National Affordable Housing Agreement, describing it as “a one way ATM providing important resources without accountability for outcomes”.

As part of the solution he said an Affordable Housing Finance Corporation could be established to facilitate a “bond aggregator” model for investing in community and social housing.

He argued for more private investment in affordable housing, referencing several social housing initiatives in the United Kingdom.

He again ruled out changes to negative gearing.

“Disrupting negative gearing on the scale that has been proposed by many wouldn’t come without a cost, especially to renters, let alone the wider economic impacts,” Morrison said.

“Proponents of disruptive, large scale changes to negative gearing, I think have glossed over this fact. It wouldn’t be good news for the 30 per cent of Australian households who rent, particularly those on the lowest incomes.

“Mum and dad investors are putting a roof over the heads of around a quarter of all rental households in this country. Keeping them in our private rental market is important for ongoing rental supply. Who will replace them if they are to withdraw from the market?”

The Australian Council of Social Service (ACOSS) said they welcomed the treasurer’s commitment to making affordability for people with low incomes and homeless people a priority.

But they said the government needed 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”.

“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,” ACOSS said in a statement.

They said the federal government had four vital roles to play to make housing more affordable:

1. removing tax distortions that have contributed to excessive growth in housing costs;
2. reinvigorating 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.

ACOSS CEO Dr Cassandra Goldie said reforms to housing tax concessions were essential.

“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,” Goldie said.

“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. Overheating 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 benefiting 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 over half of geared housing investors are in the top 10 per cent of personal taxpayers and 30 per cent earn more than $500,000.”

She said as well as laying foundations for affordable housing in the budget, the government must avoid taking action that makes the problem worse.

Meanwhile Anglicare Australia said they would “love to see how government might work with the social services sector to develop initiatives that would give everyone the opportunity to have a place to call home”.

Anglicare Australia executive director Kasy Chambers said a stable home was the foundation for health, participation, work, security and belonging.

“I think that the treasurer’s speech shows that there is an acknowledgement of the complexity and scale of the problem,” Chambers said.

“Like others in the room today, Anglicare Australia would like to see a non-partisan and national approach involving all levels of governments, industry and community to the housing crisis.”

She said tax rules “which have helped shape the current market” must also be considered in any discussion about housing.

“Everything really does need to be on the table,” she said.

“We look forward to finding ways that government can change the current system to ensure that the most vulnerable to rental stress are included in the conversation.

“Perhaps most importantly though, we need to acknowledge that the end result of extreme rental stress, and a lack of affordable housing is homelessness – a reality that is simply unacceptable in a prosperous economy like ours.”

Mission Australia housing executive Chris Bratchford said he welcomed the focus on rental affordability, but warned that without a further investment, the approach would not be adequate to increase affordable housing stock and reduce homelessness.

“We welcome Treasurer Scott Morrison’s consideration of mechanisms to encourage investment in community housing. However, access to cheaper debt-funding alone is not enough, as the returns for private investors are simply not there,” Bratchford said.

“A bond aggregator is a great addition, but it will need an additional subsidy to bridge the yield gap between market- and below-market housing returns.

“There are many different models to bridge the yield gap and encourage institutional investment and we have seen early progress with the Communities Plus and Social and Affordable Housing Funds in NSW.

“But if we are serious about giving superannuation funds and other institutional investors the opportunity to make significant investments in social and affordable housing we have to get the settings right and bridge the gap between market- and below-market return.”

Bratchford said to do this the treasurer needed to look to the market settings over the long term, to provide interventions that will ultimately increase affordable housing stock.

“If we can close the yield gap we know the interest from investors will follow,” he said.

“In the meantime, we also need to provide supports to those who are in crisis right now through continued and adequate funding for homelessness services. There is still uncertainty surrounding the future of funding for the National Affordable Housing Agreement), which funds vital homelessness services and social housing across Australia.

“The impact on the most vulnerable in our society, where this funding reduced, would be significant. I urge the federal government to commit to long-term funding to deliver affordable housing and better services for homeless people over the long term through a national housing and homelessness strategy and ongoing funding commitment.”