Housing affordability crisis set to worsen
Republished from Your Investment Property
Housing affordability issues are likely to persist in some capitals and could have long term economic implications for Australia, according to the Committee for Economic Development of Australia’s (CEDA) latest Housing Australia report.
“The aim of this report is to provide a holistic review of housing in Australia and look at some of the drivers,” said Rodney Maddock, CEDA’s research and policy committee chairman. “CEDA’s research shows that barring any major economic jolts, demand pressures are likely to continue over the next 40 years and supply constraints will continue. This is particularly the case in capital cities with a growing population and where an increasing proportion of Australia’s population are expected to reside.”
While the debate around housing affordability often centres on topics such as foreign investment, negative gearing, and interest rates, CEDA’s latest report emphasises that while these might be some of the factors contributing to the crisis, housing affordability is far more complex and requires careful reform.
“One component of CEDA’s research considers the impact of housing affordability on the poorest citizens and includes a recommendation by Dr Judith Yates that Australia needs annually 20,000 new dwellings [that are] affordable to low income people,” Maddock said. “Prolonged housing affordability issues will result in more people entering retirement without owning their home and low socioeconomic households pushed to outer or regional areas where transport infrastructure is poor and job prospects are lower.”
In the long term, these social issues could have budget implications for governments as more people become reliant on government assistance to survive.
Another key issue highlighted in the report is how the current structure of land supply may make it in developers’ interests to “drip feed” dwellings into the market.
“CEDA’s report looks at the UK as an example where developers bid high to obtain land for development and it is then in the interests of developers to build slowly to take advantage of rising market prices,” Maddock said. “This is an area that should be further examined and CEDA’s report highlights that a key difficulty in drawing policy recommendations for Australia is a lack of consistent and rigorous data available on supply of land for development … and its correlation to housing prices.”
As part of its report, CEDA has provided recommendations for governments at all levels that should be further explored to address some of the issues highlighted, including:
- Easing planning restrictions, particularly those imposed by local councils, making them more consistent and allowing for increased density.
- Developing consistent planning and funding models for transport infrastructure to better connect new housing developments to employment hubs.
- Expanding and improving protections for long-term renters.
- Further relaxing rules around the means testing of income received from downsizing in scenarios where it results in greater housing density.
- Taxing a larger portion of capital gains.
- Moving towards annual land tax in place of transaction taxes on housing, such as stamp duty.
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