First home buyer grants can push up prices: Productivity Commission

6 views 2022-09-30 15:25:56

The Productivity Commission says stamp duty concessions and first home buyer grants, on which state and territory governments last year alone spent $2.7 billion, can push up dwelling prices and should be wound back because they take away money needed to prevent people falling into homelessness.

The independent agency did not definitively say the subsidies – estimated to have more than doubled from $1.2 billion over the four years to 2020 – push up dwelling prices, as many economists assert.

But it declared the risks of doing so gave “reason to be sceptical” that such measures made ownership more accessible or affordable.

In any event, the public benefit would be much greater if some or all of that money – much of it going to people who would buy a dwelling sooner or later anyway – were spent on assistance for people who were homeless or at risk of becoming homeless, the report says.

“You see the evidence of high unmet demand and homelessness services, and demand and social housing, and then you go to the other end of the scale and say, well, home ownership – is it a good return on that $2.7 billion investment?” commissioner Malcolm Roberts told The Australian Financial Review.

“We would say that the private benefits are greater than the public benefits from home ownership. We think there’s an opportunity to tighten up what’s being done with home ownership support.”

Last year, stamp duty concessions and exemptions to first home buyers totalled $2 billion, up from $1.6 billion in 2020, and the total value of first home owner grants was $707 million, paid through 55,341 grants, the report shows.

The review of the National Housing and Homelessness Agreement, commissioned by former treasurer Josh Frydenburg last year, was a study required under law of the $1.6 billion in funding the federal government transfers to state and territory governments.

But the growing problems of unaffordable housing and homelessness, as well as the need to develop a range of different housing types for a changing country, made it necessary to put to more effective use the $16 billion that federal and state governments combined spend on housing assistance.

The next intergovernmental agreement on housing, to replace the current one that expires next year, should cover all of that spending – not just the current remit of $1.6 billion worth – to prioritise spending on the people who needed it most, Mr Roberts said.

“If you’re going to recognise that there is a housing spectrum, policy changes that affect things in one segment of the market spill over to other segments,” he said.

“So if you’ve got problems in the private rental market, as we have today, that puts additional pressure back on social housing and homelessness services. You need to look at the spectrum as a whole.”

The federal government, which puts no conditions on the $1.6 billion it hands the states each year for housing – beyond $250 million specified for homelessness initiatives – had to set firm targets with the jurisdictions on housing creation targets and make use of those funds more transparent.

“We need more supply,” Mr Roberts said. “State and territory governments need to commit to more supply, they need to work with local government to deliver it, and there need to be public targets with proper public reporting to show that we are meeting that need.”

The report also argues in favour of replacing stamp duty with broad-based land tax, even though this could be a hard political argument to make.

“We recognise that it would be challenging to make the case,” Mr Roberts said.

“On the other hand, I think a lot of people would appreciate that if you moved from a large upfront payment, to smoothing that payment over a number of years, that would be in their interest.”

This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/first-home-buyer-grants-can-push-up-prices-productivity-commission-20220929-p5blux

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