Australia’s lack of a comprehensive housing policy – unlike Singapore, Canada, Ireland and England, which all have one – has led to one-sided actions such as federal and state governments pumping $20.5 billion into first home buyers over the past decade in a way that has benefited existing homeowners more than anyone else.
In contrast to countries with over-arching housing policies, Australia’s first home buyer measures pull forward the decisions of people already likely to buy – boosting demand and pushing up prices – rather than making ownership more accessible for lower-income people, a new Australian Housing and Urban Research Institute report shows.
Further, while demand measures were in the past balanced with steps to increase the supply of affordably priced for-sale housing, such as state-commissioned housing development, government mortgage issuance, and regulatory preference for first home buyer private lending, these mostly ended in the 1970s, the report says.
As countries the world over reset their economies at a time of pandemic and consider the housing infrastructure they can provide once global migration resumes at scale, the report makes clear that – questions of fairness aside – Australia’s relative inability to provide secure housing for lower-income people puts it at a competitive weakness to other countries.
“Unlike most of the international comparison countries, Australia stands out, as it overwhelmingly uses demand-side instruments and lacks a strategic framework,” said report author Chris Martin of UNSW City Futures Research Centre.
“And unlike countries such as Finland and Singapore, Australian governments have resisted prioritising first home buyers’ genuine interests by reforming tax settings that favour their housing market competitors: established homeowners and would-be rental investors.”
The measures Australia has adopted are not all bad. Some countries have even larger first home buyer grants and concessions than this country, but they balance them with supply-side measures in more cohesive housing strategies, the report says.
Singapore, for example, also offers grants and tax concessions like Australia, but the country also had a strong reliance on use of public land to develop new housing on which owners buy apartments with tradeable leases on the land, it says.
In addition to demand-boosting measures, the UK also has a heavy reliance on public housing development, along with right-to-buy schemes allowing social tenants to purchase their dwellings and regulation of its land use to ensure development of suitable new housing stock, the report says.
Of the seven other countries compared with Australia in the report – the others being Finland, Germany and the Netherlands – only Canada, like Australia, has no systemic reliance on supply side measures, but that country makes less use of inflationary grants and tax concessions.
Since 1963, first home buyer grants have totalled $36.8 billion and the $20.5 billion federal, state and territory governments have spent in the past decade alone in stamp duty concessions and grants such as the Commonwealth’s HomeBuilder payments could have funded the construction of about 60,000 social housing dwellings without inflating housing prices.
The money could also have funded the purchase of 137,000 shared-equity homes, but even these “revolving fund” schemes that recycle money back to the government, which then pays it out to new clients accelerate ownership for moderate-income households, rather than making it easier for lower-income people to buy, the report says.
Not all supply-boosting practices used overseas can be applied to Australia – especially not rent-to-buy schemes that assume a large stock of public housing available to be sold to tenants. Stricter regulation of land-use planning and conditions around land disposal could be more practical in Australia, however, the report says.
But the biggest increase in homeownership would come from reducing benefits such as the capital gains tax deduction on investment housing and negative gearing, which preference existing homeowners, the report says.
“In Australia, pro-ownership policies were, from the 1980s to 2000s, reconfigured to advantage existing owners, including as investors in rental housing: notably the 1986 exemption of owner-occupied housing from the then-new capital gains tax, and the 1999 CGT discount for investor landlords,” the report says.
“While some currently operational Australian first home buyer-assistance measures benefit recipients without representing unjustifiable and inflationary expenditure, significantly widening homeownership access cannot be achieved without substantial changes to tax and social-security policy settings that currently preference existing homeowners over aspiring homeowners.“
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-help-vendors-more-than-buyers-20220707-p5azsn