Generous tax breaks for property investors are leading to “deeply inequitable” outcomes, the chair of the government’s National Housing Supply and Affordability Council (NHSAC) has warned.
Susan Lloyd-Hurwitz, a former chief executive of property developer Mirvac, said there was no easy or quick fix to Australia’s housing crisis.
NHSAC’s state of the housing system report in May estimated that Labor would fall more than 260,000 homes short of its 1.2m target over the five years to 2029.
“We shouldn’t be happy with 938,000 (estimated homes built), or 1.2m either,” Lloyd-Hurwitz said. “Certainly the more housing we can produce the better.”
While other property markets, including in Canada, underwent a jarring correction after the pandemic, Australian housing prices have only pushed higher.
Lloyd-Hurwitz said there was no sign of a similarly steep drop in home values here.
“The likelihood is that the best we will be able to do is to get prices to stabilise and not grow in excess of wage growth.
“And we should be building more social housing to take pressure off people at the low income end of the market.”
Lloyd-Hurwitz said Australia had “dramatically underinvested” since the second world war. “It’s now 3% of the housing stock, and it used to be 6%.”
With so much justified frustration, she said “people want there to be a simple answer” to the chronic unaffordability of Australian homes, “but there’s not”.
She pointed out multiple fronts that required work, including regulation, streamlining of planning, modern methods of construction and tax settings.
“The list goes on and on.”
There was agreement among attendees at the recent economic reform roundtable that property tax settings were skewed in ways that made the affordability problem worse.
“The evidence is that we are highly incentivising and maximising the amount we put into housing because of the concessional capital gains tax treatment for property.
“For a given salary over your lifetime, you pay a lot less tax as a homeowner than if you are a renter, and that’s something which is deeply inequitable.”
Lloyd-Hurwitz attended the recent roundtable, where she said there were “a whole range of suggestions” from participants about ways to curb property tax concessions.
Ideas ranged from restricting negative gearing to new builds or only one property to only allow expenses to be claimed against the rental income, not against other income such as wages.
Economists and experts have criticised the government’s decision this week to expand the home guarantee scheme, arguing it will increase demand in an already accelerating property market.
But Lloyd-Hurwitz described the scheme, which helps homebuyers buy a property with a deposit of as little as 5% and without the need to pay for lenders’ mortgage insurance, as “one tool in the tool kit”.
“If it does achieve more people being able to generate housing wealth and access the lifelong benefits without putting too much upward pressure on houses, then it’s OK.”
