Premier Jacinta Allan is seeking to boost supply and ease the housing crisis. Chris Hopkins
Australia is belatedly experiencing an outbreak in good housing policy.
After decades of self-defeating demand-side policies such as first home buyer grants, attention has firmly turned to supply.
While the residents of Melbourne’s bayside suburb of Brighton are protesting, the Victorian Labor government’s decision to increase housing density in 50 inner neighbourhoods is a serious move to boost the supply of homes in desirable locations such as Toorak, Armadale, Malvern and Brighton.
The protests show that governments face strong resistance from powerful Not In My Back Yard (NIMBY) interests when they try to increase the number of homes in established areas.
Local communities should be heard and the height of new apartment buildings debated.
But so too should the voices be heard of a generation of younger people struggling to break into home ownership and facing steep rent increases.
Young people, parents and grandparents should all have a stake in fixing arguably Australia’s No.1 economic and social challenge.
As federal Housing Minister Clare O’Neil suggested on Wednesday, it seems hypocritical to complain about housing affordability and then complain about more density in your suburb.
“It will probably affect my suburb, it will probably affect where you live, but if we want to make sure we live in their country where young people get a good go at getting into home ownership, change is going to have to happen,” O’Neil says.
Australia is on track to build less than 1 million homes over the next five years, well below the federal-state government target of 1.2 million, according to Deloitte Access Economics’ business monitor report released this week.
Allowing developers to build more apartments and townhouses close to jobs and existing infrastructure is good for social and economic outcomes, including shorter commute times for lower- and middle-income workers.
It is far cheaper for state governments than setting up greenfield housing sites in far-flung areas that are not close to public transport and not connected to infrastructure such as water, sewerage and electricity.
As NSW Productivity Commissioner Peter Achterstraat observes, growing through sprawl has been very costly.
Victoria is targeting 70 per cent of new homes to be built in established suburbs and 30 per cent on the urban fringes.
“If we continue that way, then ultimately existing and future residents will have to pick up the bill through higher taxes or public debt,” Achterstraat says.
“Building in lower-cost places can save up to $75,000 per home to deliver the roads, train services, water and wastewater, schools, and open space we need.”
Hence, NSW is already going down a similar path to Victoria by forcing local governments to allow the building of apartments of up to six storeys within 800 metres of transport hubs and town centres. NSW is rezoning suburbs to allow more apartments near eight metro and railway stations.
NSW Labor Premier Chris Minns has shone a light down a path for Victoria’s Premier Jacinta Allan to follow.
Victoria is targeting 70 per cent of new homes to be built in established suburbs and 30 per cent in new growth areas further out on the urban fringes. The state will also slash stamp duty for 12 months for off-the-plan apartments, units and townhouses.
The temporary stamp duty cut is more of a short-term policy signal and stimulus to struggling developers, rather than a substantive structural change.
The Victorian government wants to increase density in Melbourne’s bayside suburbs. Eddie Jim
Property developers have been squeezed by paying too much for land, trouble attaining finance from banks, higher building material costs and struggles to attract labour from higher-paying state infrastructure projects.
Serious stamp duty reform would involve permanently reducing and ultimately eliminating the transfer tax on all homes, in favour of a broad-based land tax on every home based on land value.
Permanently eliminating stamp duty would remove a barrier to people moving into homes that better suit their circumstances and encourage downsizing by empty nesters to free up larger homes for growing families.
The existing housing stock could be more efficiently allocated.
The Business Council of Australia’s suggestion for a multibillion-dollar fund from the federal government to incentivise the states for reforms such as this is a good suggestion.
But O’Neil says stamp duty is a matter for the states.
Most of the housing levers are held by state and local governments that control zoning and planning, but the federal government and opposition are also pursuing housing policies.
Opposition Leader Peter Dutton’s weekend pledge to spend $5 billion on water, sewerage and other enabling infrastructure for shovel-ready developments will deliver “bang for buck” in helping private developers to deliver more housing, says Peter Tulip, chief economist at classical liberal think tank, the Centre for Independent Studies.
“For a relatively small amount of money, you can put in infrastructure and that will unlock large amounts of housing,” Tulip says.
It will be more effective in delivering the supply of additional homes than the Coalition’s superannuation for housing push.
There is a case to enable middle-aged people, particularly divorcees and single women, to tap their super to achieve home ownership.
The former government’s retirement income review led by former Treasury official Mike Callaghan notes that home ownership is an important influence on a person’s standard of living in retirement. Home owners avoid paying rent and have the potential to draw on the house as an asset to boost retirement income.
But before opening up super-for-housing for all first time buyers, adding to the supply of homes is much more important.
The Albanese government’s $32 billion housing package is focusing more on government-driven social and affordable housing.
It is also dangling $3.5 billion of “performance bonuses” to state and local governments to fast-track the construction of 1.2 million homes, which seems unlikely to be achieved.
Albanese is also offering $1.5 billion to state and local governments to build enabling infrastructure in areas where new housing is needed.
It’s now more important than ever to get housing policy right.
Poor housing outcomes can lead to other knee-jerk policy responses such as foreign student caps in Australia’s $51 billion higher education export sector and other populist ideas such as the Greens’ proposal for rent freezes.
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