My Daily Advertiser Op Ed column for Wednesday28 February 2024
Affordable housing is possible
The Greens plan to reduce house prices through their proposal to axe tax concessions for investors to make housing more affordable for renters and first home buyers, the party’s housing spokesperson, Max Chandler-Mather, has said.
Today I will focus on this proposal from The Greens, given PM Albanese’s irritated dismissal of it, as though it was a juvenile student politics stunt. Closer examination shows it to be an economically sound proposal that could have very beneficial results for both renters and first home buyers. Perhaps Albanese is haunted by the role similar proposals from Bill Shorten fuelled the Murdoch media inspired defeat of Labor’s 2019 federal election campaign. It’s the only logical explanation I can find for such a hysterical response to the Greens very sensible proposals.
I should also note that part of the cause our housing affordability crisis is that government regulations treat housing as a commodity for financial gain rather than what it really is: a basic human right. The sooner this situation is reversed the better off renters and first home buyers will be.
In an episode of the Guardian’s Australian Politics podcast, Chandler-Mather argues projected price reductions in the order of 2.5% are “not much” and preventing further rises of 10 or 20% would be desirable.
The Greens say they will use their balance of power position in the Senate to push for Labor to pare back negative gearing and capital gains tax discounts in return for supporting the government’s Help to Buy shared equity scheme.
Negative gearing allows investors to claim tax deductions on rental property losses, while the capital gains tax discount halves the amount of excise paid by people who sell assets that have been owned for 12 months or more.
Costings of the Greens’ policies by the independent Parliamentary Budget Office in April 2023 suggested they might cause “house prices [to] fall and rents [to] rise” although the extent of the impact would “be influenced by how many renters would be able to switch to owning property”.
Asked if the Greens wanted cheaper house prices so that more renters can become owner-occupiers, Chandler-Mather told the Guardian Australia: “Yeah, absolutely.”
Chandler-Mather said that modelling including by the Grattan Institute “pointed out changes might see a 2.5% drop in house prices”. “Now that’s not much, right … in the context of big house prices.
“But it is a lot when you consider the fact, well, that means that house prices don’t go up by another 10 or 20% next year.”
The proposals have also received support from well-respected institutions. In 2016 the Grattan Institute estimated abolishing negative gearing and halving the capital gains tax discount to 25% would leave house prices roughly 2% lower than otherwise, favouring would-be homeowners over investors.
Chandler-Mather said “the problem with our housing market is we have a tax system that basically continues to force house prices up, often far in excess of wages”.
“Since about 2000, house prices have gone up more than double wages every year.”
“That’s crazy. So slowing that down, at the very least, is a good thing. Because when you’re saving up for a deposit and house prices are increasing faster than you can even save up for a deposit that … is one of the most demoralising things you can possibly experience.”
Chandler-Mather said that “big decreases” were not desirable because of “people who don’t want to fall into negative equity”, owing more to the bank than their property is worth.
“But just moderating the system, calming it down, I think, is a good thing,” he said.
Chandler-Mather rejected the suggestion phasing out negative gearing could increase rents, arguing that “generally landlords are charging as much rent as they can get away with” the Guardian Australia’s Paul Karp reported.
The member for Griffith conceded that “some … might be charging a little bit less but in aggregate terms, that’s just not really how the rental market works”.
Chandler-Mather said the Greens still want the federal government to incentivise states and territories to freeze rents for two years, a call rejected by Labor premiers last year during housing future fund negotiations.
The Greens went to the 2022 election proposing to build 1m public houses over five years, allowing cheaper access to housing with payments to allow occupants to take up to 75% of the equity in the home.
Chandler-Mather said this was “broadly” still a “good idea” but there would be “some tweaks” to its housing offering before the next election. Hopefully these will help return housing to being a basic human right rather than a profit making commodity.