The Australian Institute’s chief economist, Richard Denniss, has penned a great piece in The AFR today chiding the faux political debate over “housing affordability”, whereby Australia’s politicians tie themselves in knots trying to appease both first home buyers and property owners:
No issue creates a bigger flood of nonsensical econobabble in Australia than “housing affordability”. It’s a meaningless term engineered for the sole purpose of allowing politicians to pretend they are simultaneously on the side of home buyers and home sellers…
Talking endlessly about “housing affordability” allows politicians to duck the simple question of whether house prices are “too high”, “too low” or “just right”.
The absurdity of this situation was revealed during the federal election campaign when the Coalition attacked the ALP’s plans to reform negative gearing on the basis that such changes would, wait for it, put downward pressure on house prices. Oh, the humanity!
The Coalition’s rhetorical solution to the imaginary issue of housing affordability is to reject changes to the tax treatment of investment houses and instead blame environmentalists and state governments for “restricting the supply of housing”…
The Coalition playbook makes clear that when it’s not the environmentalists’ fault, it must be the unions’ fault…
Rapid population growth (unrelated to the tiny number of asylum seekers who arrive each year), allowing self-managed super funds to borrow to buy housing, the 50 per cent capital gains tax discount, negative gearing and rising income inequality are the main causes of rising house prices. But not only do government ignore these issues, it uses the weasel word “affordability” to pretend it is concerned, rather than pleased, about rising house prices.
Denniss is spot on. Except that I would add constraints on land supply/planning, as well as inadequate infrastructure financing and provision, into his list of factors pushing-up house prices.
Regardless, the Coalition’s Assistant Minister to the Prime Minister with responsibility for cities, Angus Taylor, demonstrated Denniss’ exact point about “housing affordability” when he penned the following drivel over the weekend in The Australian:
There are few topics around Sydney dinner tables, cafes, pubs and barbecues quite like house prices. Everyone has a perspective.
Older Australians are often pleased they have done so well but remain nervous about future price movements and how that will affect their retirement. Many worry about how their kids or grandkids can afford a house.
Younger Australians struggle with how they’ll get into the market in a location near good work. If recent trends continue, we risk the greatest wealth transfer in our history, as younger Australians borrow to the rooftops to buy out their parents and grandparents.
In the article, Taylor effectively explained how the Coalition wishes to simultaneously keep housing inflated to protect older Australians’ fake wealth, while at the same time making housing more affordable to younger Australians by boosting supply: a contradictory and mutually exclusive situation.
At least Labor have a policy to reduce house prices – by restricting negative gearing and CGT concession tax breaks – even though it doesn’t go nearly far enough. This is more than can be said for the Coalition who spruiks boosting supply – largely a state responsibility – without actually providing the states with any funding to do so, at the same time as it seeks to boost already rampant population growth via further increases in immigration, thus overwhelming supply even more.
Ultimately, if you care about housing affordability your choice is to back Labor’s negative gearing and CGT reforms – a bit-part solution – or back the Coalition’s do-nothing approach.
