Making housing more affordable is a social and economic imperative, says an independent think tank.
Ahead of the upcoming federal election, the Grattan Institute has released a blueprint of the policies “that should be on the agenda of whoever wins”.
High on the list: housing affordability. As the authors of the blueprint acknowledge, Australia has among the least housing per person of any OECD country and is one of only four OECD countries where the amount of housing per person reversed over the past two decades.
The historical shortage of housing in Australia is “largely a failure of housing policy”, says the document. “Planning rules are highly prescriptive and complex.” As a consequence, the constraints on development in metro cities has led to a shortage of medium- and high-density housing.
“This is primarily a problem for state governments – they set the overall framework for land and housing supply and govern local councils that assess most development applications.”
As the authors of the document note: the federal government has committed to building 1.2 million homes over the next five years; the target is backed by the New Homes Bonus – a $3 billion incentive for states and territories to deliver the extra homes.
“These incentives need to be reworked,” says the Grattan Institute. The National Housing Supply and Affordability Council expects net new housing supply to total 903,000 homes over the five years to 2028-29, below the 1 million home baseline over five years at which most states can expect to be paid the bonus.
Most states are likely to substantially undershoot their per-capita share of the national baseline. The federal government should therefore:
- adjust the baseline housing targets for states at which the New Homes Bonus becomes payable to better align them with cyclical housing conditions
- bring forward the New Homes Bonus to be paid in instalments, subject to progress towards meeting the recalibrated baseline rather than at the end of the five-year period.
“The federal government should also extend its new National Competition Policy to cover reforms to residential land-use planning rules, such as setting minimum national standards for residential zones to allow more townhouse and duplex developments construction.”
To address the skill shortage in the construction sector, the federal government should reform permanent and temporary employer-sponsored visas to ensure Australia can find the skilled workers needed to build these extra houses, say the authors, including streamlining pathways to skilled migration for scarce skilled trades workers.
Stamp duties among the most inefficient taxes
The authors also recommend that state and territory governments abolish stamp duty and replace it with a broad-based land tax.
“Stamp duties are among the most inefficient taxes available to the states and territories … Grattan Institute has previously estimated that shifting from stamp duties to a broad-based property tax would improve housing affordability and raise rates of home ownership.”
Removing stamp duty could also accelerate housing construction, add the authors, helping meet the national housing target of 1.2 million homes over the next five years.
In contrast to stamp duties, property taxes – which are levied on the value of property holdings – are the most efficient taxes available to states and territories, say the authors. However, they concede that property taxes “are often unpopular precisely because they are highly visible and difficult to avoid”.
It’s also difficult for states and territories to make the transition without significant revenue impacts. “The federal government should ease the transition by giving temporary revenue guarantees to any state making the switch.”
Australia’s housing problems have been decades in the making, says the Grattan Institute. The time for action is now: “making housing more affordable is a social and economic imperative”.
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