FIXING
AFF
Australia’s housing crisis has and the problem is particular ome ownership rates are falling fast, halving over recent decades for lower-income earners aged 24-34, from 57 percent to 28 percent. This runs the gamut from people experiencing homelessness and in crisis accommodation, those in community housing, and people seeking market rental and home ownership. The latest Committee for Sydney’s annual Life in Sydney survey showed concerns about housing affordability and cost of living back in force as fears about COVID-19 and its economic impacts subside. To solve this, we need to pull together on a range of solutions — people affected are in different life circumstances; some policy changes will help one group more than another. So we need more than one solution.
H
CREATE AN OWNERSHIP SOCIETY The rate of home ownership in Sydney, as in the rest of Australia, is declining. In 1961, approximately 72 percent of those in their 40s owned their home, compared to 63 percent in 2021. Over a long period, housing costs have risen faster than wages, which means young households have to save for more years for a down payment. If these trends continue, Sydney will become a
place where home ownership is increasingly only available to those lucky enough to inherit wealth from their parents — profoundly undermining the core Australian values of giving everyone a fair go. Home ownership matters because — without a much larger social housing sector (desirable but unlikely in the short term) or strong rent control in the private market — it is the only way to have a secure retirement in Australia. It is naïve to wish this fact away. We should be doing everything possible to create an ownership society, where people who work hard are able to get into the housing market. If we are serious about broadening access to home ownership, we need to give the advantage to home buyers for their primary residence, rather than to people who are buying homes as an investment or as holiday/second homes.
and/or giving renters an equivalent value of non-real estate assets that are excluded from the test. l Eliminate stamp duty and replace it with an annual land tax to reduce transaction costs. l A down payment assistance program, if narrowly targeted to first time home buyers, could help, although it may also have a countervailing impact on increasing prices. Another version of the same idea is National Housing Finance and Investment Corporation’s ‘build to rent to buy’ program. l And, while we know neither major political party is currently willing, something that would help is limiting negative gearing for private landlords — specifically, only applying investment business losses against other investment business income, not against wage and salary income.
THINGS THAT WOULD HELP l Reset the capital gains tax discount for proceeds of private rental property sales — as recommended by the Grattan Institute and others, this should be cut from 50 percent to 25 percent, reducing the excess incentive for private landlords to bid up property prices.
In addition to broadening opportunities for home ownership, reforms like this will tend to channel investment into productive parts of the real economy, rather than real estate speculation.
l Equalise the age pension assets test for renters and owners — capping the value of homes that can be excluded from the test
MAKE RENTING MORE SECURE Renting will, of course, remain a big part of the housing system in Sydney.
22 | Inner Sydney Voice | Autumn 2022 | innersydneyvoice.org.au
