The Property Council of Australia was at it again this week: hopping on the mantra of housing affordability to push for policy changes which would advantage their members.
The council’s policy changes are mainly about diverting money from other things into housing, mainly by cutting taxes and increasing government spending on housing, thereby reducing spending on health and education and so on, and by allowing people to dip into superannuation for housing, thereby putting a strain on public pensions later.
The council also wants a reduction in what it calls planning red tape.
(The full policy list can be seen at: www.propertyoz.com.au/nsw.)
Its policy stand is similar to that of several other major lobby groups: the Housing Industry Association, the Master Builders’ Association and the Real Estate Institute of Australia.
It is true that housing is less affordable now than at virtually any time since these things were measured. Affordability is basically a measure of the proportion of disposal income it takes to buy a median-priced dwelling.
But whether cutting taxes and abandoning planning constraints are justified is another matter.
Sure, if you cut taxes on property development, the price of houses will fall. But that is true of almost everything. Various taxes apply directly or indirectly on lots of goods and services equally worthy as housing.
In fact, housing is quite lightly taxed in Australia. There is no GST on the purchase of a dwelling, only stamp duty. Even allowing for a rebate of the GST on the inputs, a GST would be higher than stamp duty.
There is no GST on rent. Again, even allowing for a rebate on the inputs, a GST on rent would be higher than land tax.
There is no capital gains tax on the sale of a principal residence. And the principal residence (or its imputed rent income) is excluded when means-testing all sorts of social-welfare and business-welfare payments. Someone with a few hundred thousand dollars worth of house that in effect yields them a large income in unstated rent to themselves is not counted for welfare. If the same money was in the bank paying interest, the interest would count.
There is no GST on rates, even though rates are a service and nearly all services attract the GST.
In short, we should not be asking to reduce property taxes, we should be asking why is the housing sector treated so generously by federal and state tax regimes.
We could make food cheaper by removing the GST on processed food. We could remove the GST on books and newspapers and on opera tickets, and any number of worthwhile things.
But housing escapes, and still the lobby groups pressure for even greater tax relief.
We all have to contribute to taxation which provides money for community welfare. Housing should be no exception.
If you want to deal with affordability, you have to look elsewhere.
The first is immigration. The more people you have, the higher the demand for land. While ever the population rises, you can expect the cost of the land component of housing to rise. Yet the Property Council, the HIA, the MBA and the REIA are all proponents of high immigration. They are quite legitimately concerned with their members’ interests which is in property development and buying and selling it.
Their concern about affordability is only because it affects construction and buying and selling – money for their members. If a government pursued zero population growth, so that the demand for new dwellings was reduced to replacement only, the price of dwellings would fall, but these industry bodies would oppose such a policy.
They are right, however, in suggesting that government action in holding back land is causing prices to remain high. And they are right to say that, in the past decade or so, state government policies to recoup infrastructure costs from developers has caused the price of serviced land to sky-rocket. But why should home-buyers get a gift from the Government at the expense of other services like health and education?
Maybe the housing party is over. Maybe the 70-30 split of home-owners to renters and the 20-80 split of first home-buyer to others are freaks of the period from about 1965 to 1990 and we will never see them again.
Some things become less affordable – land, servants, water, electricity and higher education, for example — and other things become more affordable – TV sets, mobile phones and furniture, for example.
Another important point missed by the housing lobbyists is long-term affordability.
The cost of energy and water are bound to go up disproportionately as governments respond to climate change. We should not be condemning people to live in badly oriented, eaveless, poop boxes shelling out huge energy bills to heat and cool them, and huge water bills, when the rain is free.
But every time a government demands some energy efficiency or other environmental requirement in new dwellings the lobby groups whinge about affordability. They have condemned insulation requirements, energy efficiency ratings, water recycling and so on.
The question is not whether a new-home buyer can afford to do these things, but whether they can afford not to.
But in any discussion on affordability, long-term affordability is never mentioned by the major housing lobby groups.