Some good housing policies are being proposed by both the major parties, but they are not enough as they all put upward pressure on prices. They must be balanced by policies that will put downward pressure on prices. For example:
- Reduce the influence of investors on the market.
Stop negative gearing and CGT discounts except for sales to first home buyers. This will put downward pressure on prices of existing housing and help first home buyers. - Reduce the influence of developers on the market.
Use the revenue generated to fund local government development of land for housing. That land should then be sold at the cost of development, forcing land developers to stop price gouging every time demand exceeds supply.
Negative gearing and CGT discounts were introduced to encourage investment in the housing market to increase housing supply. It was abolished in 1985, but a shortage of housing and rents led to its reintroduction in 1987.
The real question is should government policies encourage investment properties for rent or home ownership?
The Benefits Of Home Ownership
Home ownership has strong advantages for the community and government as well as for the home owner. Over time rents increase as property prices increase. A home owner’s costs will decrease. A home owner will have a much greater disposable income than a renter, providing considerable benefits to the national economy. In later life a home owner is much less likely to require government rent assistance than a renter, reducing the cost of government assistance.
It is clear that governments should provide strong incentives for home ownership.
Currently there is an acute shortage of housing and a shortage of capacity to quickly increase supply. Policies should be aimed at encouraging first home ownership while discouraging investors. Abolishing negative gearing and reducing capital gains tax discounts will generate revenue that can be used to increase land supply through local or state governments and put downward pressure on prices.
It is clear that governments should provide strong incentives for home ownership.
Will Governments Support Policies For Home Ownership?
It is not clear that governments will support policies that lessen incentives for investment properties. 65% of Federal Government politicians own 2 or more properties, many are investment properties. Only the few politicians that are genuinely concerned about their fellow Australians will vote for changes that will reduce their investment returns.
We hope one of the parties will rise to the challenge.
Very interesting article!