Your housing affordability wishlist

If you could put together a small wish list of things the Government could do assist with housing affordability what would they be.

I am a big believer in longer term outlooks so mine are all infrastructure based to reduce the need to be located so close to the CBD.
But my main two are:

1 - Fast Rail connecting major cities.
This has always been my number 1! Think about the opportunities if you could link say Melbourne to Sydney in under 2-3 hours.
You could live halfway and have your choice of Melbourne, Sydney, Canberra for work in the same amount of time it takes to catch some metro trains right now.

2 - A proper network. Let’s call a spade a spade, the NBN is arguably the worst project ever delivered from a government for one of the most critical components of modern life.
It’s massively holding back our potential of innovation. It also further increases the need to be located in our CBD’s. As I keep saying, work/life balance shouldn’t be a nice to have anymore it should be a requirement and to make this more efficient every house needs proper internet. How does this help affordability? Less time traveling to work and requirements to be in the office means people can start to move away from our cities.

 

several political parties did try to change it but population of home owners and investors decided that was not in their best interest (gravy train of tax breaks that make property very attractive). what you are proposing does nothing to improve house affordability

edit: spelling correction.

 

Fast rail would be a boon but it should bypass Sydney/Melbourne/Canberra/Newcastle CBDs, it should be well away and provide access to a transit hub (eg. Westmead, Hamilton, Broadmeadows etc) to avoid the congestion on the city lines.

The structure of current FHB incentives do little to ease their entry to the market eg reduction in deposit requirements, dropping stamp duty just pushes them into more competitive sectors with higher prices. Not sure how to achieve outcomes which don't put upward pressure on price.

 

I think the problem is as much a social thing as it is economic/political.

The fact is that people can already move to Adelaide, Aulbury, Perth, Cairns etc get jobs, have a lovely life and buy a nice place to live.

But they don't.

The pull of friends, family, habit etc is just too great.

 

They have fast rail in Japan. Too expensive for many of the locals to use daily

 

I'm probably out on a limb here as this subject has likely been covered previously but Govt costs to negatively gear and support property investors shouldn't be viewed as a 'sacred cow' and as an infinite resource when homelessness, health care and other Govt priorities also require critical funding.

Therefore, change the way current negative gearing rules are applied by following the UK model. This provides taxation relief by offsetting a property investment loss in a particular year against profits that arise in future years. Losses couldn't be offset by personal income and isn't removal of negative gearing. It's an opinion only (I'm sure someone will have modelled it) but if the tax changes are introduced and applied sensibly, I think house prices will steady and help with future affordability without causing a dramatic slump.

I find it disturbing that an asset can be purchased in the knowledge it will incur significant losses from the outset and likely for many years to come (Melbourne and Sydney at least). Any asset that requires Govt supported funding to sustain it over an extended period is not a viable investment.

Happy for it to be (politely) explained where my thinking is wrong

 

don't be talking sense while noses are in the troughs.

 

This often gets brought up, however you cant take the bad and separate the good in an argument. According to the ATO

Total dwellings in Aus 10.3m
3.1m is rental stock - basically 1/3 of all properties are investment stock

1.2% is supplied by the govt.
98.8% is currently supplied by 2.15m investors owning 3.7m dwellings.
90% of these investors only own 1 or 2 properties
0.8% of Australians own 6+
43% of these investors are on an income of $<50k
78% earn less than $100k
41% of all properties owned by investors are either neutral or positively geared, Generating an annual average profit of $6000, vs an average annual loss on the remaining 59% of $6500

As you can see its not the large burden everyone likes to talk about, its everyday people trying to build some sort of wealth for themselves, whilst also doing the govt a huge favour and supplying 3.7m dwellings for a very small cost difference.

Annually we spend over $50b and growing on aged pensions in Aus, 70% of people over the age of 65 are on this pension due to not having adequate wealth, I think your suggestion would multiply this enormously.

 

Tell that to most new businesses, of which the majority will go bankrupt in the first 5 years, affecting all sorts of other business suppliers etc. Most ppl who invest in real estate won't go belly up after 5 years.

 

The debates about what negative gearing is, the phenomenon of businesses incurring initial and temporary loss for later lasting gain, the applicability of comparative overseas governance models and the valuation of housing have gone their rounds in PC already. PC hosted a number of rounds in various drawn out configurations and the records are in the electronic data library.

Most appropriately the debates were heightened when the nay-sayers, represented by many academics, millenials and new migrants perceived a legislative change was at hand at the last federal election. Their expectation of legislative change was rebutted despite championing by the Greens, the ALP and the polls.

Those past debates in PC usually ended in mutual polite disagreements. We basically have different windows on life despite having the same political and economic environment. I can understand why the regular forumers in PC would be reluctant to engage in any more of this to-and-fro debate.

 

If we're talking addressing affordability, cheap and nasty (not quite) housing.

We need to revisit the old model of inner city housing. small blocks <200m2, 3 bed terrace type houses & 1/2 bedworkers cottages, zero lot lined, limited parking. This generally increases density without the percieved density which accompanies high rise, does not require lifts or major infrastructure etc. If amenity is to be added (obviously at a cost, a common including parks, tennis courts, communal pool, community gardens etc could be added).

I have been looking at several inner-city sites from Pyrmont, Camperdown, Tempe, Sydenham, St Peters etc where the blocks are a postage stamp, rear lane access provides off street parking. Land cost in the area is a killer with a nicely spec'ed 3 bedder coming in around $1.3-$1.4M (not FHB category for inner city but with lower land cost would become sub-$1M)

Something lower spec on a $600k block in the western suburbs should be much more affordable.

(Maybe I need a reality check).

 

this is coming from a very rose tinted property investor perspective imo. are the figures you're using for wages pre or post investment losses, I suspect after and thus give a extremely misleading figure that makes it seems like property investors are "battlers" (*puke*). the reality is that most property investor will turn a blind eye to the distortions of tax breaks and easy credit that their particular asset class enjoys. I don't.

 

It may be post, I’m not sure. But even if it is post, why shouldn’t we get “some” tax relief early when the portfolio will end up paying large amounts of tax later on? Your saying it like it’s a bad thing. For the ones that are willing to give it a crack to secure a future for themselves and provide housing for others, why not. What’s your alternative? Don’t, and then end up on the pension costing a hell of a lot more?

To the “battlers” comment, I wouldn’t say most investors wouldn’t call themselves that. But at the same time it’s not easy, if it was everyone would be doing it. It takes sacrifice & a lot of hard work.

 

There are two areas where affordability is challenged. The first is ownership affordability. The other is rental affordability

I'm all for high speed rail between SYD and MEL, with maybe 6 stops along the way . Say Goulburn, Canberra, Wagga, Albury Wodonga, Wangaratta and Shepparton,

Another from MEL to Mildura, with stops at Ballarat, Bendigo and Mildura

Another from SYD to Dubbo, with stops at Lithgow, Bathurst, Orange and Dubbo

It would allow population to spread out across our south eastern states. Take pressure off Sydney. Grow the population . Increase the tax base.

But the Govt would have to ensure water supply as well by building significant additional water infrastructure in the North of QLD and NT and WA to harvest much more water than we currently harvest. You really shouldn't be considering high speed rail and the rapid growth of cities along the rail corridor without also making sure you have plenty of water. Australia has loads of surplus water ...a lack of rain isnt our issue. Harvesting it and sending it to our driest areas is our issue

Then set up special economic zones in each of the 14 or 15 regionals through which the rail will run, providing companies who relocate there with generous tax breaks to do so... for up to 10 years

A plan like this would also see the Govt raise massive amounts of revenue from value capture taxes as developers rush to buy and develop land along the corridors named above

That's how I'd go about nation building , creating massive numbers of jobs, drought proofing the country, turning the nation into the worlds food bowl , all while also improving housing affordability. But I'm not a federal pollie beholden to special interest groups, only governing for the next news / election cycle.


With regard to rental affordability - more NRAS please . The 15 year variety proposed by Labor at the last election. Again - massive construction work involved. Jobs, jobs, jobs.

 

I find it interesting you don’t think these things would improve housing affordability.
I don’t work in short sightness so perhaps these suggestions are too far in the future to understand how they would improve affordability.

In a nutshell, as long as you keep people relying on quick access to the CBD then your not going to ever truly solve the issue. People calling out for policy changes to “ban negative gearing and reduce CGT” IMO is the purest example of short sightness. It’s a quick fire shot! Let’s do it and see what immediately happens....

We need to think LONG term. Let’s allow and insensitive people to move away from our CBD’s where we have an abundance of available land.

@euro73 nailed it! Think about connecting our major cities via these hubs. So many of these places are beautiful but too far away from reliable work. Make them accessible and make them cheap (which they are) and you can guarantee with time their will be a huge migration of people away from our cities.

As for the network it’s just another critical item to get people away from our concentrated CBD’s and around.

 

No. Houses in the middle of no where are NOT what people want. People are social creatures and want to be near family and friends (for the most part). Urban sprawl is not something anyone wants and in some respects I think it’s a little NIMBY like.

To address your points. Fast rail isn’t fast if you have to stop multiple times. This then makes it impractical for people to commute into cbd or regional hubs. Also as others noted it would cost a lot to travel back and forth, that time in travel is also soul destroying and typically not compensated by the employer.
The nbn is only good for knowledge workers to work remotely, if you’re customer facing or produce a tangible good how does it help?

CGT discount pretty much kicked off the housing boom (tied to neg gearing), you fix that, properly is no longer the asset of choice and pricing drops. Put in incentives for developers to build quality affordable housing and reduce they barriers nimby neighbours and councils have to reject.

 

This is why the arguments start. No one agrees on the objective.

Improving affordability can mean
Opening up new areas (eg with fast trains) but people will have to commute longer.

increasing use of existing land (more apartments) but people will have to live in smaller places.

Decrease prices of existing properties. Cutting ng will work in the short term, but with increasing population it might mean those who have to rent will end up paying more.

Sure everyone wants a quarter acre block 30 minutes commute to work. But can anyone point to any city the size of syd / mel that does it well?

 

Smaller places is what we need. AU house sizing is a terrible joke, the size that people want is far beyond what they need.

Ten lessons from cities that have risen to the affordable housing challenge

telling quote “30 years of largely unregulated speculative housing. A lack of federal government involvement has exacerbated these problems.” sound familiar.

 

But then some will decry how kids have no yard to play in. Also, at what point should governments dictate to people how much room they should have?

 

Create public spaces where you go out and socialise rather than barricade yourself in your own gated community would be my response to that. Also quantitively wise I suspect the time is the backyard as a percentage of time in and around the house would be closer to 0% . people also overestimate how much time they spend there., it’s the dream they want to live. Sort of like people buying 4x4 thinking they’ll go outback or on the beach....most of time it’s to the supermarket and to pick up the kids.