This is the latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.
NSW to trial $780m shared equity scheme for first home buyers Guardian reporter, Christopher Knaus, reports on a NSW Government trial (over two years, starting in January 2023) involving a $780m shared equity scheme for first homebuyers. Similar schemes exist in the UK and in certain other Australian states, including WA, Tasmania, SA and Victoria. The NSW trial, which is designed to help single parents, older singles, nurses, police and teachers to buy their first home, allows buyers to enter the market with a deposit as low as 2% of the purchase price, and will see the government contribute an equity share of 40% for a new home or 30% for an existing dwelling. Eligibility for participation is subject to a means test, specifying a maximum gross income of $90,000 for singles and $120,000 for couples. Properties purchased under the scheme must be under a specified maximum value, which varies by location ($950,000 in Sydney and some regional centres, down to $600,000 in other parts of NSW).
Housing affordability ‘crisis’ needs business solutions Sydney Morning Herald economics editor, John Kehoe, writes about a recent report by SGS Economics and Planning, warning that the cost to taxpayers in today’s dollars will hit $25 billion annually by 2050 if nothing is done to improve access to affordable housing. The report (Give me Shelter) was commissioned by Housing All Australians (HAA), an initiative founded by Rob Pradolin, former General Manager of Frasers Property Australia (previously known as Australand). The economic modelling in the HAA report takes account of estimated extra costs resulting from housing affordability stress causing higher expenses for health and mental health, the cost of domestic violence services, compromised educational opportunities and productivity losses due to staff being unable to find affordable accommodation near their work. A diverse range of business organisations and industry leaders, including former ACCC chairman Graeme Samuel, have backed the HAA initiative. Pradolin says that the lack of affordable housing is not just an issue for low-income households, but also one for business in attracting key workers close to where they serve society. HAA calls for a collaborative approach from industry and all levels of government. See also the Give me Shelter report.
New fund will co-invest in home loans of teachers, nurses, police AFR journalist, Gus McCubbing, reports on the new Home Owners’ Partnering Equity (HOPE) fund, a shared equity scheme designed to assist essential and frontline workers in NSW such as teachers, police, nurses and allied health workers to acquire a home in close proximity to the CBD areas where they work. The fund is launching in Sydney with an initial $40m commitment, but with an aspirational target ten times that size. McCubbing says: “HOPE aims to help roughly 800 families buy a home near where they work while targeting 10 per cent returns for investors such as superannuation funds, family offices and philanthropists.” He cites HOPE’s CEO, Tim Buskens, as saying HOPE is “here to prove that doing good pays off for everyone”, as it is structured to deliver a commercial return to investors. Buskens is also cited as saying that there are roughly 2.7 million essential workers in Australia, 600,000 of whom live in “cramped and substandard” accommodation. Homeowners who participate in the HOPE scheme can pay down the HOPE equity share or sell the entire property at any time, and HOPE is not proposing to impose any pre-qualification income limits or price thresholds, unlike various state government shared equity schemes, and also unlike the new Labor federal government’s recently announced Help to Buy scheme.
More rented, more mortgaged, less owned: what the census tells us about housing Curtin University Professor of Economics, Rachel Ong, writing in The Conversation, offers some observations about changes in Australia’s pattern of home ownership, based on the 2021 national Census. Although overall percentages of Australians who own their home or rent haven’t changed markedly in the 5 years between the 2016 and 2021 Censuses (eg. the overall fall in overall homeownership amounted to a modest 2%, from 68% down to 66%), a deeper analysis reveals much more marked changes. For example, the proportion of homeowners without a mortgage dropped substantially, from 42% to 31%, and most of this change occurred between 2001 and 2006. The most adversely affected were, unsurprisingly, the younger age cohorts. The share of owners in households headed by 25–34-year-olds fell from 50% to 43%, with less significant falls in the 35-44 and 45-54 age groups. Other significant trends over the 5-year period include a significant fall in occupation of freestanding houses (82% down to 72%), with the proportion of those in apartments climbing from 8% to 14% – changes more evident among owners than renters.
Australian governments have spent $20b on assistance for first home buyers, but who has really benefited? ABC News business reporter, Gareth Hutchens, reviews a recent AHURI report detailing, amongst other things, how much money has been spent helping first home buyers (FHBs) in the last 10 years, and how Australian policymakers have distorted our housing market in favour of property owners since the 1980s and 1990s. The report explains how such “demand side assistance” to FHBs has changed Australian society and exacerbated the problem of housing affordability. Home ownership peaked in Australia above 70% in the mid-1960s, boosted by a range of government supported demand and supply side measures. In more recent years, governments have shifted emphasis to boosting FHB-purchasing power through cash grants and tax concessions, and on enabling low-deposit loans, thereby increasing the chance of a marginal FHB outbiding others, but at the same time placing further upward pressure on house prices. The AHURI report estimates that in the decade to 2021 more than $20 billion was spent by Australian governments on demand-side schemes, which has contributed to the upward house price spiral, at the same time benefiting existing homeowners. This in turn has contributed to a gradual decline in Australia’s home-ownership rate since the early 2000s, and a steep decline amongst younger Australians. The report’s authors say there is scope for a much more active supply-side contribution to affordable home ownership in Australia, pointing to better examples of FHB assistance in places such as Finland and Singapore. One idea they rate as worth considering (while acknowledging it might face significant barriers to implementation) is that of economist and housing expert, Dr Cameron Murray, who advocates mimicking an idea from Singapore, where home ownership has been boosted from 20% in the 1960s to nearly 90% today. Murray is cited as supporting the need for a 21st century government funded housing supplier that will build non-market housing and sell the homes at cost to eligible Australians, with a discounted mortgage and purchasers able to pay the deposit and repayments using their compulsory super contributions. According to Murray: “In a world of unequal wealth and incomes, market provision of housing usually fails to provide quality housing options to young and low-income households.” See also related AHURI report, Assisting first home buyers: an international policy review.
A million homes sit empty, so where are they and can they help ease the housing crisis? ABC News reporter, Erin Parke, notes that data from the recent Census reveals that a million houses are sitting empty in towns where, just metres away, working families are being forced to live in tents. According to Parke: “…census data on unoccupied homes showed a patchwork of under-utilised housing stock in both coastal and inland areas”. She cites demographer, Professor Amanda Davies, as saying there are two key stories. The first is second-home ownership, with baby-boomers (amongst others) having second homes and holiday homes, many of which are vacant mainly because census night is in August, and therefore falls in mid-winter. The second is remote or regional areas using seasonal labour, where houses are empty when there’s no harvesting or other intense farming activity, and mining towns which sometimes face boom-and-bust cycles leading to under-utilisation of housing stock during times of reduced mining activity. Parke notes: “Some of the most extreme examples of unused homes were recorded on Victoria’s Mornington Peninsula and Phillip Island, where in suburbs like Portsea three-quarters of properties were empty. Unusually high vacancy rates were also recorded along Great Ocean Road townships, on the Queensland coast, and in the surfing towns of southern Western Australia.” It is unclear how and to what extent the pressures of Covid may have impacted relevant census data. Although some jurisdictions have trialled using fiscal penalties to induce people to rent out their second properties when they are not in use, such measures are controversial and can be difficult to implement. Vancouver for example introduced an Empty Homes Tax some years ago, in response to their housing affordability crisis, with unclear results.
Homes for All: A roadmap to affordable housing Anglicare Australia (well known for, amongst other things, its sponsorship of the annual Rental Affordability Snapshot for households on low and/or uncertain incomes) has recently published a roadmap which offers proposals to make renting more secure and more affordable, and to end the undersupply of affordable housing. The roadmap also proposes phasing in (over 10 years) a regime of tax reform, including incremental reduction of the 50% capital gains tax discount, and a re-orientation of negative gearing concessions towards investment in social and affordable (rather than market rate) housing. Anglicare’s “The Cost of Privilege” report showed that negative gearing and CGT concessions cost the federal budget a staggering $88 billion per year, and overwhelmingly favour people on the highest incomes. The revenue savings from these proposed tax reforms would be used to sustainably fund and maintain social housing, and to fund tax credits and other measures to better leverage private investment through the National Housing Finance and Investment Corporation (NHFIC). Anglicare’s proposals include a program to expand social and affordable housing at a rate of at least 25,000 homes each year, up to an aggregate target of 500,000 new homes over 20 years. This would include 300,000 new social housing properties, including dedicated Aboriginal housing, and 200,000 low-cost rental properties for low- and middle-income earners. In this context, it is worth noting that our current rate of new social housing construction is only about 3,000 dwellings a year. Other initiatives proposed by Anglicare include State, Territory and Local Government incentives for new developments to include an element of affordable and low-cost housing; nationally consistent legislation protecting the rights of all renters by ending no cause evictions and unfair rent increases; a trial of secure leasing models for mainstream tenancies; reform of Commonwealth Rent Assistance (CRA) to help those in rental stress, an increase in the amount of CRA, and indexation of CRA to changes in average rental costs, rather than general inflation.
Oliver Frankel is a former corporate finance and M&A lawyer, who has spent the second half of his career in finance, investment and management. Most recently, he has taken a strong interest in how to address the affordable housing crisis.
Contributions to Pearls and Irritations
Your contribution will fund quality independent comment and analysis in Pearls and Irritations
Contribute
