Jason Falinski’s Housing Survey Gives Real Estate a Free Pass
It’s no surprise that a Senate report on housing affordability chaired by a former real estate developer gives the real estate industry a free pass.
Liberal MP and committee chair Jason Falinski’s view that developers should receive all the housing supply they want may have been authored by the Housing Industry Association (HIA).
Most telling is a dissenting report by members of the labor committee, criticizing the non-objective nature of the findings and its selective citation.
The report, which is the product of more than 18 months of deliberation, tinkers around the edges rather than tackling the fundamental problem – that housing has become a financial asset class.
He claims that negative debt and the reduction in capital gains tax have had a negligible impact on house prices, despite years of evidence to the contrary, including rising land and house prices. which followed the halving of the CGT in 1999.
Falinski instead preferred to focus on removing checks and balances in planning regulations.
However, we support the inquiry’s recommendation to replace the stamp duty with a property tax.
Prosper Australia has extensive research in this area, which the Treasury would find useful if it followed the report’s recommendation to analyze transition costs.
This work inspires asset-rich retirees, low-income retirees, and recent home buyers to switch to property tax for the good of society.
But, surprisingly, the inquiry report calls for all state property tax transition grants to be returned to the federal government, ignoring the significant efficiency gains these taxes will bring by making the pie bigger.
However, any transition should not result in an overall drop in taxes paid by the real estate sector, otherwise housing affordability will not improve.
The fallacy that taxes are almost half the cost of a home was also repeated in this survey. We recently analyzed this claim and found that these costs were only 19.4% of housing costs, not half.
Moreover, these calculations do not take into account that property taxes act to suppress the price of land, thereby improving housing affordability.
Obviously, some housing-related taxes are good for affordability. But you don’t hear that argument in this report. Instead, the narrative is pushed that property taxes are passed on to buyers through higher prices.
This argument further inflates the incredible market power of the real estate sector, which will only be strengthened if oversights in the planning process are removed.
Improving data on land supply is a key priority, with the most comprehensive data set in the country being provided by Queensland. NSW might as well fly blind. Improved data will allow for a more objective idea of what is happening with the land bank, especially after rezoning.
Take a look for yourself – browse your planned local community to see how many stages have been posted, over what timeframe, and how many are left.
This often takes decades at ever higher prices. But yet, land conservation practices like this were covered up in the report.
Land supply data should detail remaining capacity from previous rezonings. Queensland provides publicly available data to show 16.6 years of supply is available, with Victoria at 18.
These are generally considered sufficient housing to enable affordable outcomes for buyers, but this data has not been referenced in the report. Neither does AirBnB’s influence on the rental market.
Another subtlety that emanates from Falinski’s findings is that housing affordability should come after housing affordability.
A recommendation that buyers be allowed access to superannuation will likely drive up house prices, helping only very first movers.
Meanwhile, the rest of the market will be burdened with even more mortgage debt.
Interestingly, the Coalition lobbied for super deposits to be used as collateral, rather than as a deposit.
Sounds appealing, but will again add fuel to the fire.
Scott Morrison likes to brag about using a scalpel rather than a chainsaw when it comes to housing policy.
This rhetoric is repeated throughout the report, but with Australians having experienced a 20-year housing crisis and doing little to tackle housing as an investment class, pressure on social housing and accommodation for crisis will only grow.
Karl Fitzgerald is the Director of Advocacy at property think tank Propser Australia.