With election looming, government has three ways to ease housing crisis
Solving the housing crisis looms as possibly the defining issue of the next Federal election, and here are three immediate fixes that could be applied to address this generational issue.
As the upcoming government election draws near and the housing crisis continues to worsen, it is clear the election will primarily revolve around the government’s proposed solution to this crisis.
Recently, discussions around rental freezes and controls were reignited but as history shows, this is not a viable option and, if anything, will worsen the affordability and supply problem.
Federal, state and territory governments have committed to build 1.2 million new homes in five years from July next year. But this plan has also been subjected to claims it is unrealistic given the woes in the building sector.
The solution ultimately lies in unlocking supply, and there are three steps Australia should take to begin easing the housing crisis and delivering necessary stock.
1. Allow for more density
The solution to housing supply is higher housing density.
We can’t create more land, only become more innovative in how we use it.
ACT, NSW and Queensland are leading the way.
ACT is leading Australia with a recent proposal to change its planning laws to allow townhouses, duplexes and higher density to be built as-of-right.
This variation would allow for medium-density developments, such as townhouses and duplexes, to be built on land now zoned solely for detached housing, which makes up approximately 80 per cent of residential land in the ACT.
NSW and Queensland have taken a different approach, turning to secondary dwellings, such as granny or Fonzie flats.
Since 2010, the NSW government has allowed secondary dwellings to be built as-of-right in all residential zoned areas. As a result, there are twice as many people living in one- and two-bedroom dwellings than there are throughout Australia.
Queensland is beginning to see the light, with the state government announcing an initiative in September 2022 to provide a two-year embargo on the laws that prohibit secondary dwellings being built without approval.
It’s too expensive to build new infrastructure, the better solution being to build more houses around existing infrastructure.
Australians are starting to embrace density and investors are reaping the benefits as land values in our capital cities continue to rise. This makes land the best asset you can own.
2. Help retirees downsize
Australia’s pension is facing a significant challenge.
The ratio of retirees to tax payers increases each day as the largest generation in Australia, Baby Boomers, retires and the smallest, Generation Z, replaces them.
With a pension dependent culture and six out of seven retirees relying on the pension, it comes at a significant cost to our government.
Many of our retirees collecting the pension are living in multimillion-dollar homes and are hesitant to downsize out of fears they will jeopardise their ability to receive the pension as home value is exempt from the assets test.
This leaves 1.2 million Australian homes owned by retirees, who, 90 per cent of the time have only one or two occupants and three or more bedrooms.
By providing incentives to retirees and pensioners who sell their homes and downsize, the government can both reduce the pension cost and unlock more housing supply.
3. Incentivise Australian investors
When housing supply and affordability issues are raised, the blame is often pinned on property investors.
But it’s mum-and-dad investors who are doing the heavy lifting, providing housing supply at a faster pace than the government, while building their wealth to avoid relying on the pension in retirement.
Three out of 10 houses in Australia are rented, and almost all of them are owned by mum-and property investors. In other words, 1 in 3 Australians have a roof over their head thanks to mum-and-dad property investors.
For every government-provided social house in Australia, there are almost seven investment houses providing the supply that is desperately needed.
If the government wants a fast solution to the housing crisis, it should provide incentives for mum-and-dad property investors, rather than providing accelerated depreciation and tax discounts to super funds and foreign corporations.
The housing crisis will not be quickly or easily solved, but the time to act is now before more Australians are struggling to find adequate housing.
