Our Dangerous Housing Crisis Requires A Super Solution
The difficulty in attaining home ownership for hard working Australians is the greatest policy challenge our society currently faces.
In the last forty years Australia has been moving from a country that celebrated the highest rate of home ownership to a country of lords – land lords.
The Liberal Party’s founder Robert Menzies placed boosting homeownership as one of the central pillars upon which his party would stand – in addition to low and fair taxation.
It’s in the Liberal Party’s DNA to promote policies that empower the homeowner.
Currently the investor has an unfair advantage. If this is allowed to continue fewer people will own more property – funded from the rents paid by the very people being locked out of the market.
Meanwhile the housing market in the big cities has become extremely volatile with huge price increases as investors clamour to take advantage of historically low interest rates, easy credit including 100% loans, and tax incentives that only work in high interest rate environments.
If nothing is done, the risks of a correction grow. The OECD warned of this very concern just last week, I agree, I’ve been raising it for years.
A correction will be incredibly damaging for all Australians.
Any policy reform must achieve two things: Ensure the stability of the market, and empower the homeowner.
Labor’s inflexible policy of a blanket scrapping of negative gearing for second hand properties has clear and present grave risks to the stability of the market, it’s irresponsible and should not be enacted.
I have THREE core proposals that will make housing more affordable for homebuyers.
ONE: Stabilise the market by empowering the Australian Prudential Regulation Authority (APRA), or another statutory independent body, to target housing market volatility to a prescribed broad band by setting the minimum percentage deposit allowable for new investor loans – and reviewing it on a monthly basis.
TWO: Allow home buyers to afford a deposit by giving them access to their superannuation.
THREE: Open up vast tracts of affordable housing supply by boldly taking action and connecting big cities with their regions via fast rail connectivity.
Let me expand.
Making housing more affordable does not mean we make the market crash, Labor’s policy risks this.
Access to superannuation to make a deposit does make housing more affordable.
Inflationary effects would be countered via APRA’s powers to constrict access to credit for new investor loans. If the market accelerates dramatically as a result of people accessing Super, APRA can respond.
If Super is used, then the house would be part of the Super account. Any gains after sale would be required to go back into Super. Upon retirement, the home owner would have access to the accumulated equity contained within the home and draw on that equity via a ‘reverse mortgage’ style line of credit. The house would be an assessable asset, which would reduce the Government’s exposure to claims on the aged pension.
Super is rightly designed to provide a reasonable standard of living in retirement. Owning the roof over your head with an accumulated pool of accessible equity within it, clearly provides this.
It is unacceptable that our future standard of living is reliant predominantly on bets made in the stock market via our managed super funds, and not being able to put your own home into your super fund.
Now, if you buy a home in your 40s, and retire in your 60s, you can cash out your Super and pay off your mortgage. The Government would be liable for the aged pension, which is what Super was supposed to replace. So currently, clearly, the Super system is not working.
Allowing APRA to adjust monthly the access to credit for new investor loans is no different to allowing the RBA to set interest rates on a monthly basis. In fact, having APRA’s lever available would allow the RBA to lower interest rates for the benefit of the non-housing market economy, and not worry as much about the inflationary effects it would have on the housing market, as APRA would respond in kind.
The RBA’s recent Governor Glenn Stevens has commented on the clear dampening effect APRA’s powers can have on the housing market.
Supply too is an important factor. But simply boosting supply without changes to the advantages the investor enjoys, will simply turbo boost the advantage the investor enjoys.
Notwithstanding this point; new and rejuvenated regional cities on a high speed rail line 30 min or an hour out of Sydney or Melbourne could provide homes for millions of people for generations to come. It would rejuvenate our regions and relieve our cities as our nation expects to house millions more in the decades ahead.
These are my thoughts on how to remedy the housing affordability crisis.
It’s time for both sides of politics to commence a positive contest of ideas, not negative political points scoring, and develop reforms that will allow all Australians with a job the chance to fulfil what is their birth right: being able to afford their own home.