By Hayden Groves
Greens’ leader Adam Bandt’s impassioned address at the National Press Club earlier this week, demanded the government immediately impose a rent freeze across the nation. This is on top of equally impractical Greens policy such as imposing on developers a minimum 25 percent of all large apartment developments be set aside as affordable social housing.
Last time I looked, it is the private investor market that supplies 89 percent of all rental homes in the nation. The government provides 11 percent. If seems obvious that if you disincentive private investors (with things like rent freezes), investors will stop providing enough houses for renters. This leads to shorter supply (investors will sell) which pushes rents even higher. This is exactly what is unfolding across the nation right now. Supply is the core of the issue; the rest is mere tinkering.
you can’t magic more housing supply out of thin air
Calling for an end to negative gearing and capital gains tax discounts (another Greens policy) would demolish the current rental housing system, causing a rental crisis far worse than currently experienced. The Greens say they want solutions to address the rental crisis ‘right now’. Well, you don’t and simply can’t solve it by turning on the very people that supply the houses; you can’t magic more housing supply out of thin air if all your policies are designed to whack investors. Unless, of course, the aim is to have no private investors at all, which would cost taxpayers a mere $3 trillion – the value of rental homes in Australia.
The Greens have also called on more government-built housing, something desperately needed. Yet they refuse to back the $10b Housing Australia Future Fund which aims to deliver 30,000 more affordable homes, blocking it in the Senate.
To get more supply in the market immediately, you could start with stamp duty reform. Imagine offering a stamp duty rebate for investors that offered property at a below-market rent that guaranteed a certain reasonable return with fixed moderate annual rent increases. Investors would buy and supply the market.
Treasurer Jim Chalmers is on the record as a supporter of reforming stamp duty; that hideous, unfair tax that stifles economic growth and impacts affordability. Everyone from the Henry Tax Review through to the National Housing Finance and Investment Corporation (NHFIC) agree with what real estate agents have always known; that stamp duty is a significant barrier to property ownership and rental affordability and is an insidious, transaction-killing tax that should be reformed.
Stamp duty reform doesn’t just help renters, it helps buyers too. NHFIC CEO, Nathan Dal Bon has advocated the benefits of a broad-based land tax as an alternate to stamp duty, stating that a typical household would be better off paying land tax on a median priced property than transfer duty. As an example, a household in NSW would have to pay a broad-based land tax for more than fourteen years to be worse off which is greater than the 12.4 year average holding period of a property.
There is no avoiding that the only way to address rental affordability is by increasing supply and unhelpful policies that seek to diminish supply rather than incentivise it is counter-intuitive madness.
