Finance Minister Mathias Cormann appeared on ABC Q&A where he was grilled on housing affordability:
DANIEL COHEN: Yes, my question relates to housing affordability and tax reform. My question is for the Coalition Minister Cormann. My question relates to the fact I work with first-home buyers every day and the struggles are real in terms of them being priced out of the market. Only last week on Hack Live on ABC, we found there was an investor sitting next to a first-home buyer and the investor found it easier to go and buy their 201st property than a first-home buyer could get their first property. Then we see that first-home buyers are at all-time lows, while investor activity is at all-time highs. So my question is why is the Liberal Party doing nothing to help first-home buyers? If you don’t agree with the reforms from the Labor Party, why not come up with reforms of your own?
MATHIAS CORMANN: Well, firstly, the best way to increase housing affordability is to increase supply of housing and, of course, the worst thing you would do if you want to increase the supply of housing is to reduce the level of investment. I mean, Labor’s negative gearing policy, a range of economists have now clearly pointed out, would drive down the value of existing homes. It would increase the cost of rental accommodation. It would distort investment in the property market but, like, if it was really about housing affordability, why is Labor proposing to remove negative gearing from investment in shares in small business, in commercial property and the like? So what we would – what we would say is, I mean, negative gearing, if you look at what it actually is, it enables people to leverage the value of the existing home and the existing income to invest in income producing or appreciating assets and that is the way families around Australia have gone ahead for a very long time. Now, whether these are investments in a small business, whether these are other investments, now what Labor is proposing is to indiscriminately remove that opportunity and to say you can only use it when you invest in new housing developments. Now, that means that there will be more competition for first-home buyers when they want to buy a new house. So we don’t believe it’s a well thought out property. The issue of housing affordability is real and to way to deal with it is to ensure working together with state and territory governments in particular that we free up the release of land, that we increase the supply of housing, not by reducing the level of investment going into the house market.
A few points for Cormann.
First, if increasing supply is the important issue, then where is the Coalition’s policy?
Where are the federal incentive payments to the states to free-up land supply, relax planning, and build housing-related infrastructure? It is the federal government, after all, that has decided to run a high immigration program, so the least it can do is provide the states – the ones primarily responsible for service delivery and infrastructure – with the means to cope with this growth. But the Coalition has offered absolutely nothing on this front.
Second, if housing supply is the main issue, then surely chanelling negative gearing towards new builds would boost supply at the margin, making it a better policy than maintaining the status quo, where over 90% of investors receive a tax benefit for bidding-up the cost of established housing?
Third, the claim that first home buyers would be out-competed from buying new dwellings under Labor’s policy is laughable given they are already being massively crowded-out by investors, but mostly in the existing market, which again accounts for over 90% of investor mortgage demand (see below chart).
Finally, the claim that removing negative gearing would prevent families from “getting ahead” is laughable. Surely the best way for them to “get ahead” is to ensure that they don’t have to pay-off some of the world’s biggest mortgages and can put a roof over their heads?
What Cormann has shown is that he is an empty vessel that has absolutely not plan for housing affordability.
