The Housing Industry Association (HIA) has released another tirade calling for Australia’s governments to act on housing supply:
“Modelling by the Australian Bureau of Statistics showed Australia’s population broke through 24 million just after mid-night last Monday. After many years where new housing supply has fallen short of demographic demand, housing affordability has become a perennial problem in many parts of the country. With a population set to reach 25 million in just a few years, policy makers must make planning for the nation’s future housing requirements a higher priority,” commented HIA Economist, Geordan Murray.
“By the year 2050, it is highly likely that Australia’s population will lie somewhere between 34 million and 42 million. This range implies a very wide array of possibilities, any of which will have a significant determining influence on the amount of residential building activity required in the intervening period”…
…the risk is that a serious housing deficiency will remain the norm in most capital cities across the country.
“Ensuring that the housing stock and new housing supply match the needs of the community is a near certain way to ensure housing affordability improves. This will require the right number of homes and the right mix of dwelling types being built in the right places.”
“While debate about housing supply has recently been caught up with speculation about possible changes to negative gearing rules, it is important to remember that there is a multitude of more important avenues for reform if policy makers are to ensure an appropriate supply of new housing.”
“The burden of taxation on new home building is excessive, planning processes are too slow, land supply is inadequate, and we need to see more equitable funding models for the community infrastructure that supports residential development,” concluded Geordan Murray.
This comes on the back of last week’s lobbying against Labor’s proposed changes to negative gearing and the capital gains tax (CGT) discount:
“Yesterday’s announcement by the Opposition that it intends to halve the capital gains discount on investment properties will, in our view, not achieve these objectives”.
“… restricting access to negative gearing for residential property would reduce investment in housing, erode housing affordability and put upward pressure on rents”…
“Now is a pivotal time for investment in new housing, which has implications for affordability and the broader economy, with starts expected to decline over the year ahead. Any changes to taxation with respect to housing must be aimed at boosting housing supply, and reducing the overall tax burden on the sector.”
While I obviously agree with the HIA’s position on the need for more affordable and flexible land/housing supply, its latest rant does once again highlight the ridiculousness of its staunch opposition to Labor’s property tax reforms.
As shown in the next chart, investment in existing dwellings has literally exploded since negative gearing was reinstated in 1987, followed by the halving of CGT in 1999. By contrast, investment in new dwelling construction – which is the supply that the HIA bemoans is far too low – has been poor (see next chart).
In fact, investment in new construction has been so poor that it has actually grown at a slower rate than owner-occupied construction lending since negative gearing was reinstated in 1987 (see next chart).
As shown above, every other form of finance has grown stronger since negative gearing was reinstated in 1987 than investor finance in new construction. Accordingly, negative gearing as it is currently structured has not worked to boost housing supply (possibly the opposite), and instead has merely substituted homes for sale into homes for let. In turn, negative gearing has not improved rental availability or affordability, and has merely boosted demand and put upward pressure on existing home prices.
By all measures, negative gearing and the CGT discount have been epic failures in achieving the HIA’s goal of boosting new construction, despite their large cost to the Budget.
So why, then, has the HIA run such a furious campaign against reforms to property tax concessions (e.g. see here, here, here, here, here, here, here and here), which continues today?
Here we have Labor proposing to restrict negative gearing to new homes, thus channeling investment into the exact thing that the HIA is lobbying for – new supply – and boosting jobs for its construction members. And still, the HIA remains staunchly opposed.
I can only speculate once more that the HIA cares more about protecting the value of its developer member land banks, rather than actually boosting dwelling construction. Otherwise, why would it go to such great lengths to oppose Labor’s ‘negative gearing for new homes’ policy?
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