The devouring monster we’ve allowed home ownership to become is now eroding what’s long been the fourth leg of retirement income policy. More people are retiring without owning a home, whereas the level of the age pension is kept low under the assumption that almost everyone owns their home outright.
Get it? We’re suffering the wider economic disadvantages of huge household debt without the commensurate advantage of a higher rate of home ownership. The rate of home ownership is actually falling slowly as the oldies with high rates of home ownership are dying and being replaced by newly formed, young households, very few of which can afford a mortgage…
When measured against the ruler of household income, America’s house prices are much lower than ours. Why? Because of differing policies towards housing. The Yanks have kept land prices lower by allowing more suburban sprawl.
For our part, we’ve had various tax and pension policies seemingly intended to help would-be first-home buyers that, in reality, work to benefit existing home owners. We’ve made housing – whether owner-occupied or rental properties – a tax-preferred investment, not just a means to security of tenure. In the process, we’ve made it too hard for young first-home buyers to afford.
When parents respond to this by recycling to their offspring some of the capital gain they’ve enjoyed on their own property investment (as I have), they’re solving their own children’s affordability problem in a way that keeps house prices high, at the expense of those many young people whose parents aren’t able to help out.
No, if we want to make home ownership more affordable for more young people seeking security of tenure for their home, the answer is to make home ownership less attractive as a form of investment.
Gittins is partly right. The solution to making “home ownership more affordable for more young people seeking security of tenure for their home” is to:
- Normalising Australia’s immigration program by returning the permanent intake back to the level that existed before John Howard ramped-up it up in the early-2000s – i.e. below 100,000 from 180,000 currently – in addition to curbing temporary visas [reduces demand];
- Undertaking tax reforms like unwinding negative gearing and the CGT discount [reduces speculative demand];
- Tightening rules and enforcement on foreign ownership [reduces foreign demand];
- Extending anti-money laundering rules to real estate gatekeepers [reduces foreign demand];
- Banning borrowing into property by SMSFs [reduces speculative demand]; and
- Providing the states with incentive payments to:
- undertake land-use and planning reforms, as well as provide housing-related infrastructure [boosts supply]; and
- swap stamp duties for land taxes [boosts effective supply].