MB submission to housing affordability inquiry

Below is MB’s submission to the House of Representatives Standing Committee on Tax and Revenue’s inquiry into Housing Affordability and Supply, which was uploaded yesterday.

The House of Representatives Standing Committee on Tax and Revenue is conducting an inquiry into Housing Affordability and Supply.

In launching this inquiry, committee chair Jason Falinski rallied an “urgent moral call for action by governments of all levels to restore the Australian dream for this generation and the ones that follow”.

Mr Falinski also claimed that “regulatory settings are directly responsible for the unresponsive nature of housing supply in Australia”. Therefore, this committee “will investigate the impact of tax and regulatory regimes on price, affordability, and supply of housing in Australia”.

Let’s get real and admit that this inquiry is a waste of time and taxpayer’s money.

Australia’s governments have run numerous housing affordability inquiries over decades, including but not limited to:

  • Menzies Research Centre: Prime Ministerial Taskforce on Home Ownership 2003;
  • The Productivity Commission’s First Home Ownership Report in 2004;
  • A Good House is Hard to Find Report from the Senate Select Committee on Housing Affordability in Australia in 2008;
  • Western Australia’s Affordable Housing Strategy 2010-2020;
  • NHSC: State of Supply Reports (2008, 2010, 2011, 2012, 2013 onwards);
  • COAG Review of Capital City Strategic Planning Systems Report 2011 and report on Housing Supply and Affordability Reform 2012;
  • Senate Inquiry into Affordable Housing, 2014-2015; and
  • Parliamentary Inquiry into Home Ownership 2015.

On top of these we have received many reports from think tanks like the Grattan Institute, the McKell Institute, AHURI, and others.

Thousands of work-hours and millions of dollars worth of salaries and consultants’ fees have been spent on these reports and absolutely nothing has come from them. So what is the point of wasting more taxpayer dollars? Nothing will come from this inquiry because our politicians don’t actually want more affordable housing, since this requires prices to fall.

Besides, if the Morrison Government truly believed there was an “urgent moral call for action by governments of all levels to restore the Australian dream for this generation and the ones that follow”, then it would have supported Labor’s negative gearing and capital gains tax reforms last election.

The sole focus on the supply-side – particularly red tape and taxes – suggests this inquiry is being driven by the property industry.

Any housing shortage pre-COVID was unambiguously caused by the federal government throwing open the immigration floodgates in 2005 (see next chart).

Australia’s net overseas migration (NOM) jumped from an average of 90,500 between 1991 and 2004 to an average of 219,000 between 2005 and 2019 – representing an annual average increase in immigration of 140%.
But now that immigration has collapsed thanks to COVID, Australia’s ‘housing shortage’ has miraculously disappeared (see next chart).

The National Housing Finance & Investment Corporation’s (NHFIC) first flagship report on housing supply and demand came to exactly the same conclusion.

NHFIC forecast that “cumulative new supply is expected to be around 93,000 higher than new demand by 2025”, thanks to the fall in immigration (see next chart).

Moreover, the migrant epicentres of Greater Sydney and Greater Melbourne were forecast by NHFIC to experience the biggest surpluses of housing supply:

The lessons from the above are obvious:

  1. Australia’s housing supply ‘problem’ was caused by the massive increase in immigration-driven population growth from 2005.
  2. The first best solution to Australia’s housing supply problem is not to return immigration back to its extreme pre-COVID level.

Sadly, all sides of Australian politics are determined to restore ‘Big Australia’ immigration at the earliest opportunity, which will ensure that Australia’s housing supply problems return.

This is evidenced by the latest Intergenerational report, which projected permanently high NOM of 235,000 from 2025-26 onwards (see next chart).

In summary, it is hard to take the inquiry’s supply arguments seriously in light of the above evidence. It is speaking with a forked tongue on the matter.

Any housing supply problem is first and foremost an excessive immigration problem.

Unconventional Economist


      • Here it is mate:

        It’s time for some answers on the housing crisis
        While politicians, bureaucrats and developers have championed the cause of the first home buyer, prices have risen, housing costs as a proportion of income have increased and ownership has slipped,

        Robert HarleyContributor
        Sep 9, 2021 – 5.00am

        Falinski, the Liberal member for the Sydney seat of Mackellar, is the chair of the House of Representatives Standing Committee on Tax and Revenue, which has been tasked by the Treasurer, Josh Frydenberg, with a new inquiry into the impact of tax and regulation on housing affordability and supply.

        Submissions close on September 13 with the first public hearing on Tuesday and a report in early 2022. So far, despite the hand-wringing and outrage over house prices, only nine submissions have been lodged.

        Perhaps we have had enough. I count five Commonwealth government and Productivity Commission inquiries into housing in the past 20 years, along with a pile of state reports, Reserve Bank analyses, and even dustier volumes dating back, in my library, to a report on Urban Land Prices 1968-74 commissioned by the Whitlam government.

        Yet for all that time, while politicians, bureaucrats and developers have championed the cause of the first home buyer, prices have risen inexorably higher, housing costs as a proportion of income have increased, and home ownership has slipped, particularly among 20- to 40-year-olds.

        “It is hard to think of any area of widespread public concern, where the same policies have been pursued for so long in the face of such incontrovertible evidence that they have failed to achieve their ostensible objective,” writes independent economist Saul Eslake, a long-time campaigner for housing reform, in his Falinski submission.

        For Eslake it’s politics. The majority of voters – those who own houses and those who aspire to ownership – want house prices to remain high, as ALP leader Anthony Albanese has conceded by ditching reform of negative gearing and capital gains tax.
        “Sadly, there’s no reason to think that the political calculus is about to change,” Eslake concludes.

        Global shift
        Nevertheless, the pandemic surge in global house prices, driven by dramatic improvements in mortgage affordability – for those with jobs and savings – and a new appreciation for life at home, has produced a slew of new proposals around the world.
        Many address supply constraints. US President Joe Biden has a $US5 billion program to reform the remnants of racist exclusionary zoning; California has just passed legislation to allow duplexes in single-house zones; UK Prime Minister Boris Johnson has a hotly contested proposal for a “once in a generation” reform of the planning system; and the major parties in the Canadian election all promise to boost housing numbers.

        New Zealand, which has tried to boost supply with little success, has returned to demand management, trimming the tax advantages for investors and boosting prudential restrictions on mortgage lending.

        Falinski, a former local government councillor on Sydney’s northern beaches, has already decided his committee should focus on supply.

        “As consistently noted by the RBA and others, regulatory settings are directly responsible for the unresponsive nature of housing supply in Australia,” he said at the launch of the inquiry. “The research points to limitations on land, and restrictive planning laws, as the major causes of short supply.”

        There is plenty of fodder here. Falinski is due to address UDIA National TV on Thursday with stamp duty, the managed investment trust treatment of build-to-rent schemes, inefficient planning systems, industrial relations and contribution reform already on the agenda.

        The government’s National Housing Finance and Investment Corporation (NHFIC) weighed in to the debate last month with a new report, Developer Contributions: How should we pay for new local infrastructure, which pointed to the increased use of infrastructure charges, to as much as $85,000 a dwelling in NSW which, chief executive Nathan Dal Bon said, “increasingly act like a tax on new housing, which can impede new housing supply and reduce housing affordability”.

        Nevertheless, I hope Falinski and his committee understand that housing is more than a metric of building activity.

        New era, new challenges
        As the pandemic has demonstrated, the quality of homes is vital. A few of the houses and apartments delivered in the last boom are literally unlivable. The next generation of housing must meet the challenges of working from home, of greater occupier diversity, and increased energy efficiency and climate resilience.
        And yes, Falinski does acknowledge the impact of housing affordability on issues such as mental health, family formation, domestic violence, financial stress and unemployment.
        Housing will also be at the heart of the post-pandemic city and community. More than high-rise inner-city apartments and low-rise distant communities are required, which is why so many look to the opportunities, and challenges, of densification in the suburbs and responsive housing in the regions.

        Even Boris Johnson, with his sarcastic criticism of “newt-counting delays”, has stressed the UK needs to build “better” and “greener” as well as “faster”.
        Falinski shows his Liberal Party DNA with an “urgent moral call” to “restore the Australian dream for this generation and the ones that follow”.

        But he also acknowledges what I see as the moral imperative; the need to properly house the more than a million low-income Australian households struggling in private rental accommodation.

        The average Australian household spent 14 per cent of its income on housing in 2017-18 according to the Australian Institute of Health and Welfare. But those on the lowest 40 per cent of incomes in private accommodation paid on average 32 per cent of their income for their homes, which puts them well into financial housing stress.

        NHFIC estimates that 700,000 new social housing units are needed and can be developed over the next 20 years.
        Sydney’s decision-makers, polled in August by the Committee of Sydney for the latest Sydney Leadership Survey, took the same view, with more than 70 per cent rating increased funding for social/affordable housing as “very important”, well ahead of the 31 per cent who felt the same way about the NSW government’s new land tax proposal.

        Not every Australian can afford to buy a house; but every Australian should have the safety and security of a home.

  1. reusachtigeMEMBER

    The best way to make housing more affordable is to remove all taxes on investors so that they can reduce rents slightly if they wish.

  2. blindjusticeMEMBER

    Should interest only loans be legal for more than emergencies? 40% of the market last time i check a few years ago. Wonder what it is now. They are purely speculative in nature and do nothing but increase prices at high risk to the financial system at such large %

    Ponzi stuff.

  3. Failed Baby Boomer

    I would like to commend and thank you for your hard-hitting submission.
    Let us hope it gets some traction.

  4. Did the submission upload, if so, what is it’s title?

    No. Submitter
    1 Mr Chris Moore (PDF 547 KB)
    2 AHURI – Curtin Research Centre (PDF 133 KB) Attachment 1 (PDF 7654 KB)
    3 Mr Saul Eslake (PDF 132 KB) Attachment 1 (PDF 137 KB) Attachment 2 (PDF 257 KB)
    4 Mount Isa City Council (PDF 2699 KB)
    5 Ms Patricia Warren (PDF 50 KB)
    6 Mr Jordan Ralph (PDF 125 KB)
    7 Apple Lodge (PDF 2774 KB)
    8 National Centre for Economic and Social Modelling (PDF 203 KB)
    9 Broken Hill City Council (PDF 344 KB)
    10 ShelterTAS (PDF 230 KB)

    • I uploaded it yesterday. Cameron Murray also uploaded his (not yet appeared). The automated email said that it will be considered by the Committee before uploading publicly:

      “Thank you for your contribution to the Inquiry into housing affordability and supply in Australia inquiry. The Committee will consider carefully all the matters you have raised”.

      “All contributions to Parliamentary inquiries that are accepted as a submission become Committee documents and are made public only after a decision by the Committee. In accordance with Committee procedures, if you have not asked for confidentiality, your submission will be authorised for publication by the Committee. This provides your submission with the protection of parliamentary privilege. Publication of your submission includes it being loaded onto the internet (with your signature and/or contact details removed) and being available to other interested parties including the media”.

    • Looking at that list, sadly I don’t see Austrac or a significant figure in the AML space talking about several Australian Governments not implementing Tranche 2 of the AML legislation

  5. Ghost of Stewie Griffin

    Great work Leith, so glad you and MB are out there fighting the good fight. Not sure if anyone’s submission other than the property developers will get much airtime, but at least yours will be on the record when future generations look back on the disastrous decision made today.

    Sadly I suspect this inquiry is going to serve little purpose other than to justify cranking immigration up to obscene levels that will make the last decade look mild in comparison, as the rent seekers try to make up for lost time.

  6. Fantastic post and up to date memes too, it’s disgusting how much time and effort gets wasted per those reports over the years.

  7. Keep it simple and concise, I’d go with
    “Follow the Money”
    Unfortunately It really is that simple.
    Of course it helps that the $B earned by developers are supplemented by the $M that flow into every house owners pockets, but make no mistake about it, it is these developer $B which shape our policy and enrich our politicians.
    Look no further than our own very Bin Chicken and her mate, nothing to see there everything is absolutely above board…ah not

  8. Goldstandard1MEMBER

    Thanks MB and Leith. Fighting the good fight to at least try and plan a measured affordability deflate as opposed to the carnage that will happen otherwise. You should be proud to be representing the good of Australia but a change of Gov is the only way it (might) happen.

  9. Thankyou.

    But lets face facts. This is a completely lost cause. The government is utterly trapped, surrounded, cornered and snookered by this bubble and nothing outside of total chaos will change things from here on. Society has bifurcated. If you arn’t set to inherit $1 million dollars you are now in the underclass. A lot of people are. And a lot arn’t. Neo-feudalism is here. The USA is a gerontocracy. Australia ruled by thieves. It’s over.

    I always knew the demographic timebomb going off was going to be bad. None of what is happening is a surprise to me. Of course its a disaster. It was always going to be. And when things get this bad they don’t just continue smoothly. Black swans. Step changes. All I know is what we have now is not sustainable and that bad things are on the way. We’ve known for decades but the truth is just too much for boomers. That they were the bubble.

    We should have been preparing for 20 years but instead we pretended it wasn’t happening. We thought we could mass migrate our way out of it with a literal ponzi scheme. Disenfranchising large swaths of the young in the process, those in the inheritance class get that at least. The disenfranchised don’t feel like a member of society. Or their community. They are not invested in its future. All for boomer retirements. You created whats coming. Just remember that.

    • Camden HavenMEMBER

      I agree completely with this sentiment. But the external shock is still a realistic possibility with Xi reforms going to shake things up quite a bit I think…

    • Jumping jack flash

      Once we put the banks in charge in the late 90’s which brought us the wonder of equitymate, the call to let them “go for it” back around 2000 was the beginning of the end.
      So powerful was the desire to not have another “recession we needed to have” when the tech bubble burst, [and then 9/11 happened].

      The decision to allow bankers to turn the economy and its mechanisms inside out and upside down with interest rate manipulation – basically putting the cart before the horse, was always ever going to result in the total mess we have today.

      The solution however is remarkably simple.
      All we need to do now that we have run out of interest rates to cut to enable debt expansion while wages are muted, is to simply start inflating wages (again) and that starts with enabling prices to inflate. Once wages start inflating it will mean everyone will be able to take on more debt, enough debt so the debt can repay its own interest and leave enough left over for consumption. If this can happen, and is allowed to happen the economy *will* be saved.

    • Good comment.

      The pro-bust side will not be helped by this crony fake enquiry.

      However on the pro-bust side we have a few things:

      * millions of recent immigrants would like cheaper housing
      * millions of renters would like cheaper housing
      * boomers won’t live for ever
      * Liberal and Labor are as rusted-on as the morons voting for them. They will not be able to respond to effective political competition when it finally arrives.
      * China is a wildcard

    • More baby boomer nonsense. I do blame the baby boomers who voted for the big neoliberal parties, sometimes out of self-interest, but more often because they are stupid enough to be bamboozled by the (oligarch owned) media. Most of the politicians aren’t even baby boomers. Federal cabinet is essentially Gen X. What you are ignoring is that most voters in every age group voted for the neoliberal/Big Australia parties, no doubt for much the same reasons. Younger voters outnumber the baby boomers by more than 2 to 1. Your generation voted for this. See Fig. 4.4


      Old people don’t get a particularly good deal in our society unless they are also rich. Why would they, when most of the electorate and most politicians are younger? Age discrimination in employment is widespread and widely condoned, so many people find themselves in the sweet spot where they are too old to be attractive to employers and not old enough for the aged pension. The fastest growing group of homeless is women over 50. Our aged pension is among the least generous in the OECD


      Apart from the forced savings aspect, superannuation only benefits the top 20% and especially the top 10%, as often reported by MB. The median superannuation balance for those retiring in 2015/2016 was $110,00 for men and $36,000 for women (according to ASFA). Many of the elderly have paper wealth in housing, but they still have to live somewhere, and alternatives also have extortionate prices. Only the top 20% own an investment property. Many of our nursing homes are hellholes…

      • Thank you for putting balance into this conversation where boomers are blamed for the ills of the world, when in fact the problems are driven by class division and the failure of the ALP to look after the interests of Oz workers.

        I am amazed at the stupidity of younger folk in supporting the major political parties, including the Greens. The brainwashing of our young over the last 60 years has been very effective in developing a compliant flock of sheep that are unable to make sound judgments.

    • Vladimir Scorpius

      Agreed that it’s captured and in that sense a lost cause. Still worth submitting though for the record.

  10. I have never understood why Australian (&NZ) house prices are so much higher than nearly all other Western countries.
    You’d think that eventually the prices would be similar (i.e. relative to incomes etc.) but doesn’t seem to be ever so?

  11. TailorTrashMEMBER

    Good submission …..it’s going to take some burying…
    …..probably say it’s racist cos it mentions immigration .
    Expect the righteous to jump up and down