IT'S OUR DUTY TO HELP THE YOUNG GET A HOME, The Herald Sun, 21 March
I was holding a Saturday street stall recently when a young couple came up to chat about their troubles buying a first home. He was a builder and she was a teacher but they were planning for a baby and worried about meeting mortgage repayments when their two incomes went down to one. So despite being in their late 20s, this couple had just moved back in with their in-laws. In the months to come they’ll be changing nappies and juggling sleepless nights under the same roof as their retired parents who are trying to enjoy a quiet life.
Their story is sadly typical. There are now 10 per cent fewer young Australians owning a home than there were in 2001. Among the lowest-earning young people, home ownership has crashed from above 60 per cent to just 30 per cent in the past 15 years.
It’s not hard to understand why. In 1985 the average home loan held by a first homebuyer was a little over $81,000 in today’s money. Today, an equivalent mortgage is worth $308,000. Prices in Australia’s capital cities have risen 20 per cent over the past two years, but wages have been growing at just over 2 per cent. As that young Canberra couple said to me: even getting a deposit together becomes a major challenge when prices are climbing so much faster than savings.
It’s harder than ever for people to get into the property market, yet our current tax system offers more support to people buying their tenth investment property than their first home.
Negative gearing tax deductions account for more than half of all individual tax concessions claimed in recent years, and most of the benefits of negative gearing go to the top tenth of income-earners. For example, surgeons claim 100 times the benefit that cleaners do, and 16 times the benefit received by nurses.
If we’re going to spend billions a year on this tax break, we should ensure it is achieving what it set out achieve. One of the main aims of the current approach is to increase housing supply, but it simply isn’t working out that way.
That’s why Bill Shorten and Chris Bowen have announced that from 1 July 2017, negative gearing will only be available for new homes and the capital gains tax discount will be reduced to 25 per cent. If you own a negatively geared property now, or you buy one before then, you’ll be unaffected by the change. We firmly believe that Australians relying on past investments to fund their retirement or secure their future shouldn’t see their careful plans waylaid.
But from the middle of next year, we will ask that anyone who wants the benefit of negative gearing helps the nation out by adding to our housing supply. Right now, 93 percent of property investment goes towards existing properties, not new ones. This means that negative gearing not only benefits the most affluent; it also does little to increase the supply of new houses. Boosting supply is the most important thing we can do to make housing more accessible to young people and those on low-to-middle incomes.
Kickstarting tens of thousands of new builds across the country will also boost jobs and growth at a time when these have been lagging. Analysis of our policy by the McKell Institute says it will create 25,000 new construction jobs.
Rattled by the realisation that Labor has many more costed, serious policy proposals on the table than his Government, Malcolm Turnbull flicked the switch from ‘agile’ to ‘Abbott’ this week. Despite his promise to provide new economic leadership and respect the intelligence of the Australian community, the Prime Minister has launched a baseless scare campaign that would make his predecessor blush.
The fact is, Labor’s policy is designed to ensure that young couples like the ones in my electorate have a chance to break into the housing market. Property prices will still rise, we just won’t see them racing so far ahead of wages and savings as they have in recent years. This is a sensible approach which balances the concerns of those who already own property with those who have been locked out of the market for too long.
Like our earlier policy announcements on tightening tax loopholes for big multinationals and reining in super concessions for the very wealthy, our plan for negative gearing has been driven by a sense of fairness. It’s not fair that first homebuyers should be locked out of the market because they can’t compete with investors. And it’s certainly not fair to talk about cutting pensions or putting a six-figure price tag on university degrees – as this Liberal Government has done – without looking at existing tax concessions which mainly benefit the better-off.
This is a big change we’re proposing, but it’s the kind of change we need to ensure home ownership is accessible to all Australians once more. It’s also the kind of long-term, structural change the budget needs if we’re going to get it back into balance over the coming decade. Getting this tax policy right will mean that young couple from my street stall can one day have a place to call their own, just like their parents and grandparents did before them.
This opinion piece was first published in The Herald Sun on Monday, 21 March, 2016.