TUESDAY, 9 JUNE 2015
SUBJECT/S: Housing affordability
STEVE CANNANE: The Treasurer Joe Hockey said today in relation to housing affordability that people would not be buying homes if they were unaffordable. He also advised young homebuyers to get a good job that pays good money. Is he right?
SHADOW ASSISTANT TREASUER ANDREW LEIGH: Well Joe Hockey seems not only to think that poor people don't drive cars, but also that they shouldn't own houses. He seems to be the only person in Australia not to recognise that housing affordability is a major issue for young Australians. I worry constantly about how people in Sydney on a five-figure income can afford a house that costs seven figures. We've now had numbers showing that the home ownership rate for 25 to 34-year-olds has fallen 10 percentage points over the last decade from 50 per cent down to 40 per cent. That creates real challenges for young Australians looking to break into the housing market.
CANNANE: So what's your advice to them then?
LEIGH: Well, we need a Federal Government that's willing to take housing policy seriously. That involves, largely, interventions on the supply side. It involves things like investment in public transport which this Federal Government has washed its hands of, and it requires more than these sort of faux crackdowns on foreign investment that the Government seems to be saying is its answer on housing affordability.
CANNANE: So you don't think that will make a difference, cracking down on foreign investment in big cities?
LEIGH: People should definitely obey the law but I do worry that we've got a government where you've got Andrew Robb saying Australia is open for business and then you've got Joe Hockey poking around in the mailboxes of homebuyers trying to work out if they're doing the wrong thing. The Government is talking about something in the order of 200 investigations. That isn't going to make any tangible difference to housing affordability in Australia.
CANNANE: Alright, well as an economist you have written extensively about economic inequality and social mobility, I know this issue of housing affordability is something that concerns you. What is your party going to do about it?
LEIGH: Our work is being spearheaded by Chris Bowen and Jan McLucas, and it has around been engaging with experts on this. We've got a discussion paper out for consultation at the moment. We're looking at the way in which a range of policies have an impact here, and how we can have smarter policies to increase supply. Just to give you one concrete example, Steve, I was really troubled a while back when NSW Premier Barry O'Farrell cancelled a plan for medium density development along the northern suburbs train line in Sydney, the North Shore train line, just for purely local political reasons. That would have put new housing supply in an area where we need it, where people have good access to public transport. We need smart decisions around infill. We also need a government willing to do things like the National Rental Affordability Scheme, and the sustainable housing initiatives that we saw under the Rudd and Gillard governments.
CANNANE: You raised Barry O'Farrell there but NSW Labor did virtually nothing when it came to public infrastructure and public transport for 16 years when they were in power.
LEIGH: There was significant investment in public transport over that period and the decision I referred to was one that had been made under NSW Labor and then not followed through with by Barry O'Farrell.
CANNANE: So you've got a round table and you've got a discussion paper but where's your policy? I mean back in 2009 the Henry Review made it clear that reforms around stamp duty, negative gearing and land tax would make housing more affordable. You yourself were running workshops about this issue at ANU back in 2008. Isn't the time for talking over? Don't you know what the policy solution levers are to pull here?
LEIGH: You raise a couple of important areas here. Stamp duty is a vital one. Here in the ACT, where I'm speaking to you from, Andrew Barr and Katy Gallagher spearheaded a reform that will move the ACT away from stamp duty to a land tax base. Tom Koutsantonis in South Australia is looking at something similar. That's important, Steve, because one of the reasons we have challenges with housing affordability is that stamp duty acts as a tax on mobility. It means that you have retirees rattling around in five bedroom houses while young couples stretch at the seams in small apartments. We can get a better allocation of households to the housing stock if we move away from stamp duty. Federal Labor is keen to encourage that reform.
CANNANE: You mentioned supply; earlier your leader Bill Shorten said in order to tackle the issue we think there's a lot of focus that needs to be on the supply side. He says negative gearing changes are not the focus of Labor Party. If Bill Shorten's focus is on the supply side doesn't that mean federal Labor isn't going to do much about this issue because overwhelmingly the supply of housing is the domain of local and state governments?
LEIGH: I think there's a role for the federal government in enabling this, Steve – in making sure that we have housing supply that's keeping up with demand. We haven't had that for the last couple of decades. Australia has had the fastest population growth in the OECD but we haven't had as fast a growth in the rate of home building that we've required. We've seen this translated into prices going up and we've now got the Government's number one economic adviser, the Secretary of The Treasury, saying there is a housing bubble. And yet, when we asked the Prime Minister about this in Question Time, he immediately batted it away with a standard sort of three-word slogan, a scare campaign, rather than dealing with the specifics of the issue and the fact that the median Sydney house price is now $914,000. The median Australian house price is now $666,000.
CANNANE: But that supply issue that you've identified and that Bill Shorten wants to be the focus, isn't that problem evaporating? If we look at the December quarter, 170,000 new residencies were under construction – that is a record high. We are on track for a housing supply surplus in four to five years going on those current rates. As an economist, you know that housing surpluses can cause bubbles to burst; perhaps focusing on supply could be counter-productive?
LEIGH: Steve, you need to look at the pent-up demand that's come to exist over the course of the last decade. I think we can go a fair way before we get to the stage where we're in an oversupply situation.
CANNANE: But if supply is increasing at record levels and you want to deal with housing affordability, shouldn't you be looking at reducing demand and doesn't that come back to those Henry Review measures: stamp duty, increasing land tax, changing taxation policy on investment properties? Bill Shorten is saying the focus is on supply; shouldn't you also be looking at demand?
LEIGH: We've spoken about the role of stamp duty and I entirely agree with you that there's a productive conversation to be had on negative gearing; we're not ruling that out as a policy issue. But we're also making absolutely clear that we need to be focussing on the supply-side measures. We'll be having a productive conversation around negative gearing and frankly I'm surprised that the Government wants to be batting that down given that its own tax discussion paper, just a couple of months ago, asked questions as to whether the current rules around negative gearing are appropriate for Australia. Mature political parties will have these conversations. We need to make sure that our rules around negative gearing are fit for purpose.
CANNANE: Andrew Leigh, we'll have to leave it there, thanks very much for your time.
LEIGH: Thank you, Steve.
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