On 16 December, Bill Shorten announced a $6.6 billion plan to address housing affordability, which directly involves incentives.
Mr Shorten said that under the policy, if investors construct new properties and place them for rent at 20 per cent under market value, a subsidy of $8,500 a year for 15 years would be available for the investor.
While the policy was welcomed by many property experts, one thing was clear: there is still more that needs to be done.
Speaking to Smart Property Investment, Peter Koulizos, chairman of the Property Investment professionals of Australia, said that it was a good step in the right direction, but it was a policy that bore a similarity to the Rudd government’s National Rental Affordability Scheme programme, which incentivised property investors to build new properties and offer rents at 20 per cent below market rent.
However, the NRAS programme also featured a contribution from the state government.
“It’s certainly a good move, but it’s not as good as Kevin Rudd’s NRAS program,” Mr Koulizos said.
He added that if enacted, many investors would likely use this proposed programme.
However Leanne Pilkington, president of the Real Estate Institute of NSW and managing director of Laing+Simmons, believed this policy was brought out in order to combat the rental rise from the Labor government’s negative gearing proposal.
“They know that the negative gearing discussion is going to be a big one in the lead-up to the election, and they know that by changing negative gearing, it is going to have an impact on rents; rents will go up, there’s absolutely no doubt about it,” she said to Smart Property Investment.
Ms Pilkington was also sceptical around how effective this proposal could be for housing affordability, with the subsidy available only to a small margin of property investors.
“They’re only talking about, the amount of housing that they’re talking about subsidising makes up … about 1 per cent of the total rental pool. So what impact is that really going to have?” she said.
“It’s not going to counteract the issue that changing negative gearing will bring.”
Ken Morrison, CEO of the Property Council of Australia, said it makes sense to harness private investors to deliver affordable housing.
“While there is much media focus and commentary on the cooling of housing markets in Melbourne and Sydney, housing affordability remains a critical issue for many Australians whether they are looking to rent or buy a home,” Mr Morrison said.
“Labor’s incentives for investors to deliver affordable housing will make a contribution to meeting that need while also providing a boost to our construction industry which is a key driver of economic activity.”
However, Mr Morrison also said for any sustainable long-term housing affordability improvement, there needs to be a range of measures, not just a singular blanket policy.
“Planning schemes, land supply, and property taxes which make up around 25 per cent of the cost of a new house are all part of the housing affordability mix – there is no single ‘silver bullet’ solution,” he said.
“Labor’s incentives are welcome – but they are no substitute for the supply of housing which is funded by 2.1 million property investors, including those who access negative gearing.
“One-third of Australian households are in rental accommodation and Labor must hasten slowly with any changes to the policy settings which could impact this housing sector.”
Andrew Cairns, Community Sector Banking CEO said that while Mr Shorten was correct to call rental affordability a ‘challenge’, a better word to describe the situation would be ‘crisis’.
“The majority of very low-income households in Australia are under rental stress meaning they are spending more than thirty percent of their income on rent,” Mr Cairns said.
“Providing more affordable homes from people on low and moderate incomes is a welcome step in the right direction; however, 20,000 new units and houses over the next four years would only go some way to addressing the huge shortfall.
Citing Community Sector Banking’s own Rental Affordability Index, single parents were found to be one of the worst impacted groups due to the current rental situation, with Mr Cairns claiming many are forgoing basic necessities such as food in order to provide a home for their family.
“To truly put an end to this crisis, we need a plan which provides many more safe, affordable and secure homes for those most in need,” he said.
What should be done?
Ms Pilkington said that the Labor government needs to return back to the drawing board and come up with a more cohesive proposal.
“They really need to get serious and research it and go into detail with it, not just throw out a policy to counteract another policy,” she said.
“I think we just need to take it a much more combined approach with talking to industry, talking to all of the different stakeholders and coming up with a cohesive approach to it.”
For Mr Koulizos, he would prefer to see a focus to see housing affordability addressed on a broader scale in what he called “greenfield locations”, or places on the edge of the urban fringe.
“One of the things that Bill Shorten spoke about is he wanted key workers like policemen, workers, teachers to be close to work,” Mr Koulizos said.
“So, what we need is that affordable housing to be spread throughout the metropolitan and regional areas rather than just cheap locations like greenfield sites.”
In order to really tackle housing affordability, Mr Morrison suggested that Labor should be instead considering the build-to-rent asset class of investment, looking at institutional investors developing and managing rental properties.
“By enabling international investors to access the withholding tax concessions available through managed investment trusts, build-to-rent has the potential to deliver more housing to the market more quickly and more efficiently, including affordable housing choices,” Mr Morrison said.