Senate debates

Monday, 16 June 2008


Housing Affordability in Australia Committee; Report

4:49 pm

Photo of Andrew BartlettAndrew Bartlett (Queensland, Australian Democrats) Share this | Hansard source

I would also like to speak to this report, and I start by congratulating the secretariat and all the committee, particularly the chair, Senator Payne. As some senators would know, the issue of housing affordability is one that, over the years in this chamber, I have spoken about many times and asked many questions of the previous government and indeed of the new government since they have come in. It has been an immense frustration to me that the federal level—the national parliament—has not sufficiently engaged with such an absolutely crucial, fundamental issue as housing affordability. This report does do that. It achieves that. It is comprehensive and wide-ranging, and it makes a real effort to be balanced.

Many times in the past the issue of housing affordability has been treated as a political one as much as one that is a matter of serious social and economic significance. This report and this inquiry could have gone the same way. The terms of reference, to be frank, were framed in a way that meant that it could have been used just as a vehicle for a narrow political point-scoring, state-bashing exercise. It is a real credit to the chair and the committee that it did not do that but has managed to acknowledge the wider issues—very many—that contribute to the serious problem of housing affordability, recognising the complexity of the issues and seeking to provide a wide-ranging and balanced report with a full suite of recommendations addressing all of the factors that contribute to housing affordability. It is still a matter of frustration to me that the previous government—the coalition, when they were in government—did not engage terribly constructively with this issue, despite housing affordability worsening seriously over that period of time. But we should focus on where things are at now and look at the opportunity that this report provides.

I have provided some additional comments and proposals to the committee’s overall report and recommendations, but I do support all of the recommendations that are there. I think it is very valuable that they are unanimous. A number of those recommendations address issues that I have certainly spoken about a number of times and many people in the community have spoken about for many years. In many respects my views have simply been a reflection of the concerns I have continued to hear over the years. I do think there are a few areas where it would be good to go further. I say that not just to try and always go a little further than everybody else but really because I think it needs to be recognised just how urgent and serious this issue is.

This report contains some really good proposals—not only long-term proposals but also some medium-term proposals—which I think, if they are all adopted, will go a long way. A recommendation that I think is very important is that the tax review process that the federal government has set up include examining the impacts of negative gearing, capital gains tax discounts and the land tax exemption—areas, I might say, that were proposed to be examined by the Productivity Commission, amongst others, some years ago but which the previous Treasurer, Mr Costello, refused to act on. I really hope that this time, particularly as it is a unanimous recommendation from this committee, the federal government adopts that recommendation and actually reviews those tax measures.

I also call for the government to review the capital gains tax exemption on the family home. This area was raised by a number of witnesses. Almost inevitably when I raised that area with witnesses in questions they would say, ‘Ideally, it would be good to look at this capital gains tax exemption, but politically it is never going to happen.’ Probably they are right that politically it is never going to happen. But, when you are putting forward an examination of the issues and the causes behind the housing affordability crisis, I do not think you should censor yourself in that way. I think that it is worth putting it forward, not least because—as the report demonstrates—there is very unclear data about just how much the capital gains tax exemption on the family home costs. To me, it is bizarre that we have this major measure and yet very little effort has been made at Treasury level to examine and nail down what the actual cost is as a tax expenditure.

The report contains an estimate that the capital gains tax exemption on the family home costs $20 billion a year. Contrast that to the amount spent through the Commonwealth-State Housing Agreement, which is about $1 billion a year, and rent assistance at the moment is $2.2 billion a year. So we have this massive amount of forgone revenue. It is clearly regressive. It clearly benefits those who are better off—at best, it is neutral—and quite possibly contributes to part of the reason that housing affordability is a problem. In my view, it is time to look at curtailing that tax break. At the very least, it should be examined by the review. In saying that, I should acknowledge that it was a proud boast of the Democrats for many years that we played a key role in bringing in that exemption—and, in hindsight, I do not think it is a good outcome. I would also say, though, that clearly other factors of the tax system, like negative gearing and the way it interrelates with the capital gains tax discount—both things the Democrats did oppose—also play a role and they should be examined.

I also think that, whilst the report recommends some modifications of the first home owners grant, it is appropriate for that to go further. This grant should be about trying to assist people who could not otherwise afford a home to buy one. It should not assist people who have plenty of money to get a slightly better home than they would otherwise buy. It is a significant amount of money and it should be targeted at affordability. I think it should be capped or means tested or perhaps only apply for houses that are below a certain value.

Senator Payne pointed out the role of private tenancy, and I very much appreciate the fact that the committee examined some of the issues relating to that. I think there is a real case for stronger tenancy laws to give people more security of tenure. It is in the private rental sector that the worst pain is currently being felt with regard to housing affordability, and that unfortunately also links to people who have the least security, in most cases, over their home. Those are state matters, it has to be said, but, now that we are finally taking a national approach on these issues, that is an area that should get more focus.

I again congratulate the committee. I think it is a crucial issue, and I am glad to see it getting further attention across all parties at a national level. I do hope the new federal government takes on board these recommendations in the spirit in which the committee has put them forward and considers them urgently—which is an approach to Senate committee reports that has not always happened in the past. I hope it does in the future.


Juiced Pixels
Posted on 28 Dec 2008 6:08 pm

Negative gearing policy needs review.
Especially negative gearing on existing housing stock as this encourages speculation and not investment.

Posted on 28 Dec 2008 10:25 pm

Regarding "capital gains tax exemption on the family home". If a person had to pay capital gains tax to relocate in pursuit of employment, they would suffer a significant equity penalty. They would not have as much equity in the new house (of similar value) to the one they sold. Some ramifications;
1) The value difference between property within commutable distance of good employment and that with fewer prospects would increase further.
2) It would be a disincentive to contemplate relocating for work. It may make 'financial sense' to be unemployed for a few years rather than to relocate.
3) This *may* foster the development of 'ghetto' mentalities.
4) Employers could not be expected to compensate for the relocation cost.
5) It would discourage 'up-sizing' the house every five to seven years, which would negatively impact the real estate industry, and state collected stamp duties.
6) It would further encourage young people to purchase the biggest house they can (or cannot) afford (in order to avoid having to up-size later on). This would reduce the amount of disposable income available to support the 'consumer economy'

I agree with Juiced Pixels. Negative gearing needs to be respun. It should have a sunset clause and only apply to newly constructed housing. Expenses related to property should only be allowed to offset income from the property, rather than being a mechanism for converting 'wages income' into 'capital gain income' and hence being taxed at lower rates.