“It took neglectful governments two decades to create the current housing affordability mess. They preferred the easy choices that merely appear to address the problem,” says Grattan CEO John Daley.
The report states that home ownership rates among Australians younger than 65 is falling, especially those with lower incomes. Owning a home increasingly depends on who your parents are – a big change from 35 years ago when home ownership rates were high for all levels of income. Those on low incomes – increasingly renters – are spending more of their income on housing, added the findings.
In addition, the report recommends that state governments should fix planning rules to allow more homes be built in inner and middle-ring suburbs of larger cities. More small-scale urban infill projects should be allowed without council planning approval and state governments should allow denser development along key transport corridors, as these measures will improve chances of housing affordability. Other steps recommended by the report include reducing capital gains tax discount to 25%, abolishing negative gearing and including owner-occupied housing in Age Pension assets test.
Development in middle suburbs has increased in recent years, especially in Sydney. But today’s record level of housing construction is the bare minimum needed to meet record levels of population growth driven by rapid migration. Meanwhile a decade of accumulated shortages are forcing younger people to set up their own homes later in life.
“The politics of reform are fraught because most voters own a home or an investment property, and mistrust any change that might dent the price of their assets. But if governments keep pretending there are easy answers, housing affordability will just get worse. Older people will not be able to downsize in the suburb where they live, and our children won’t be able to buy their own home.”