You cannot have an election without a debate about housing affordability and how to fix it. Like clockwork, this year, Australians have been forced to weigh up the merit in allowing homebuyers to access their super to buy a house or, alternatively, inviting the government to coinvest with them in property.
All the major parties, and most of the minors, have a housing affordability policy and some focus group-tested lines on why their plan is superior to their opponents’ and will definitely work this time.
The problem is that, if history is any guide, none of these housing affordability plans will actually make housing more affordable for the masses. They might help a few first homebuyers, including disadvantaged Australians, get to the first rung on the property ladder.
But in the past three decades, as well-meaning governments have championed countless housing affordability plans, the ratio of house prices to average household disposable income has, according to the Reserve Bank, more than doubled from about 2.5 times in the early 1990s to 6 times today.
For those not on the property ladder – or without a line of credit from the ‘bank of mum and dad’ – your first home is as out of reach as ever.
Housing affordability – and the related issue of homelessness – have challenged federal and state governments for generations. Too often policy-making is not coordinated between the Commonwealth and the states, leaving each tier of government to tackle the issues independently and, in many cases, ineffectually.
On affordability, many of the measures put forward by the major parties are designed to help a cohort of homebuyers – particularly first homebuyers – but are almost always focused on the demand side of the market. That is not surprising as most of the supply-side responses to housing affordability, like increasing the number of new houses being built by releasing or rezoning land, are in the hands of the states and local councils.
Commonwealth-sponsored measures are typically designed to help increase Australians’ buying power by making home loans more accessible – and that has the effect of increasing demand for the limited housing stock available. Basic market economics tells us that more demand without additional supply almost always results in upward pressure on prices.
Notwithstanding this month’s modest increase in official interest rates, recent economic conditions have been fuelling housing demand, while supply constraints such as materials costs and labour shortages are pinching prices from the other side. The last thing the market needs is more demand in a good-intentioned but unsuccessful government attempt to ‘address’ housing affordability.
There are measures the Commonwealth could consider that would not simply pump housing market demand. For example, it could create a template for long-term residential leases to improve tenant rights and make renting a more attractive alternative to home ownership – something we see in other countries, including across Europe.
It could also reconsider competition-style payments to the states that undertake the difficult and initially expensive reform of replacing stamp duty with a broader and fairer land tax. We know that stamp duty is an enormous barrier to moving houses – upsizing and downsizing – into the most appropriate accommodation and opening up more housing options for other buyers.
There are no easy answers to housing affordability and homelessness. These are wicked problems that need to be untangled thoughtfully, not simply by throwing more money at the market. We cannot keep trying the same solutions and coming up with same poor results.
We believe that one of the reasons governments have struggled to design effective policy is the lack of accurate data. High-level unsophisticated data produces high-level unsophisticated policy.
Timely and accurate data would help future governments better understand the problems and drivers, enabling them to formulate better policy responses and measure their effectiveness.
We need research based on people, not property. The buying and selling behaviour of demographic segments – the young, families, the vulnerable, women, Indigenous Australians, immigrants and so on – will help determine the root causes of housing disadvantage and help governments to design more refined policies.
Use of property data should be leading best practice but it’s not. In fact, it is lagging other public and private sectors. We know the data exists. PEXA has access to real-time data on nearly every property transaction in the biggest markets in Australia. From that, you can draw de-identified and aggregated data on the buying and selling of Australian houses, including sale volumes, house prices and mortgage and refinancing figures – all in real time.
With that, we can map property trends to see where there is a need for government intervention and, when there is intervention, how effective it is by measuring behaviour and outcomes. When it works, programs can be deployed at scale; when it doesn’t, programs can be tweaked or terminated.
The problem is that the data is locked up by state-based land registrars and we are often unable to use it without registrar approval, even on a carefully anonymised and aggregated basis to protect privacy. On average, it takes PEXA more than 60 days to obtain either an approval or rejection from the registrars, with two recent instances of separate requests taking longer than 12 months to reach a definitive outcome.
There’s been commitment at a federal level to reform laws ‘to improve the flow of information in the economy, encouraging the development of new products and applications’, such as through the Consumer Data Right, first applied to Open Banking.
This approach needs to be applied to property data if the country is truly going to tackle the intractable issues of housing affordability and homelessness. Otherwise, we will be here in another 10 years, with house prices higher again, bemoaning the ineffectiveness of the same failed solutions.