Higher-density housing needed; stamp duty and negative gearing have to go, expert says
In order to improve housing affordability, the government must institute reforms to allow for higher-density housing and remove market distortions like stamp duty and negative gearing, according to KPMG.
Speaking at The Australian-Melbourne Institute Economic and Social Outlook Conference, KPMG Australia partner and chief economist Brendan Rynne said the government needed to institute a combination of regulatory and tax reforms to address the affordability crisis. Rynne warned that the reforms should be instituted in unison to avoid an “investment freeze” that could only worsen the situation.
“Homeowners cannot expect to see their home values continually rise, yet also expect the government to fix the housing affordability problem, so that their kids can buy their own home. We know that’s the political challenge,” Rynne said. “In terms of fixing housing affordability, there are two policies that matter more than any other; they relate to regulator policy and tax policy.”
Rynne said that regulatory policy should aim to increase housing density, The Australian reported.
“With a fixed supply of land within our cities, planning reforms need to occur to ensure we optimise the efficiency of this resource,” Rynne said. “The question of adequate shelter has to address the issue of quality. How many bedrooms and bathrooms … is adequate?”
Rynne said that tax policy should be changed to remove – or at least minimise – distortions in the market, The Australian reported.
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“Tax policies like stamp duty, capital gains tax, negative gearing, principal place of residence exemptions for land tax and other concessions, all collectively influence when and how new and existing housing stock flows into and out of the market,” he said. “Importantly, if we’re going to be serious about fixing housing affordability, any reform to regulatory and tax policy needs to be considered in unison. Where reforms get out of sync, there is a risk that you could induce an investment freeze, thereby worsening the situation.”
Rynne said that if reforms made it easier to build higher density housing, the cost of land per dwelling could fall.
“We simply need to use less units of land per dwelling than we currently do,” he said.
While the private sector would deliver the vast majority of both rental and owner-occupied housing in the future, National Housing Finance and Investment Corporation chief Nathon Dal Bon said the government had a role as well.
“There is a segment of the market, particularly for those on low incomes or no income, where the market may not necessarily provide the necessary accommodation services,” Dal Bon told The Australian. “It is a national problem and so I would argue that there is also a need for a national solution.”
The Albanese government has laid out a plan for housing reform, including an ambitious goal of getting 1 million homes built by the end of the decade as part of a national effort by government, investors and industry. The government said it would also set aside $350 million to fund an additional 10,000 affordable homes by the end of the decade, The Australian reported.
