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Speech to national housing conference

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ALEXANDER DOWNER S h a d o w M in ister fo r H ousing, S m all Business & C u sto m s *






Office No. (08) 391 0888






In my six months as Shadow Minister for Housing I have spent a good deal of time pointing out to the Australian community the very severe impact of the Federal Government's monetary policy on the capacity of young Australians to purchase their own homes.

Although the Government argues that the real cause of the housing crisis is land shortages - and they do that for the obvious political reason that the States not Canberra are responsible for land management - there is plenty of evidence to prove that the

increase in interest rates has had an enormous impact on home affordability.

Even in Sydney, where land shortages have been the most apparent, ABS data shows that over one third of the increase in housing monthly costs in the last decade can be directly attributed to interest rate rises alone. In Melbourne, Adelaide, Perth, Hobart

and Brisbane, the interest rate effect has been far in excess of 50% of the increase in housing costs.

Add to that the effect of the capital gains tax - so starkly revealed by the figures on home improvements and additions which, as a proportion of home construction expenditure, rose to their highest level ever in the years following the introduction of the

capital gains tax - and you can see that Mr Keating and Mr Hawke must take a good proportion of the blame for home ownership being out of the reach of most young Australians.

I am not, however, going to use this occasion to be negative. As a passionate believer in individualism and the capitalist system and in the whole concept of turning as many Australians into capitalists through home ownership, it is incumbent on both me and my Party to promote positive programs which are consistent with our world view.

The role of Government is not to run the industry as a whole; the private sector can do that with much more professionalism than can we in Canberra.

The role of Government, rather, is to ensure low income Australians have access to affordable housing, be it through home ownership - which is my preferred option - or through the private or public rental markets.

We have, of course, our own Housing Policy which I inherited after the Shadow Ministry re-shuffle last September. Our policy commits us to a greater level of expenditure on home purchase assistance for low income families and to giving tenants in public housing greater opportunities to purchase the homes they rent.

That policy is a practical expression of our profound and very Australian commitment to the whole concept of home ownership.

We have also recognised that more needs to be done to manage land supply better. Indeed, while I was promoting that aspect of our policy as well as our "demand side" commitments, the


Government was telling us that the housing crisis was nothing more than (in Senator Walsh's words) "...a beat up by real estate agents".

What I have also been doing - albeit very quietly - over the last six months is searching for other initiatives which may help us achieve our economic and social objectives.

There has been no shortage of suggestions flowing in from the community. But they remind me of the old saying that there is nothing new under the sun.

As the alternative government of Australia, it is important we examine serious proposals and that we do so in consultation with the housing and housing finance associations and industries. That is precisely what I have been doing over the past two months.

There are four issues I want to raise with you today which I personally think merit greater community debate. Let me say, however, that at this stage these are by no means the agreed policies of the Coalition.

First, there has been a great deal of discussion about the taxation arrangements for home purchasers and home owners. In recent weeks I have been inundated with suggestions of schemes which could help home purchasers meet Labor's high interest rate


While I have yet to be convinced that special tax free housing bonds or accounts should be introduced, I am interested in the proposal to change the tax arrangements for savings in general.

We are actively investigating the possibility of exempting the inflation component of interest income from tax. Not only would this change to the tax system stimulate savings in general, it would bring down home loan interest rates substantially thereby making home ownership more affordable for young first home


With such a policy we could credibly argue that under a Coalition Government home loan interest rates would be lower.

It would also encourage savings as against consumption thereby acting as a more appealing alternative to dealing with the balance of payments crisis than just forcing up interest rates.

Secondly, I think everyone who is interested in the housing debate would agree that we need to move towards what the Prime Minister yesterday described as "...more innovative patterns of housing developments".

What concerns me is that while there are already examples of more efficient use being made of land for housing, Australian builders are unlikely to embrace unit or town house projects on a major scale because of the industrial relations implications.

The building unions in most States define those projects as


construction projects which means they are unionised. Housing projects, by contrast, depend on the more efficient sub-contract system.

Unless the sub-contract system is extended universally to town house and unit type developments, then more innovative projects simply will not proceed.

The Government has ignored that issue. For our part, it will be high on our agenda.

Thirdly, I still remain concerned about the inability of our young people to save enough for a deposit on their first home. Consequently, my colleague David Connolly, the Shadow Minister for Social Security and I have been working on a scheme which we

call the Homesure Scheme which would link housing policies with retirement policies.

This scheme, put simply, would allow a person aged 25 to cash in 75% of their accrued superannuation benefits provided they used that money as a deposit on their first home and they stayed in the superannuation scheme.

This proposal would have two clear benefits. First, it would encourage more young Australians to get into superannuation and provide for their own retirement.

Secondly, it would give first home buyers a significant amount of money to be used as a deposit for a house. While the actual amount available would depend on the person's income and the number of years he had been in the superannuation scheme, a

figure of $15,000 would be a reasonable estimate of the amount of money someone might accumulate for that deposit.

Let me make it clear: we have not finalised any commitment to this scheme but it is an example of the sort of creative thinking which addresses not one, but two, public policy concerns at a minimal cost to government.

The fourth issue I wish to address is housing allowances. I joined the Liberal Party because I was committed to the individuals not paternalistic corporatism. I want individual to have choices over their own lives, not be told eternally by some Leviathan (to use Thomas Hobbes' word) what to do and where to


I do not think that current housing policies give low income individuals enough choice - or any choice for that matter - and nor are they equitable. Those lucky enough to get into public housing get the biggest subsidy followed by home buyers and

finally people in the private rental market.

Furthermore, public housing alone as a solution to low income housing has many disadvantages. First, there is a considerable body of evidence to suggest it is a very expensive and round about way to help solve low income housing problems.

Secondly, it has (but need not) created welfare ghettos.

Thirdly, it makes people dependent and unless there are constructive schemes to promote the sale of public housing to tenants, then those tenants never have a home they own and nor do they have the mobility which they may need to give them greater opportunities.

One possible solution is housing allowances.

Qualifying low income households could be eligible for an allowance - paid by the Department of Social Security - o f , say, $50 or $60 a week. That allowance could be used to help meet monthly mortgage repayments or to help meet the rent in the private rental market or to help the relevant State housing authority meet the cost of providing public housing.

This would have the advantage of providing greater horizontal equity between public housing, private renting and home purchase.

It would give greater choices for qualifying households.

It would give people greater mobility.

And it would not mean, as many welfare groups fear, the end of all public housing. Insofar as low income households wanted to enter public housing, that option would still exist.

Obviously, it is very difficult to assess the total cost of this scheme as it would depend on the qualification criteria and the actual size of the allowance.

There is also the difficulty of getting from where we are today to such a different policy.

The transition would be likely to create some temporary problems for State housing authorities.

Consequently, in the short term one option would be to convert home purchase assistance schemes (such as FHOS) and the rental assistance program to housing allowances.

In conclusion let me make one thing clear: the Coalition is unashamedly committed to home ownership as a fundamental component of Australian society and we know that most Australians want to own their own homes.

No Coalition Government would meekly preside over the two Australias which have emerged under the Hawke Government in which a whole generation of Australians are being excluded from owning their homes.