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Barriers to homeownership in Australia

CHAIR —Welcome. Thank you very much for coming this afternoon and assisting the committee. I also thank the coalition for your submission to the inquiry, which is very helpful to us. I would like to ask you to make an opening statement, if you wish; then we will go to questions.

Mr Myers —Thank you very much. Queensland Community Housing Coalition is a peak body representing not-for-profit providers. Our members are housing associations and co-ops, local government and Indigenous housing providers. They operate across the whole spectrum, from homelessness to the new affordable housing companies, like Brisbane Housing Company and some of the larger providers.

Our members are at the front end of dealing with the growing housing crisis. What they are telling us is that the housing crisis is having a whole lot of impacts on the wider community, not just on the people who are in housing need. They are really describing a situation of increased polarisation between housing haves and housing have-nots. There are those people with a choice in housing, people who believe that the last two decades, when house price inflation has risen faster than general inflation, have been good to them because they are actually in housing stock and they have acquired an increased capacity to get access to credit and the other things that go with it. Then there are those who are outside that.

Our members are describing some quite surprising impacts right at the very bottom end, where, for the very first time in the life of many organisations, they are seeing homeless people who have actually got work. So there are people in jobs but they are low-paid, part-time or casual jobs and they cannot access housing. They are putting increasing demands on homelessness services which have traditionally worked with people who have got a mental health problem, are escaping violence or have some other personal characteristic to their need. In this case it is simply that the new homeless are those who are economically excluded from the housing market.

Obviously, the core issue for our members is not to see governments putting more and more money into social housing responses but to actually find ways of putting the housing industry on a more balanced and sustainable footing in the long haul. If we do not do that, if we are going to try to tackle a situation where the private market is failing maybe as many as 50 per cent of new households, then the cost to the taxpayer and the cost in social investment, in social and affordable housing, will be quite enormous. We did a bit of research in 2004-05 and we looked at the income profile across Brisbane. We looked at a typical bank lending regime and we looked at median house prices in the poorest suburb in Brisbane, which is Inala, for those who do not know Brisbane. We found that 54 per cent of households would have insufficient household income to buy a medium-priced house in Inala, the cheapest suburb in Brisbane, if they were entering the market right now and seeking a mortgage to pay for that house.

Our members are not providing evidence in front of this committee to say, ‘Let’s spend billions more on social housing or on our members and the housing that they are providing.’ They are saying that some very, very significant political decisions need to be made to put the housing system back onto a sustainable footing. We have covered some of those in our submission. One of the most surprising things when we talk about the quantum of resources is that the 2004 report of the Productivity Commission inquiry into homeownership identified about $25 billion that goes in various tax concessions to the homeownership field and about $4 billion a year that goes in direct government outlays in terms of the Commonwealth-State Housing Agreement, Commonwealth rent assistance and the First Home Owner Grant scheme. Our members are saying that that is a lot of money and asking why Australia has still got a housing problem when the Australian government is providing outlays or tax concessions to the tune of $30 billion a year.

Clearly, the need for money is not the answer. Maybe the problem is the way that that money is distributed and its impact overall on the housing system. That may be to do with the fact that many concessions and spending programs have grown up in an ad hoc way. They have just been layered on top of each other and some of the tough decisions that would be needed to take away some concessions and benefits from some people are just too tough, politically, to make. That includes capital gains on very rapidly rising house price inflation at the top end of the market that is dragging the rest of the market with it.

There are a number of things which governments have done. They have met one particular segment of need by providing a new funding program or a new concession, and that has probably added to the overall ad hoc nature of investment, taxation and tax concessions. There is no clear view about the impact on the overall long-term sustainability of the industry. You have probably heard loads of evidence about the statistics and the demand and supply side factors. Supply clearly is a major issue. We are sitting in a part of the country that has to provide another 500,000 homes by 2026. New towns are springing up all over the south-east. It is a major issue if you cannot get the supply side sequenced and released in the right way. It is not just governments that are sitting on land. The private sector sits on land with a speculative eye as well. There may be ways in which you can penalise certain behaviours and reward certain other behaviours.

When we talked about polarisation, one of the things that has happened which is a great success story is the rise in two-income households—the rise of working women in households—and the corresponding wealth that has gone into those households. On the other side, if you are a single-income household, whether you are young or aged or have been separated or divorced—and a third of all marriages end in divorce—it is not so good. There are major issues when two incomes have been needed to service a house and to pay the mortgage or the rent and a relationship breaks up or a partner dies due to ageing and you then have only one income to service a house. In some cases, two houses are needed, because both partners are sharing a caring responsibility.

On taxation and concessions, a lot of work was done by Judy Yates and also by the Committee for Economic Development of Australia to show that the way that tax concessions are distributed means that many people are getting those concessions when they least need them: towards the middle and end of their housing careers and at higher levels towards the middle and end of their housing careers. The way we are distributing assistance is not helping the right people at the right time. Other kinds of fees and charges, like stamp duty, get in the way. It is a barrier; it is a transaction tax; it has literally nothing to do with housing and housing supply and demand. Infrastructure charges, particularly the propensity of councils to have flat rate infrastructure charges, reward bad behaviour.

If we were trying to put an affordable housing development on Pine Rivers with small-lot workers cottages at $300,000, a $60,000 infrastructure charge would be out of the question. The people up the hill were providing $600,000 houses. A charge of $60,000 is much more able to be accommodated by a large house with five bedrooms and three bathrooms than by a workers cottage. If we are going to steer the industry better, we have to have progressive fees and charges that say, ‘This kind of behaviour is affordable, sustainable and provides good housing outcomes; this kind of behaviour is massive overconsumption and we need to tax it accordingly.’

I now come to a couple of political points that I would like you to consider. The first is the idea that we can get this system into long-term balance without there being any losers. I know that that is a politically palatable way of handling this situation, especially when we are talking about changes that we would like to steer over 10 to 15 to 20 years, so that the next generation have good housing opportunities. Every successive generation has had better housing opportunities than the previous one. But it is very difficult to see how you are going to find a way of bringing incomes and house prices into some kind of rational relationship if house price inflation continues to rise at the rate that it is rising and low and moderate incomes are rising at three to four per cent. If house prices are rising at 12 per cent and their incomes are rising at three per cent or four per cent, they are going backwards.

So, somewhere along the line, for the long-term interest, it may be that we have to find a way of, over time, changing the mix of winners and losers. And it is a very sad thing to say, but I know that there are people out there who are now concerned about their children and their grandchildren and their opportunities. While they might be able to help them, because they are reasonably housing-rich themselves, as a society that is not a good way of saying how we are going to care for the next generation moving into housing—to say that it is a matter of who got into the market at the right time, and whether they can afford to help their children.

Those are some of the issues that we wanted to raise. We also wanted to talk a little bit about the idea of an affordable housing industry. Across parts of Europe, as they have tried to deal with these changes, you have seen structural changes in the way both government assistance and the direct provision of housing has happened in the social field; the Netherlands and the UK are two leading examples. Where the common interest has lain between government, industry, the finance sector and the community sector is in trying to generate an industry that can deal particularly in the affordable housing field. I do not just mean a spending program; I mean things that would be characteristic of a proper, functioning, long-term industry that can drive innovation and can improve efficiency. In the UK, over £35 billion has gone into affordable housing since the 1989 housing reform act. That has been welcomed by all parts of industry and by both sides of politics. But it would be a real shame if, in 10 years time, we saw the housing infrastructure fund, the National Rental Affordability Scheme and the first homeownership scheme ending up as spending programs that delivered a limited number of outcomes in that time and did not, instead, work to a holistic approach to creating a more affordable housing industry.

We will end by saying that the kind of functioning housing system that our members, who work in the community, want to see is one where incomes and prices have some rational relationship. They want to see a housing system that responds to the different markets, conditions and household make-ups in their local areas but meets the needs of the whole community—a system that works for everybody and it is in everybody’s interest. They want a system that promotes the idea that people of different incomes and different households can actually live together in integrated communities where some people might be renting, some might be buying, there may be shared equity, and there may be rent to mortgage schemes and mortgage to rent schemes—a whole lot of new diversity that reflects people’s changing circumstances. They want to see people living together and not polarised into estates of rich people and areas of poor people.

That also means that we need to find a way of ending the polarisation that is public and social housing—that it has moved so far into a welfare housing system. It is really un-Australian; it is not the way that previous generations have experienced public housing. They got in there, it was near jobs and it was there to provide a helping hand where you could save up and then you could either buy your home through the commission or you could go off into the market. Now it is an American style welfare tenure and it is going to remain that way and it is going to stigmatise the very people who need it most. It will isolate it away from community support. Already out there in the community our members are saying, ‘Nobody wants this stuff in their neighbourhood.’ Well, it is the same stuff we were building 25 years ago. Why does nobody want it in their neighbourhood? Because of the stigmatised label of welfare housing. That has got to change and we have got to work through how we have a continuum of housing responses. This fundamentally means that the way that we distribute subsidy must be much more sophisticated and discreet—at the right times, in the right ways and not with a big flag over it saying ‘welfare dependent’ or ‘not welfare dependent’. As Judith Yates’s research has shown, the people who have received the most would never perceive themselves as receiving welfare. But the people who have received $5,000 a year in subsidised public housing have got a big label over their head saying ‘welfare’—in fact, ‘non-deserving welfare recipient’ increasingly is the flag that is over their heads.

So those are some of the ways that we want to see things move. We want to see opportunities for improved choice, diversity, social inclusion and economic participation driven through better housing outcomes.

CHAIR —Thank you very much, Mr Myers. You have given us a lot to think about there, and so has your submission. Let me start with one question. Under your heading of ‘Planning and Infrastructure’ you talk about agreeing a:

national framework for the types of infrastructure that it is reasonable for new homebuyers to pay—

for, and then what—

the wider ... community should meet—

and, I assume, what government should meet.

Mr Myers —Yes.

CHAIR —How do you envisage that working?

Mr Myers —A lot of this is actually about having a proper conversation about what the options are, because at the moment you just get an industry-polarised view. You will get government, particularly local government, saying, ‘We can’t afford to put these higher standards of infrastructure in place unless somebody pays and it’s a user-pays system,’ and you will have industry saying, ‘The fee structure is unreasonable and it doesn’t bear any relationship to the infrastructure that’s required.’ There is some very interesting research that has been done in the UK about categorising what is housing related infrastructure and what is broad community infrastructure. Even more sophisticated than that, they have said, ‘What is infrastructure that is necessary for today’s generation to consume housing and what is infrastructure that is intergenerational—that will be there for future generations to enjoy? How do we spread the cost of that?’ I would certainly say that the discussion papers that have been produced in what was then the Office of the Deputy Primary Minister in the UK were really good starting points, but I am sure that there is good academic research here as well. We just have to find a way of saying that people who are buying houses right now do not pay for all the libraries, parks and everything that people are going to enjoy for generations to come.

CHAIR —Thank you very much. I have a couple more questions but I want to give my colleagues a go, so let me go round the table.

Senator HUTCHINS —On your last point, Mr Myers, in some states—particularly your own state—the local government is very much limited in what they can charge, whereas in other states it is one of the few ways they can get funding for a library. Do you have much contact with your New South Wales colleagues?

Mr Myers —Yes.

Senator HUTCHINS —Do you have a common view in relation to the charges? I am not sure you called for the abolition of stamp duty, but you did say it was a barrier to homeownership. I am not sure you used those words. In New South Wales and other states, as I recall, it is a long-standing and legitimate charge.

Mr Myers —Yes. We do have these conversations through the Community Housing Federation of Australia and through the National Affordable Housing Summit group, which I have been active in as well. I think that there is generally a consensus that it would be nicer to codify infrastructure that was relevant to the household that is buying the house. But it does mean that somewhere, out of the common pool, resources have to be provided for the other infrastructure, and that is the trade-off. It can be pretty unpalatable if you are a ratepayer and it comes out of the long-term rate base, taxes or whatever. It has got to come from somewhere.

Local governments, I think, would benefit from some standardisation in a range of things to do with housing planning approval processes as well as infrastructure, and a national framework could provide guidance for that. There are plenty of levers that the federal government could pull that would steer councils to having much more consistency and transparency in that way.

Senator IAN MACDONALD —What are the levers?

Mr Myers —Through funding arrangements, basically. We know that, for example, if the Commonwealth wanted state governments to approach a certain housing issue then the Commonwealth-State Housing Agreement would be a funding lever that they could attach certain behaviours to. Again, funding levers in particular can help steer. At the end of the day, if the councils believe that the community as a whole is prepared to share in intergenerational infrastructure then they should be political champions of that. You have to wonder why councils would want to continue to put their heads on the chopping blocks of these very high infrastructure charges if there were a more rational way of doing it.

Senator IAN MACDONALD —I do not think you were here earlier, when we had some witnesses from the conservation area—if I can broadly categorise them as that—who were suggesting that we should have caps on the number of people living in particular areas like the Gold Coast or Brisbane. Do you have a view on that? Would that in any way assist in providing affordable housing, or does it perhaps do the opposite?

Mr Myers —In the Noosa example it has done the opposite. In a sense, where you constrain the supply of housing and you constrain population moves then the price of the good that you are constraining goes up. In Noosa it went up a lot. I drove to Noosa to meet the then mayor, who is now Mayor of the Sunshine Coast Regional Council, to talk about affordable housing and I picked up a young bloke hitchhiking from Cooroy to Noosa—30 kilometres. He was a chef in Hastings Street and he could not afford to live in Noosa. In fact, I think the Mayor of Noosa for quite a long time could not afford to live in Noosa. So I do not think that that is necessarily the answer.

If there are real ecological issues that we cannot deal with through good infrastructure and good planning then the community need to have a debate about what are the best ways to get a fair distribution of the costs, burdens and benefits in that. But simply pricing people out by saying, ‘This is a limited and prestige environment,’ is exactly the kind of polarisation that is not doing anybody any good. The person serving in a coffee shop or driving the bus around Noosa for the old-age pensioners to get to the shopping centre has as crucial a job to that environment as those of the people running the five-star hotel. It seems to me that it is a form of economic prejudice to exclude those people from living near their jobs.

Senator IAN MACDONALD —For those of us who have houses—and I suspect we all declare an interest here—you acknowledge that to change the law that says that when you sell your house as you get older you will have to pay capital gains tax on it would be hugely unpopular politically. We are politicians, and governments, unfortunately, are run by politicians. A number of people have suggested that we should get rid of the exemption of private housing from capital gains tax. Have you seen any research or suggestions from think tanks that have come up with some idea that practically might achieve something like that? By ‘practically’ I mean politically acceptable.

Mr Myers —No. A lot of the analysis is about why certain concessions or expenditures are good or bad in their own right. To me, the biggest challenge that we face is actually getting the balance of this right for the right kinds of arrangements. In other words, it may well be that capital gains tax should only feature in certain circumstances in certain ways for certain types of gain. It could well be that the fees and charges need to work in certain locations differently. I just think that from our point of view the $30 billion that is going out there in concessions seems to be working to fuel the problems that we are facing. If it is politically unpalatable to put in something like a capital gains tax, maybe it is still more palatable to look at the whole mix of what the government is currently doing and find ways of changing it over generations. I think it is a 10- to 15-year thing, because what we have now is the result of 15 to 20 years. So we need small changes, but steering things in the right direction is the way that I would go.

Senator IAN MACDONALD —Finally, the $30 billion you have used: have you got a rough line item on how that is made up?

Mr Myers —Yes, I have.

Senator IAN MACDONALD —Is it in your submission?

Mr Myers —It is in the 2004 Productivity Commission report and it is made up of three components that the economists outlined at that time: capital gains tax exemptions—these are 2003-04 figures—of about $8 billion, land tax concessions and imputed rental value, which is a way of calculating the value to somebody who is consuming the housing, who owns or is buying the housing. Those three add up to about $25 billion or $26 billion then on top of that you have got $2 billion in Commonwealth rental assistance, $1 billion in Commonwealth-State Housing Agreement and, at that time, just over $1 billion in the First Home Owner Grant. They did not put in negative gearing, which is also a concession, but that is because it is seen as an investment class concession and not to do with housing. Many people—probably people who have appeared in front of you—will have had a go at negative gearing.

I make this point: the federal government has announced $603 million in incentives for a new supply of privately rented housing that will be offered at a discount—that is, $603 million over five years. I just read a report that currently negative gearing is costing the taxpayer about $2½ billion. You could do a hell of a lot more with that money if you said that that concession was about the supply of affordable housing and those investors who wanted to do a triple bottom line investment would still get their concession and would be helping the country. At the moment, in Queensland a lot of that on the Gold Coast will be going into investment and short-term let housing for holiday makers. Why the taxpayers of Australia want to support investment activity that finances holiday activity for people coming into apartments that stand empty most of the year I do not know. It is beyond me why we want to do that.

Senator IAN MACDONALD —It helps with the local tourist economy, I suspect.

Mr Myers —If the lord mayor of the Gold Coast were here, he would be saying that about 40 per cent of his residents earn less than $30-odd thousand a year and they cannot afford housing down there. If he had a choice between that tax concession I know where he would be putting it, and he has joined us on many a platform to share that view.

Senator IAN MACDONALD —He is but a politician relying on the votes of his constituency, as we all do.

Senator COLBECK —I was interested in your comment in respect of the impact of two-income households. I do not think that there is any question that they might have had an effect, particularly as more and more women started moving into the jobs market and their households had more income available to spend on housing. That has potentially had an impact on the market. My perception is—and I have had conversations in this context and it is perhaps even borne out by your comments about the number of people who can afford to purchase a house in the cheapest suburb in Brisbane—that it is not so much an additional income but a necessary income as part of this whole process, but it still does not lessen the effect on those that are single-income households.

Mr Myers —That is right. It is a really big issue, and I think it is also tied up to some extent with our generation, who see housing differently from our parents, not as something that you consume, pay off and is the right size for your household—the right number of bedrooms—but increasingly as an investment good. There is a whole industry out there selling books, magazines and television shows all about this wonderful thing called your investment.

When I did go up to Pine Rivers to look at providing those workers cottages and we looked up on the hill, they were all what is commonly described in magazines as McMansions. The typical household there had 2.1 to 2.4 people. The houses had four or five bedrooms, three bathrooms—heaven knows who wants to clean it all! The point about it is that we have an idea that the value of the land and infrastructure requires this big investment of a big house, because we are going through such a lot of pain to pay for it, so we had better get the best investment out of our house that we possibly can, and the market feeds into that concept of size.

One of the challenging things when we face these environmental changes ahead of us is how we curtail that consumption pattern and get it back into balance with our household size. People have borrowed to the hilt and they are very concerned—there are scared people out there—about ending up in negative equity. So all these policy issues that you are dealing with are clashing into each other. How do you get house prices down while taking into account a whole lot of people who have been overexposed in a that kind of environment. It is really long-term things that need to be done in short, short steps.

Senator COLBECK —So we have gone from little boxes on the hillside, as the song used to go, to McBoxes on the hillside. It is all part of the social change over the last 15 or 20 years.

Mr Myers —It is. We should not forget that Australia is one of the best housed countries in the world. We should always start with that. We are really doing very well internationally and we are not short of spending money but we just do not seem to be getting the housing outcomes, the environmental outcomes and the affordability outcomes that we need.

Senator COLBECK —I want to take you back to your comment with respect to public versus welfare housing. It is something that we have discussed previously in our hearings. Do you have any numbers on the amount of public housing—we will call it public housing in an overall sense for the purposes of the question at the moment—that is here in Queensland? Do you have any sense of where that has been trending? I sense that it is down, but have you got any hard numbers on that?

Mr Myers —It is about 3.5 per cent of housing stock. It depends on how you quantify what is in there. It is about 60,000 units of accommodation. It has not been going up. There are a number of ways you can look at it. Basically, if you are looking at the population inflows that are coming into the state then you would have expected a much more significant expansion of direct provision of housing and we have not had that. So that is not a success story and I do not think it has been a success story nationwide. Social housing has gone from 6½ to probably about 4.7 nationally and there have been big drops in South Australia, New South Wales and places like that. Queensland always had a very small stock, so we have not gone backwards as fast as other people have gone backwards. Queensland also had the benefit of not concentrating as much housing stock in very big estates. We have got some medium sized estates but most of it is not concentrated in estates.

Senator COLBECK —You say that it has gone slightly down but is almost static?

Mr Myers —In relation to the population it is going backwards but in relation to other states it is holding up reasonably well.

Senator COLBECK —When we were in New South Wales and we talked to some of the groups down there, we asked them about the sustainability of the stock given the fact that it had a narrowing base and it was much more focused with respect to who it was providing the service to and therefore had a much narrower capacity to charge a range of rentals which could therefore be churned back into the system and assist with its sustainability. It was agreed that it was not sustainable anymore because the base was too narrow. Would you say that was a similar situation to that which exists here?

Mr Myers —It is a similar situation, and the polarisation that has happened means that the economic base that the system relies on is narrowing and reducing—and all for very good policy reasons. If you have a limited supply of very costly provision—which is your housing stock—anybody would want it to go to those with the greatest need. But when you target excessively those in the greatest need, you are actually running down your economic base for providing that need. The cake keeps getting smaller. You keep saying, ‘This top group of people who used to be in housing need are no longer defined as in housing need. They can go off over there and do whatever they are supposed to do in the market.’ So it is pretty dysfunctional. The rental base has dropped quite considerably in the housing stock and the cost of providing the operational subsidy has gone up quite considerably, because the more you concentrate people with complex needs the more you have to manage the system. It is a self-defeating policy. Even social housing in America, which has had a dreadful reputation, is now moving away from that. They are moving away from it, and the Brits have moved away from it.

Senator COLBECK —So you would support a broadening of the base that is eligible for public housing, as distinctly opposed to the terms that we have used in respect of welfare or social housing.

Mr Myers —We have done a bit of work on a continuum. I do not know if I can table anything, but it has a continuum of housing need and then a continuum of responses and more sophisticated ways of targeting subsidies. It is linked to a set of affordable housing principles; the way that our communities are saying they would like us to live.

CHAIR —In your submission at 6(g) under the subheading ‘New delivery and safety-net arrangements’ you mention a not-for-profit shared equity homeownership model being developed in Brisbane and you also mention funding a program nationally for not-for-profit housing providers to buy properties where families are being repossessed. I have called those marginal mortgage holders in previous conversations. I wonder if on notice, because we are almost out of time, and if it is not too much trouble for you, flesh those out for us. They are the sorts of ideas that we have found quite interesting in the past couple of weeks and I think some more information on that from the perspective of your very practical experience would be very helpful for us.

Mr Myers —Very much so. I have a presentation on shared equity which I can table.

CHAIR —Thank you.

Mr Myers —But there is a lot more information and detailed economic modelling that can go in behind all of that.

CHAIR —That would be fantastic. That would be extremely helpful because we have been discussing shared equity ideas in a number of places, and what you had to say about waiters, cafe workers and so on in Noosa strikes a remarkable chord in relation to Karratha. You would not exactly line up Noosa and Karratha side-by-side because they are very different places, but the issue of key workers not being able to be accommodated in their own communities is just phenomenally looming for communities like that.

Mr Myers —The two things that I will quickly say about shared equity is that the first thing that we understood in helping people in the community—and we run housing that is privately owned in the rental sphere as well—is that there are a lot of people in there who in the past would have moved through into homeownership. They are people who have a predictable income but it is a fairly low or modest. They are in a better position to compete for rental stock than the traditional households that we assist. This is having a knock-on effect down the chain and that is why we are seeing people on marginal and casual incomes being made homeless, which is unheard of. They cannot access the rental market because they are disadvantaged in relation to those who used to be able to move into homeownership. The shared equity model, which we are very close to doing the pilot on in Hurworth Street, is aimed in a non-inflationary way because it is actually taking people who cannot compete for the bottom of the market and slotting them into a new market underneath that.

CHAIR —If it is within your capacity, I would not mind you having a look at the Hansard from some of the evidence we took in Sydney from the NSW Federation of Housing Associations, which was about the very significant change in the profile of public housing tenants in Australia. In New South Wales we would call it the post-Richmond report—that is, looking at people who were de-institutionalised; the elderly, who are completely marginalised and have no capacity to sustain a housing contribution. There is also a cohort of young people which he referred to. I would not mind you having a look at that—it is not very long; that aspect at least—and reflecting on that from the Queensland perspective and your experience.

—Yes, that is fine. Was it Adam Farrer?

CHAIR —Yes, thank you.

Mr Myers —We work together.

CHAIR —I would be very grateful for that. If there are no further questions, I thank you very much for your submission. There are some very interesting ideas in there which I think are very helpful to us, and this has been a good discussion. Thank you for coming this afternoon and for assisting our inquiry. I would appreciate you providing that further evidence.

Committee adjourned at 4.15 pm