The Victorian government's recent moves on affordable and social housing have attracted widespread praise in recent days, but they are merely a "first step" and will do little to address the root causes and effects of housing affordability, experts say.
As the federal government flatly shrugs off any discussion of reforms to negative gearing or capital gains tax, Daniel Andrews' government has shot to the front of the pack with a suite of recent announcements and new policies around housing.
A recent international study found Melbourne was the world's sixth most unaffordable housing market, and in the weeks since, the state government has announced action on a number of housing issues including:
- Rezoning land to create 17 new suburbs and 100,000 lots in the Melbourne area;
- A $1 billion fund for social housing, and made low interest loans available for housing providers to build stock;
- Long-term tenancy agreements for renters;
- Funding boosts to rooming houses in Ballarat, Melbourne and Carlton;
- Giving first home buyers priority in government-led urban renewal developments;
- And a new pilot scheme for shared equity, where the government will 'co-purchase' homes with low- and middle-income people, taking up to 25 percent equity so the buyer will be able to "purchase less than 100 per cent of the property...require a smaller deposit and are able to enter the market sooner" and have smaller loans to pay back.
But it has been two recent announcements in particular -- abolishing stamp duty for homes below $600,000, and a doubling of the first home owner grant from $10,000 to $20,000 for homes purchased in regional Victoria -- which have grabbed most attention.
As the federal government hesitates to make any moves on housing affordability (even as Sydney is listed as the second least affordable housing in the world and we see such ludicrous housing events as tin sheds, burnt out houses and ramshackle shacks selling for millions of dollars) a government making any move to address housing affordability is welcome.
But housing experts say the first home owner grant and stamp duty abolition won't be nearly as effective as hoped, and will just level out the playing field a little for younger and poorer households, rather than actually addressing the issue of housing affordability itself.
"This is not a general fix for our affordability problem at all. There might be some first home buyers who will win some auctions, but in short, you'd expect there to be price increases when it's more money being tipped into the system," said Dr Chris Martin, a housing policy research fellow from the University of NSW's City Futures Research Centre.
"Housing becomes more affordable when people can spend less on it, not more. This is tipping more money into this circuit of money."
Martin told The Huffington Post Australia that cutting stamp duty and boosting first home owner grants would essentially throw more money into an already super-charged housing market, which he forecast would have the undesirable effect of actually pushing housing prices up. He said buyers wouldn't bank the money they save from stamp duty cuts, but rather plough it into their offers, citing research that showed stamp duty cuts sometimes led to inflating housing prices even further.
"That partial exemption for some in the market means they personally might do better in the market when they bid, but it doesn't really bring prices down generally," Martin said.
"[Stamp duty savings] end up being a bit more money people are able to put into their bids, that's money the vendor takes."
"Getting rid of stamp duty, you'd expect prices to increase. There are good reasons for getting rid of stamp duty but housing affordability is not one of them."
Associate Professor Wendy Stone, director of the Australian Housing and Urban Research Institute at Swinburne University in Melbourne, was more positive in her assessment. She said the suite of recent Victorian housing policies were a positive step in how governments dealt with affordability issues.
"This is very welcome activity by the government, and quite a sea change in the way government is thinking about housing problems. They're moving from a 'silver bullet' approach to a multi-faceted change to a systemic problem," she told HuffPost Australia.
"It's very progressive reform, but they're first steps and brave in a climate of what federally has been policy inertia."
While she said she would wait to see the effects of the policies before giving any specific evaluation, Stone said the first home buyers grant boost would probably not make a big difference for many people.
"What we know is it gives assistance to people who would have bought a home anyway. They would have made it, just taken another year or two. It doesn't really support people who would still miss out."
She conceded Martin may be correct in fearing the measures could actually increase prices and make homes even more unaffordable, saying it was "possible there could be a perverse price effect", and stressed there was more to do.
"What's important is that this is just one of a range of reforms we will see. That the Victorian government is taking these steps should not negate our discussions around negative gearing, wider investments in housing," Stone said.
"By itself, it won't shift the equation or have fundamental change. It will only have effect in conjunction with a suite of other reforms at both state and federal level."
In terms of further work, both Stone and Martin singled out negative gearing reform as a key in addressing housing prices. Martin also cited winding back capital gains tax concessions, and suggested a broad-based land tax.
"That's whats missing, changing some settings to work on excess demand, to restrain this money throwing in this money fight over the last 15 years. What we need is some restraints on speculative demand for housing, which could come from a broad-based land tax," he said.
"Taxes on vacant or unoccupied land make it expensive to hold a house for speculative reasons, then people will be more inclined to put it on the market. Reform to negative, reform to discount rate on CGT, both those things relate to investment housing but at the centre is this issue is tax treatment of owner-occupied housing. As long as owner occupiers are encouraged by tax settings to throw money at their own housing, there will be speculators looking to catch some of that money."
HuffPost Australia's housing affordability blog series, The Great Australian Nightmare, begins on Tuesday. Everyone from senior government figures to first-home buyers will have their say on one of the most pressing issues facing the nation. See more here.