The Grattan Institute research centre has accused state and federal governments of ignoring the real cause of Australia's housing affordability crisis by opting for 'quick fix' solutions.
A new report has warned that Australia's migration intake might need to be cut in order to address the chronic housing affordability crisis in major cities like Sydney and Melbourne.
The Grattan Institute research centre report said despite politicians proclaiming they are dealing with the nation's housing crisis; they have actually had little impact.
The institute has warned housing affordability is getting worse with young, low-income families the worst hit in trying to buy home.
And those lucky enough to get a mortgage are finding it harder to pay it off given loans are larger and wages growth is low.
The Melbourne-based centre's latest report has labelled governments "neglectful" and said their policies had created a "housing mess."
It has accused both state and federal governments of concentrating on quick-fix, short-term solutions, rather than committing to a long-term overhaul of planning for housing.
The Grattan Institute's Chief Executive John Daley said: "it's bad. It's getting worse," while summing up the outlook for housing if nothing is done.
Mr Daley said political leaders needed to rethink the regulations.
“What our work shows is that state governments have not done what they should in terms of using those planning regulations to allow people to increase the density of our cities,” he told the ABC.
“Those are the things that that will really make a difference to housing affordability in the long run and those are the things that largely governments have been pretty reluctant to do because it is not popular with local residents.”
Mr Daley said better planning could mean more development around major transport routes, and an increase in the number of homes in the inner and middle-ring suburbs of big cities.
The report released on Sunday says boosting housing supply will have the biggest impact on affordability, even if it will take time.
It says the states have not done a great job in planning and they need to allow more housing to be built in both inner and middle-ring suburbs.
They also need to replace stamp duties with general property taxes, adding the Commonwealth can help with financial incentives for these reforms.
Mr Daley said limiting negative gearing and reducing capital gains tax will help in the short term but won't help nearly as much as getting housing supply right.
"If you got rid of capital gains tax and negative gearing you might have some money to bribe the states with," Mr Daley said.
'Unfair' to blame politicians
However, University of Sydney economics associate professor Stephen Whelan said it would be unfair to place all the blame on political parties.
Professor Whelan noted that politicians want to tackle the issue but often lack the time to deal with its complexity.
“Often it's easy to provide some short-term solutions in the form of subsidies for buyers, rather than developing those long-term solutions in terms of increasing the housing stock, developing the infrastructure around it, and ultimately providing more affordable housing,” he said.
The Grattan Institute report makes 13 policy recommendations, including:
- abolish negative gearing
- reduce the capital gains tax discount to 25 per cent
- include owner-occupied housing in the Age Pension assets test
- encourage greater density in inner and middle ring suburbs
Federal Labor has seized on the recommendations, claiming they endorse its housing affordability strategy, which includes reforms in those areas.
But Federal Treasurer Scott Morrison said the report shows that "abolishing" negative gearing is more about raising taxes than housing affordability.
And the incoming Minister to the Deputy Prime Minister, Liberal MP Keith Pitt, told Sky News there is enough property for everyone but just not where people think.
“We have the levers to be able to make those changes, to make a difference for regional areas, we do need to be focused about where they are, but the absolute reality is, in my electorate right now you can buy a house for $200,000,” he said.
Cutting back on immigration
If states and territories do not agree to overhaul their planning systems, the Grattan Institute report suggests a different angle be considered - cutting back on immigration.
John Daley said Australia's growing population is not being sufficiently planned for.
"To take Melbourne, for example, it's growing at about 130,000 people a year, you need at least around about 55,000 dwellings of some kind every year to deal with that increase in population growth,” he said.
“On top of that you have got a backlog because for a lot of the last 10 years we did not build enough housing."
"We're not necessarily saying that's the right answer but we should at least be thinking about it pretty consciously."
The Housing Industry Association has cautioned against cutting migration and warns that population stagnation would lead to fewer homes being built. Instead, it has called for more supply.
Principle Economist Tim Reardon said the Turnbull government has already made moves toward cutting back on the flow of new migrants, including restricting student visas.
“I think that Australia is also no longer as attractive to skilled migrants as what it was a few years ago,” he said.
“As Europe and the Americas are increasingly economically and [with] strong employment growth, Australia won’t attract as many skilled migrants as we have in the past. “