Housing Affordability Policy Crisis
Housing policy remains in crisis as today’s 8 capital cities index revealed a rise of 7.6%, with Melbourne up 6.8%.
“This heralds Victorian housing affordability policy a distinct failure. Never before have so many generous exemptions been given to the property industry with so little in return” stated Prosper Australia Project Director Karl Fitzgerald.
The Victorian urban growth boundary expanded by some 1.5 million households over the last decade but yet failed to provide enough supply to curb prices.
“The dynamics have changed in housing with investors averaging 36% of the market to first homeowners barely 13%. Investor’s market power is expanding at the rising cost of affordability.”
Housing ministers at state and federal levels complain of supply-side issues.
“Using water consumption as a proxy for vacancy, the sixth annual Speculative Vacancies in Melbourne report found 64,465 vacant properties in Melbourne (at a rate of 4.4%). This indicates the sort of latent supply that families could purchase at prices closer to long term averages.”
“At issue are the poor incentives to bring unoccupied homes to market when the longer they are withheld, the greater the return. Land and housing is a unique market for this very reason.”
These empty properties need to be added to the 2.9% REIV vacancy rate to find a total 7.3% vacancy rate.
“This is akin to a 7.3% unemployment rate for land. With prices escalating so dramatically in the face of rising investor demand, we need to ask if this is the most efficient outcome for a society continuously told that ‘supply is the lynchpin to affordability’. Why isn’t this hidden housing supply included in supply side analysis?”
“If the unemployed can be demonised for claiming $5bn p.a in Newstart, why then cant we look more closely at the $50bn subsidy given to property investors each year?”
This was the most extensive Speculative Vacancies report yet covering a full 12 months and with all three water retailers providing data. Ninety four percent of Melbourne’s residential properties were analysed. With even single homes averaging 177L p/d, the 50L cutoff is seen as a conservative threshold as a proxy for vacancy.
“The 64,465 empty homes signifies the threat investors are placing on the efficient use of housing stock. Prices have diverged from rents over the last 15 years, providing greater incentive to enjoy capital gains rather than rental income.”
“We ask if paying ones rent is a vital weekly priority, why isn’t the government under similar pressure to provide effective affordable housing policy? To do so they need a more accurate vacancy finding. We call on the Federal government to adopt this methodology nationally to reveal just how many empty homes there are in Australia” said Fitzgerald.
The report recommends higher holding charges on land, in the form of a broad-based Land Tax to improve supply incentives.