Image by Bernard Spragg. NZ CC 2.0 via Flickr

Editor’s note: This is an extract of a speech given by Rachel Ong at the Women in Economics post-Budget event, held at the National Press Club of Australia on 16 May 2017. Speeches by two other speakers can be accessed here and here.

I would like to share with you my perspectives on the housing measures proposed in this year’s budget through three important lenses – the housing market overall, gender and intergenerational lens.

The housing market

Let me start with the housing market lens. This is the primary lens through which the government has viewed the housing affordability problem in the 2017 budget. Both supply and demand levers have been incorporated within a raft of housing measures that the government claims is a ‘comprehensive package’.

The Budget includes the following measures aimed at the housing market:

  • A new national housing and homelessness agreement;
  • a first home super saver scheme;
  • incentivisation of investment in affordable housing;
  • removal of barriers to downsizing;
  • rules around foreign ownership;
  • a package for western Sydney; and
  • the release of commonwealth land.

It seems everything but the kitchen sink is included. That is, everything but genuine reform to the tax system to limit negative gearing or the capital gains tax discount. This is despite continued calls by experts and a rare consensus by housing economists across Australia that these are two of the biggest policy levers that the federal government has at its disposal, that should be pulled to make real ground on housing affordability.

The range of proposed measures do represent an overdue and welcome acknowledgement on the Government’s part that much needs to be done on the policy front to improve housing affordability. However, will this patchwork policy quilt make much headway when it comes to housing affordability in Australia?

If we consider housing supply first: the measures being introduced do represent a positive step towards expanding the size of the housing stock. However, it is important to note that according to new research from the Australian Housing and Urban Research Institute, most new homes are being built in middle-to-high value segments that are out of reach for households on low incomes. Indeed, less than 1 per cent of new building approvals delivered housing to the lowest price quintile between 2006 and 2014 [<$200,000].

Encouragingly, the National Housing and Homelessness Agreement will go some way towards helping low income groups in our society. However, Australia does not operate an overarching housing policy. The extent to which this Agreement succeeds in achieving its supply targets will depend very much on close housing policy coordination and cooperation between the federal, state and territory governments to meet the affordability objectives.

The National Housing Finance and Investment Corporation will deliver a much needed boost to the community housing sector. But there remains a funding gap to ongoing costs associated with operational and maintenance requirements that are not fully covered by subsidised rents.

Moving on to demand, the government has repeatedly stated its preference for a ‘scalpel’ rather than a ‘chainsaw’ or ‘sledgehammer’ approach. The scalpel will likely need a more sharpening if it is to make an effective incision into the housing affordability crisis currently affecting an entire generation of aspiring home owners.

The First Home Super Savers scheme may help some groups of aspiring young home owners save for their home deposit, but there appears to be a general reluctance to make voluntary contributions into superannuation already, due to household budget constraints or a lack of knowledge of the superannuation system. Indeed, Treasury expects the cost of this Scheme to be just $70 million in 2020-21, suggesting that take-up will be pretty small. Importantly, this scheme will not do anything to ease demand pressures.

A Gender Lens

Turning next to the gender lens: public policy decisions do not always affect men and women equally. For 30 years from 1984 to 2014, the Australian Government recognised this formally through the publication of a Women’s Budget Statement.

The National Foundation of Australian Women has since 2014 produced an annual Gender Lens that does a gender impact assessment, adding a critical gender lens to measures proposed in each budget. The most recent report on the 2017-18 Budget is just released.

Housing not only represents a basic human right, it is also the biggest form of individual wealth accumulation. So does this budget place men and women on an equal footing when it comes to opportunity to access home ownership?

The First Home Super Saver Scheme allows first home buyers to use up to $30,000 of voluntary superannuation contributions to place a deposit on their first home. It is clear that the scheme offers greater benefits to those in higher income bands. Currently, the proportion of renters aged 25-44 years who salary sacrifice into their super rises from nearly 0% in the lowest wage decile to 6.2% in the highest decile. We know that women are under-represented in higher income bands, so they will be less likely to benefit from the scheme than men.

The interaction between gender, housing and ageing is also an important issue that governments cannot ignore. Research by the Bankwest Curtin Economics Centre and others have shown that women are overrepresented amongst older renters so they are particularly vulnerable to tenure insecurity, housing cost concerns and  risk of poverty.

Some of the supply side measures such as the National Housing Finance and Investment Corporation are designed to assist with rental affordability among low-income households, which will benefit low-income female renters. However, the funding gap means that the community housing sector is unlikely to deliver the scale of affordable housing supply needed to cater for the housing concerns of the most vulnerable.

Meanwhile, public housing, which has become an increasingly residual and feminised sector, is highly rationed. Indeed, latest figures from the Productivity Commission show that nearly 150,000 households are currently on state and territory housing wait lists.

An Intergenerational Lens

I’d like to conclude by expressing the gravity of the housing affordability problem through an intergenerational lens.

The great Australian dream of owning a home is fading fast for younger generations.  Among 25 to 34 year olds, the proportion in home ownership has declined by some 20 percentage points to just over one-third in the last three decades. The median real housing equity of home owners aged 45-64 years has doubled over 20 years from $200,000 to $400,000. In contrast, the median real housing equity of home owners aged 25-44 years has increased much less, from $140,000 to $200,000.

Life-time renting is now a very real prospect that many millennials have to contemplate. Unless the decline in home ownership is reversed, the children of millennial renters will in turn be bypassed by the intergenerational circulation of housing wealth. On the other hand, those who have parents who are able and willing to transfer wealth will be more likely to access home ownership, as well as take advantage of a wider set of economic opportunities.

As a result, home ownership has become the new class divide. It is increasingly a marker of distinction between the ‘haves’ and the ‘have nots’, and between young aspiring homebuyers and older homeowner-investors.

It is now urgent to move quickly beyond piecemeal approaches to housing affordability. The consequences of delaying genuine housing policy reform are multi-generational and will affect families and individuals now and for years to come.

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