Opinion
Coalition’s super-for-housing policy would only help wealthier homebuyers
By Brendan Coates and Joey Moloney
For decades after World War II, Australia was a nation of homeowners. But in recent decades, homeownership has fallen fast. In 1981, two-thirds of 30 to 34-year-olds owned their own home. By 2021, it was just 49 per cent.
Opposition Leader Peter Dutton says he wants to turn this around, and has appointed Senator Andrew Bragg as the new shadow assistant minister for homeownership to develop policies for the Coalition to take to the next election and reverse this decline.
NSW senator Andrew Bragg and Opposition Leader Peter Dutton.Credit: Alex Ellinghausen
So, what could the Coalition promise that achieve its goal of boosting the number of home owners in Australia, and also make housing more affordable?
Its 2022 election offering – allowing people to use up to $50,000 of their superannuation to buy their first home – could help some younger Australians become homeowners.
Allowing people to dip into their super to help buy a house won’t leave them impoverished in retirement. Australians are being forced to save more via compulsory super than they need. But the big problem with this policy is that younger, poorer Australians – who are increasingly being priced out of homeownership – don’t have much in the way of superannuation.
The average superannuation balance among the poorest 20 per cent of renting households that are headed by a 25-34 year is just $5000. The top 20 per cent of renting households of the same age bracket, however, have more than $70,000 in super.
Introducing policies that allow Australians to use their super for housing would therefore disproportionately help wealthier people buy more expensive homes, while doing little to reverse the decline in homeownership among poorer Australians.
Allowing a major cohort of Australians to access their superannuation all at the same time would also add even more demand for housing, which would then push up prices, particularly within the already highly competitive lower end of the property market. But the price impact would be much smaller than the $75,000 jump suggested by lobby group the Super Members Council.
Here’s three policies Peter Dutton – or Anthony Albanese – could adopt that would help boost home ownership.
First, they could commit to helping the states and territories phase out stamp duties on the transfer of homes. One recent study found that replacing stamp duty with a property tax could boost the share of Australians owning their own home by 6.6 per cent. Better yet, removing stamp duty nationwide would reduce rents and house prices by up to 6 per cent, and could also lift Australians’ incomes by up to $20 billion a year by making it easier for Australians to move home to take a new job, and for retirees to downsize. It’s a win-win-win.
So why has no state or territory, apart from the ACT, made the switch? Because the politics of this transition are hard. In total, state and territory governments collected $36 billion in stamp duties in 2021-22. That’s money they need to keep their schools and hospitals open – unless they replaced that revenue stream with another, such as property taxes.
People who have recently paid a big stamp duty bill would understandably feel aggrieved if the rules changed, and they received a land tax bill soon after. And the more painless any government makes the transition, such as by exempting them from paying land tax for a period, the bigger the budget cost.
The federal government should commit to filling part of the short-term revenue hole for any state willing to take the plunge.
Second, if the Coalition wants to show that it is serious about boosting homeownership, it would pledge to curb negative gearing and the capital gains tax discount, as former Coalition Treasurer Joe Hockey urged when he left parliament almost a decade ago in 2015.
Simple arithmetic demands that if more Australians are to own their own homes, there must be fewer property investors.
The Coalition – or indeed the Labor government – should halve the capital gains tax discount and curb negative gearing so that rental losses could no longer be offset against wage and salary income.
These changes would not have much impact on housing prices – Grattan Institute modelling suggests they might fall by 2 per cent – because the value of these tax breaks is small in the context of a $10 trillion housing market.
But these changes would help more renters to become homeowners, raising the rate of homeownership by nearly 5 per cent because they would be bidding against fewer investors at auctions.
And these changes could add about $7 billion a year to government coffers in extra personal income tax – money which could be used to both shore up the budget and pay for more support for low-income renters by boosting Rent Assistance.
Lastly, Dutton should commit to following through on the Albanese government’s promise to pay the states if they get more housing built. The long-term solution to Australia’s housing crisis is to build more houses.
It is possible to reverse the decline in homeownership in Australia. But if any future Coalition government is going to do so, it would have to do much more than simply allow people to dip into their super to help buy their first home.
Brendan Coates and Joey Moloney are housing policy experts at the Grattan Institute.
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