As we approach another Federal Budget, it looks like housing affordability will be the dominant theme. Yet much of this debate is founded in a premise that is increasingly false: the idea that housing affordability is about being able to buy a home.
Our entire approach to housing in Australia is based on this idea. Our tax system provides generous incentives for people to buy homes. If you buy an investment property, negative gearing allows you to offset interest and other expenses against your income. If a property is your principal place of residence, it has special treatment under capital gains tax and Centrelink asset tests.
This focus on home ownership is also reflected in our tenancy laws. They are designed to support renting as a short-term, transitional option on the way to buying a home, with the standard term of a lease being six months.
All of this is consistent with the great Australian dream of getting an education, a job, a partner and a home before you are too far into your thirties.
The problem is that this dream is no longer realistic for most younger Australians. The prospect of rapid capital gain, with the added benefit of generous tax concessions, has pushed a flood of investors into the property market.
Rather than being a transitional option, renting is now the long-term reality for a growing number of Australians. Renters also face fierce competition for available properties, meaning that they are often reluctant to assert their rights. As recent CHOICE research shows, many tenants feel too scared to raise basic issues like mould or doors that don't lock, for fear of retaliation when their lease ends.
The housing affordability debate needs to acknowledge these realities. This means that if we want to help people to buy a home, we've got to think about the market as a whole. Giving more concessions to first home owners, like stamp duty concessions or the ability to raid their super (also a bad idea, but that's for another day), will only increase the number of buyers competing for a small number of properties, further driving up prices. These measures will only work if we also increase housing supply, through encouraging investment in construction of new housing.
But increasing housing supply is a long game, and will probably never turn around the trend of increasing long-term renting, so we also need to consider whether our tenancy laws are fit for purpose in the 21st century. With rent the largest area of household expenditure for most tenants, it's important they feel confident to exercise their rights, especially when the property they are renting isn't safe or of acceptable quality.
Alan Kirkland, CHOICE CEO