Budget 2017 squibs housing affordability: $1bn infrastructure facility not needed

The housing affordability measures in the 2017–18 Budget fails to address housing affordability, according to the Centre for Independent Studies (CIS).

CIS economist Michael Potter said, “The government set up high expectations for the budget measures for housing affordability.

“However, the Budget largely fails to meet the government’s own expectations. The beneficial measures are overshadowed by a number of unnecessary and even harmful policies.

“The $1 billion National Housing Infrastructure Facility is not needed: the federal government should not have to finance housing-related infrastructure as the states should be doing this already — and if they aren’t they should lose funding accordingly.

“The Housing Finance and Investment Corporation has potential, but should be free of government sponsorship or guarantee to avoid distortions to financial markets.

“The promotion of institutional investment into housing through this Corporation, and other Budget measures, is valuable, but is completely inconsistent with the further clampdowns on foreign investment and the increased taxes on investment in housing.

“These increased investor taxes — the denial of tax deductions for travel and improvements to investment property by previous owners — are likely to just feed through to higher rents, just like any other tax increase on investors.

“The further discouragement of foreign investment in housing will have negligible impact on affordability, and will make Australia appear even less welcoming to foreign investment — a major problem given the pressing need to boost investment in Australia from potentially recessionary levels.

“Some other measures are worthwhile but will have limited impact, including releasing Commonwealth land and an increased CGT discount for investment in affordable housing.

“The only budget measure that will have significant and beneficial effect is the incentives through the new National Housing and Homelessness Agreement for states to increase supply. At long last, funding agreements with the states will now encourage housing supply and planning reform.

“This is what CIS recommended in the research report Reforming Social Housing, released earlier this year. However, this reform is overshadowed by the other policies that have minimal, or even harmful effects, leaving us with a package that is a disappointment.

“The government has squibbed on this opportunity to address housing affordability,” Mr Potter said.

Michael Potter is a Research Fellow in the Economics Program at the Centre for Independent Studies and author of the CIS research report Reforming Social Housing: financing and tenant autonomy.