The Federal Government’s COVID-19 housing stimulus package provides an economic sugar hit, but will likely favour people who could have purchased property anyway and exacerbate wealth inequality, a new paper published by CEDA has found.
Home truths: the role of housing in economic recovery, by Curtin University School of Economics, Finance and Property Professor Rachel Ong ViforJ and University of Adelaide Centre for Housing, Urban and Regional Planning Director, Professor Chris Leishman, finds while homebuilding is the favoured solution for stimulating the economy, the Government’s HomeBuilder and First Home Loan Deposit Scheme (FHLDS) programs will do little to address affordability and access in the long-term.
CEDA Chief Economist Jarrod Ball said there are well-known economic arguments for targeting home building in any stimulus package, but there are also unintended consequences to such large-scale policy measures.
The paper highlights the opportunity for governments to build more social housing, which would help boost growth while also improving the lives of vulnerable Australians.
“At last count there were more than 140,000 people on public housing waiting lists,” Mr Ball said.
“Social housing investment can boost economic activity while improving the livelihoods of Australia’s poorest households.
“After the GFC, 19,700 new homes were built as part of the $5.6 billion Social Housing Initiative. This created 9,000 full time jobs in construction.”
The report also outlines the continuing case for changing the way housing is taxed, while acknowledging the political challenges this would face.
- Replace stamp duty with a uniform broad-based land tax: There is no obvious rationale for imposing stamp duty on property purchase. It can deter the transfer of property from lower value uses to higher value uses and make it harder for people to move for work. The supply of land is fixed, and a broad-based land tax cannot be avoided by changing use or jurisdiction.
- Tighten current generous negative gearing provisions: The partial exemption of property investments from capital gains tax encourages speculative demand for housing; when accompanied by negative gearing provisions, this demand is satisfied through debt-financed purchases. These tax settings can amplify market cycles and worsen financial instability.
- Limit family home exemptions from income-support means tests: This would encourage downsizing and therefore drive more efficient use of housing stock. Such a reform would promote equity, help the budget and discourage over-investment in property.
Download:
Home truths: the role of housing in economic recovery
Listen:
To coincide with the release of this paper, CEDA Chief Economist, Jarrod Ball, spoke witht the authors, Curtin University’s Professor Rachel Ong ViforJ and University of Adelaide’s Professor Chris Leishman to discuss how COVID has changed the conversation around housing policy, housing construction's effectiveness as a stimulus tool, tax reform, and social housing.
CEDA Chief Economist Jarrod Ball is available for further comment and interviews.
For more information, please contact:
Justine Parker, Media Manager and Content Specialist
Mobile: 0436 379 688 | Email:
justine.parker@ceda.com.au
Roxanne Punton, Director, Communications
Mobile: 0409 532 287 | Email:
roxanne.punton@ceda.com.au
About CEDA
CEDA – the Committee for Economic Development of Australia – is an independent, membership-based think tank.
CEDA’s purpose is to identify policy issues that matter for Australia’s future and pursue solutions that deliver better economic and social outcomes for the greater good.
CEDA has almost 700 members including leading Australian businesses, community organisations, government departments and academic institutions. Our cross-sector membership spans every state and territory.
CEDA was founded in 1960 by leading economist Sir Douglas Copland. His legacy of applying economic analysis to practical problems to aid the development of Australia continues to drive our work today