Mark Butler (Port Adelaide, Australian Labor Party) Share this | Hansard source

I am very pleased to speak in favour of the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008. Together, they form the second, important wing of the Rudd government’s package to rescue Australians from the housing affordability crisis we find ourselves in. Can I say at the outset that, from the perspective of the national interest, it is pleasing to see that the coalition has started to take housing, and particularly housing affordability, seriously by giving the portfolio to someone of considerable talent: the member for Cook. Although, so enthusiastic is the member for Cook to be on the frontbench finally after his short number of months of this parliament, he, by my count, stomped on the jurisdiction of no fewer than five of his frontbench colleagues, so he might not be long in the portfolio of housing if he has his way. Notwithstanding his considerable talents and capabilities, the member for Cook, unfortunately for him, will continue to wear like an albatross around his neck a terrible legacy of neglect in this area by the previous government.

The previous government’s only trick in this area was the lump sum payment for first homebuyers, which undoubtedly serves a useful purpose within housing and more generally within the economy but is completely inadequate and insufficient to deal with the complex factors at play in the area of housing affordability. Relevant to this bill in particular, there was no attempt by the previous government whatsoever to deal with the difficulties faced by renters. In the area of housing affordability Australia in recent years has by no means been alone in the developed world. After the dotcom burst in the share market in 1999-2000, with low interest rates, a whole lot of money flooded into the residential property market around the developed world.

The Economist magazine says that in the developed world, between 2000 and 2005, housing prices in American dollars rose by $30 trillion. That price rise is equivalent to about 100 per cent of the combined GDP of those countries—100 per cent; the largest asset bubble in the history of humanity. We know that Australia’s price rises were right at the top of the table of OECD price rises. As a result Australians now have to live with a seriously overvalued housing market. While that is okay if you managed to get over the rope bridge and pay off a house before 2005, for younger generations and other Australians trying to buy into the housing market it presents very significant challenges.

The standard measure of valuation of housing is the price-rent ratio, the equivalent in the housing market of the price-earnings ratio used in the share market. By 2005 the price-rent ratio—that is, comparing the price of the house to the rent able to be achieved through it—was some 70 per cent higher than the 25-year average to that year. Again, that price-rent ratio in percentage terms saw Australia right at the top of the table in the OECD, with a price-rent ratio even higher than other overheated residential property markets such as the United States and the United Kingdom.

Logic and experience dictate that when you have a price-rent ratio so far from the historical average one of three things will happen: prices will decline, rents will increase or a combination of those two things will happen. We have seen in overseas residential property markets, particularly in the developed world, prices coming down—in some countries, coming down in a fairly calamitous way. But as Australian housing prices started to moderate some years ago, Australians began to be hit with the first, the second, the third and up to the 10th straight interest rate rise under the previous government. For that reason, although we have seen some moderation in housing prices in Australia, we have seen the measure of housing affordability continue to decline.

The most recent index published by the Commonwealth Bank and the Housing Industry Association—not the newspapers that the member for Cook cited but the most recent index published by the HIA and the Commonwealth Bank for the June quarter—saw housing affordability in that quarter decline further. The average repayment in that quarter for a house in Australia had increased to $2,827 per month, which on my calculations is in the order of $33,000 or $34,000 of after-tax income per year. Although in that quarter there was some improvement in housing affordability in the Perth and Brisbane markets, which had been seriously overheated in the previous quarters, housing affordability in the June quarter declined in all other capital cities and in some regional areas including regional South Australia and regional Queensland.

As one would have predicted from looking at the price-rent ratio in 2005, we have seen since those years very significant increase in private rents. In the last consumer price index published for the June quarter—the September quarter is due out in the next several weeks—rents went up by 2.2 per cent just for that quarter, around nine per cent at an annualised level. That was well above any increase in incomes, whether through wages or government payments. Those rent increases, which we have seen over the last several years steadily outstripping wages, growth and growth in government payments, impact on two groups: firstly, and most obviously, long-term renters and, secondly, those Australians who follow the traditional path of renting in the private rental market while they save their deposit to buy a house. The Australian National University department NATSEM published in December 2007 figures that showed that some 700,000 families in low- to moderate-income households were suffering rental stress, defined as paying more than 30 per cent of their income in rent.

The member for Cook, in his contribution to this debate, queried whether 30 per cent was now the right threshold to use, and we on this side accept that, if you were talking about very significant incomes, paying 30 per cent of your income on either house repayments or rentals might leave a very significant amount of income left over for other essential items of expenditure and other discretionary items. But for low- to moderate-income households, 30 per cent is still a very meaningful threshold. For 700,000 families to be paying more than 30 per cent for private rental demonstrates, in our submission, the level of rental stress being suffered in Australia.

In my own electorate of Port Adelaide some 38 per cent of renting households are paying more than 30 per cent of their income on rents. There is a very significant level of rental stress in my own electorate. It is an electorate in South Australia. The member for Cook—as I guess he might, being from New South Wales—concentrated on some of the larger property markets in Australia. But over the last decade we have seen prices converge around Australia. There have been very significant price increases in the more medium-sized capital cities like Adelaide and Perth, and those are starting to have impacts on Adelaide families, including Port Adelaide families, that might more historically have been seen as restricted to Sydney and Melbourne.

The level of rental stress being suffered in Australia really came home to me when I happened to see a piece on the BBC World News earlier this week. For about five minutes, BBC World News carried stories of Australian families having to move out of the private rental market into caravan parks—the trailer park phenomenon that we used to think was restricted more to the United States of America.

This bill, as I said in my opening, constitutes the second plank to the government’s housing affordability plan. It fills a space that we need to say was left completely vacant by the previous government: boosting the supply of affordable rental properties in Australia. These bills see some $623 million being spent over the next four years to create up to 50,000 new affordable rental properties. That will be done by way of incentives to investors at the rate of $6,000 per year for up to 10 years, combined with a contribution of $2,000 per year by relevant state and territory governments.

I noticed that the member for Cook spent some time talking about whether or not there would be institutional investors willing to come into this market. The government hopes that that will take place. But I know that in my own electorate significant residential property developments by companies like Lend Lease, Urban Pacific and a range of other developers are taking place. We are confident that those developers will be interested in opting into this scheme, along with governments and along with a whole range of community housing providers and other NGOs that are very interested in being a part of this solution.

Those incentives are conditional upon properties being rented to low- to moderate-income households at rental rates that are 20 per cent below market rates. Obviously, that will require some continuing adjustments to the thresholds by way of regulation.

These bills, as part of a broader package, constitute a 21st century solution to a very real problem and crisis facing Australian families and Australians more generally. We are confident that it will see innovative partnerships emerge between business, government and the community housing sector. If demand remains strong after the $623 million is exhausted, another 50,000 packages will be released from 2012. The Minister for Housing has presented a strong and comprehensive package to deal with the crisis of housing affordability. This is not a new crisis, but a crisis that has confronted Australians for several years. Not only is there this rental affordability scheme but the first home savers accounts have also been put in place by this government.

Although I know that the members opposite, including the member for Cook, like to concentrate on supply-side measures within the bailiwick of state governments, this government—unlike the previous government—has put in place measures to do what it can to boost the supply in this area firstly by reviewing Commonwealth land holdings to identify new housing opportunities and secondly through measures in this year’s budget totalling some $500 million over five years to cut a range of other supply-side costs. After 12 years of the previous government watching from the sidelines while this crisis of housing affordability got worse and worse, finally Australians get some action from the nation’s government. I commend the bills to the House.

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