Alex Hawke (Mitchell, Liberal Party) Share this | Hansard source

I rise to support the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008 but I also want to raise some of the concerns that the shadow minister and the member for Cook raised in relation to the workability and practicability of the scheme that the government has proposed.

We indeed have a rental affordability crisis facing us at the moment. Coming from an electorate in metropolitan Sydney, I am patently aware of the problems with rents at the moment. It is very interesting to see that the government is proposing measures in relation to the housing market at the moment that address and attempt to tackle the symptoms of a problem but they are fairly silent on what is causing this problem and how we can fundamentally turn around the housing and associated rental affordability problems in our country.

I am happy to look at this measure before the House today, a national rental affordability scheme to address the symptoms of a problem that has been a decade in the making, as the member for Port Adelaide pointed out. But in all of the analysis that we hear from members opposite about how there is a series of comparisons to be made between the rent-income ratios in Australia, the United Kingdom and the United States of America, there are some obvious things missing—some glaring failures in their analysis. We live in a country with 20 million people. That is a very small population in a large territorial land mass. We do not have the population and the land availability problems that they have in London and the United Kingdom generally and that they have in the major cities in the United States. We could afford to give everybody who does not own a house in this country five acres of land without even blinking.

The situation that has been created in the affordability of housing and the availability of rental stock is completely artificial in a number of ways. It is artificial because the government has pursued policies that have been environmentally driven. These policies say that our cities are bursting at the seams and that we have somehow run out of room in this country. It is a complete and utter furphy to suggest that we have run out of room in Australia. Those comparisons that the member for Port Adelaide was making between Australia and the United Kingdom and the United States are not the central reason why we have a rental and housing affordability crisis—something that I will be addressing shortly.

In all of the expert analysis we hear a lot about the problem as it is today: a situation in which people cannot get rental stock and when they do there are rental auctions or bidding, with people turning up offering a year’s or two years rent in advance or higher rents—whatever they can do to secure the rental property. That is certainly one of the pieces of feedback that I receive from my own electorate and from surrounding electorates. That is a problem. That is why we in the coalition are happy to support these measures, which will do something to address the urgent situation that we have been put in.

But if we as a parliament do not look at ways of stopping this problem, altering its course and changing its nature, then we are not doing the right thing by the people who can afford it least. If we are to do something meaningful to rebalance the property markets around the country, we need to look deeper. The object of this bill is to encourage the large-scale investment in new housing by offering an incentive to participants in the scheme in order to increase the supply of affordable rental housing dwellings and to reduce rental costs of low- and middle-income households.

I accept the amendments that have been proposed by the member for Cook in that many of the people in these income scales that the government has produced are ordinary workers—people such as teachers, firemen or policemen. They all fall outside the income thresholds that have been provided by the government, so in some ways the design of this scheme is not going to achieve what it is supposed to achieve, purely in its inception from the design of the income levels.

I think the incentives that are offered under the National Rental Affordability Scheme will be in respect of rental dwellings let to eligible tenants, and I understand that the rent charges at all times during the year are to be at least 20 per cent less than the market value rent for the dwelling. There are some flaws in the design of this scheme that we are concerned about. I think that incentives ought to be on a sliding scale. In my view it is a compelling argument against offering the same amount of money for all of the rental and housing markets around the country that there is a great difference between the rental market in Tasmania and the rental market in Sydney, so to offer the same amount of incentive in Tasmania and Sydney will see a flood of capital and development to areas where you can get a greater rate of return, such as Tasmania and other places including South Australia. That is a logical and common-sense position, and I think the coalition’s amendment in relation to seeing a sliding scale of incentives is a practical and workable idea that should be taken on by the government.

The 20 per cent amendment that the member for Cook has suggested for projects of 20 dwellings or more is also sensible. By having a 100-dwelling minimum lot size, you are ruling out any investment in the city and in major urban areas. After a decade of urban consolidation policies in Sydney, it is very hard to think of where you would see a minimum 100-dwelling size, as proposed in this legislation, that would be taken up by developers in the middle of an urban area, where often there are rental problems.

Before I address many more of the specific provisions of this bill, I think it is relevant to examine the climate that we find ourselves in at the moment with housing in Australia. We now know that, after the election of the Rudd government, we have ended the blame game in Australia, so that nobody is to blame for the policies that have produced the situation with the housing sector, rental affordability and the availability of housing stock in Australia, and everybody is to blame under the ending of the blame game and the position that we are now fortunate enough to find ourselves in. But I take the view that, if you look at the facts and the data in relation to New South Wales, where I come from—the electorate of Mitchell in particular—and metropolitan Sydney, you will see a cause and effect that require addressing by government and this parliament. The member for Port Adelaide said, ‘We’re doing what we can to assist at a federal level; don’t worry about the states.’ I am happy that he mentioned the state governments, because often you do not hear about the states anymore from members opposite. You do not hear: ‘What can the states do? What should the states do? What have the states done that has caused the problem?’

Affordable housing and the shortage of rental stock in Sydney are connected. It is interesting to note—and I want to record here—that there have been five consecutive years of falling house starts in Sydney. Australia has the unfortunate distinction, I guess, of having cities that are now amongst the most unaffordable in the entire world. All of our major cities fall into that category. There have been declines in rental and housing markets around the world, but they were easier to get into to start with. In Australia, with a tiny population and a massive continent, we have cities that are amongst the most unaffordable to live in in the entire world. What is causing this problem?

One of the major factors is the failure of successive government policies in this area, mainly by state governments. I do not think we ought to be afraid of saying that. If current government policy is failing and hurting people at the margins who need affordable rental properties, we ought to come out and say so and have a frank discussion about it. It is hardly surprising to me—and, I think, to this place—that one of the direct results of increased regulation, tighter and tighter controls on land releases, urban plan after urban plan and increased taxes and charges from the state government has been to make housing more unaffordable. When you institute new taxes and tax at a higher rate, you create a disincentive to do whatever you are taxing, so with increased taxes and charges on property and increased levies on development you are creating a disincentive. If you add disincentive after disincentive, you will create a major disincentive, which is what is happening in Sydney.

This week it was interesting to note an academic report by Dr Gabrielle Gwyther, and another report that said that the amount of land released in Sydney has dropped from 9,000 plots to 3,000 and that there are dwindling amounts of cheap land. The second report’s author is quoted as saying:

This has resulted in new dwelling construction in Sydney falling to levels not seen since the 1950s.

It is really surprising when we take a step back and have a think about this. We have a vast amount of land available to us. We have a very small population in world terms; let us be realistic. We do not have the populations of the cities in the Asia-Pacific region, the UK or the US, yet when you listen to urban planning departments it is as if we have reached the edge of human expansion in Sydney. There is a line. They have drawn lines on maps; if you cross that line then you cannot live there anymore. There is no more room. We are bursting at the seams, we keep hearing. But the fact of the situation is that we have enormous amounts of land. We have governments that are unwilling to release that land, and that is creating a major supply problem. I think all of the urban experts are starting to understand that this has become one of the key blockages to affordable housing and subsequently to available rental properties in Australia.

Supply and demand, whatever your view, is no doubt distorted at the moment in Australia. It has certainly been noted in recent times that we had underbuilt by about 10,000 homes in Sydney during the period of the Carr government. My electorate is home to one of the proposed growth corridors of Sydney. The new Rouse Hill Town Centre and the North Kellyville land release areas are premised on massive growth, yet there is no developer as yet that is willing to take up those developments. The disincentive to invest in property at the moment is one of the main blockages to that.

I think that one of the main contributors to unaffordable housing and lack of rental affordability in Australia is state and local government taxes and charges, and this is one of the less understood reasons for why we are here today. If you take, for example, a tax like land tax, which was imposed by the Carr government shortly after its election, it sounds great. It was an easy tax for Labor to put in because you are taxing wealthy people who allegedly have numerous properties and are somehow making a lot of money out of these properties, and therefore we need to tax them and that is a great thing; they can contribute to hospitals, roads and police. But what we have actually found is that taxes like land tax, stamp duties and the vendor duty tax—which indeed was the subject of major controversy in recent times in New South Wales—have added about 30 per cent to the cost of a new home, and that is not including many of the other hidden taxes and charges. After a decade of operation of a tax like a land tax, what you have done is to create a major disincentive for people with capital to invest in the property market. I hear this from people in my area all the time; they have got out of their second properties and given up their rental property. People used to have their own home; they would buy a property to rent and receive an income.

The new land tax regime is a major disincentive and therefore after a decade of this scheme is it surprising that we have seen a flight of capital out of property investment in New South Wales? That is what government policy has been designed to do: you tax something and you create a disincentive to do it. You keep taxing it and you create further disincentives to do it. That is what has happened in New South Wales. One of the conclusions of Alan Moran in his address to the Housing Industry Association some three years ago was that the restraints on supply together with the imposts placed on developers have clearly been the major, if not the only, factors in pushing up the price of housing.

One of the objects of this bill is to encourage large-scale investment in new housing by offering an incentive to participants in the scheme to increase the supply of rental housing dwellings and reduce rental costs. It is anticipated that the scheme is going to provide 50,000 new affordable rental dwellings. It does seem that that is a high expectation to set and a very high bar for the government to put out there when they are offering a 4.5 per cent return and incentives that are a standard $6,000 in the Sydney property market. The design of the scheme certainly needs to be rethought if it is going to achieve that very lofty aspirational goal of 50,000 new affordable rental dwellings.

I am also concerned that the scheme can apply to constructions that are already underway. If this is to attract large-scale investment in new housing, then the developments that are already underway have already been assessed as acceptable for a rate of return and they have already been assessed as suitable development. So why don’t we limit this to those new developments to encourage that large-scale investment back into the new housing market? Fifty thousand does seem to be a very difficult threshold to set, but we support this bill in the hope that there will be 50,000 new affordable rental dwellings built. But it is difficult to see that happening.

The incentives that are mentioned within this bill are rigidly structured and I think there is an argument to say that they are insufficient to make these investments viable. We have spoken about the 4.5 per cent yield, whereas I guess the real threshold is about five per cent minimum to make it acceptable to investors today. I do not think that the value of the incentives is adequate to make the scheme attractive in those expensive residential markets such as Sydney, Melbourne and Brisbane. The value of the incentive, I think, should probably be more closely tied to the value of the project and projected rents. If you are really talking about making this scheme workable, you have to consider the value of the project and the projected rent that you will receive from the rental property. If you are not considering those factors, then you are seriously failing in your ability to ensure that these things are viable and that these places are built. A sliding scale, as suggested by the member for Cook, is probably one of the best ways to achieve this and it is certainly something that I support.

There is a real sense in this legislation that the contribution that is made to the incentives by the states and territories is inadequate. This is not blame game but the state governments are benefiting from the windfall stamp duties and GST revenues from the projects that will be developed. For a small contribution in terms of the National Rental Affordability Scheme incentive the state governments will reap significant profit from the property taxes and all of the other taxes that are applied to the completed developments. It does seem sensible and logical that they make a contribution in addition to the Commonwealth contribution to the incentives.

I do think that we are now seeing what happens in Australia when government oversteps its proper authority in relation to land release and spends too much time regulating a sector and not enough time considering how we get the balance right in terms of land release and sustainability in the housing market. The system may work for a little while but the people who really suffer in this whole debate are the people at the margins, the people who can afford it the least—the first-time home buyers, the people who desperately need access to affordable rental properties but who can least afford them. As for rents in my own electorate of Mitchell, sometimes people are receiving $50 or $100 increases in one hit. This has been a major issue for elderly people, people on low incomes and those suffering family stress. Hills Community Aid and St Michaels refuge at Baulkham Hills have all indicated to me the great problems suffered by aid agencies in Sydney finding affordable properties and placing people in affordable rental properties, and that is a great concern to me. While it will achieve something, if we cannot get more affordable rental properties into Sydney, then really we are failing a lot of people who are hidden in Sydney who are having a very difficult time. Indeed, because the system is set up to not provide an extra incentive to do that in a major city like Sydney, it is probably going to be one of its most significant weaknesses in the final analysis when this is implemented unless the coalition’s amendments are examined. It has been widely reported that at rental auctions in Sydney people are offering years of rent in advance and I can anecdotally report to this House that from my own electorate’s experience there is a shortage. It is very difficult to find a property in Sydney at the moment.

I am very disappointed in the government’s responses at a state level. The most significant proposal that the New South Wales government came up with in recent years was fairly tokenistic. They should already have allowed property owners to rent their granny flat at the back of their house to people. It sounds like a commonsense thing to do, but under previous zoning rules and restrictions most of that was not allowed in urban areas in Sydney. Again, this is a tokenistic response at the margins of the symptoms rather than looking at how we ensure that the housing market is affordable in the future. Again, I believe that it is at the expense of those who can least afford it.

I do not think it is compelling to say that we ought to wait for an economic downturn or be thankful that we have had an economic downturn to reduce demand in the property market. Reduced demand in the property market leads to many more flow-on consequences that are quite serious, so that is not an answer that inspires me. But there is almost a sense of relief from this government and from state governments that there has been an economic downturn in relation to property or that the problem is going to dissipate a bit because we are going to see a downturn in demand for the housing and rental markets in Australia because people cannot afford them. As I said, I do not find that a very inspiring argument.

I know it is a challenging concept to explain, but if you do not get the supply and demand balance right in the housing market you are setting yourself up for failure. We can pass as many resolutions and as many bills into law in the House as we like, as we have with the first home owners scheme and as we are doing today with the Rental Affordability Scheme, but that is addressing the symptoms of a broader problem and ignoring the elephant in the room, which is a fundamental failure of state governments to get their housing and land release policies right. We do need to start playing the responsibility game and sheeting home responsibility to state governments, where appropriate. I do not think we should always tinker at the edges. I would say to the government that, while we support this initiative to provide relief in the interim to those people who are suffering, we do need to examine ways in the long term of improving the situation in housing markets all around this country and ensuring that people do not suffer. (Time expired)

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