Alan Cadman (Mitchell, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House acknowledges that:

(1)

the cost of housing in Australia is often more than double what it should be;

(2)

the high cost is mainly due to the huge increase in the price of land and, as a result, land affordability is a problem in Australia, and especially in Sydney;

(3)

Sydney is the most penalised city in the country, with affordability being worse than in London or New York;

(4)

the main causes are State and local government planning restrictions and taxes; and

(5)

State and local governments must play their part to reduce the cost of housing so the great Australian dream remains a reality, especially for future generations.

Over the last few days we have had three authorities speak about the affordability of housing in Australia: the Institute of Public Affairs, the Productivity Commission and the Governor of the Reserve Bank. Each authority has said that the affordability of housing is becoming less and that the house-and-land package is becoming more difficult to buy. The Housing Industry Association indicates that if some impediments to the affordability of housing were removed a further 50,000 homes could be built in Australia. Homeownership is important because it provides family and social stability. For people buying their own home, it is an investment in their future, which can be turned into a retirement program as they come to a time when they do not need the space of a large home. Every study supports the significance of homeownership and the value that it provides for the Australian community.

Any assumptions that make the reverse proposition need to be challenged. In New South Wales, the New South Wales government taxes homes. When the federal Labor Party were in government here they taxed superannuation. And so the two extremes of needs of the Australian community, whether it is the elderly or family formation, have been the target of attack by the Australian Labor Party, both federal and state.

According to a study initiated by the Institute of Public Affairs, 30 years ago one-third of the total land-house package went to the paying of the cost of land. Now the same body estimates that one half of the total house-land package goes to the cost of land. In Sydney it is said—on figures that I have from the institute—that 80 per cent of the price of a house-land package is attributable to the land itself. It is more expensive and less affordable to live in Sydney than it is to live in New York or London. The figures of the Wendell Cox consultancy from St Louis indicate that the affordability of housing in New York and London is better than in Sydney, Australia.

And today we have the announcement from the New South Wales government that local government will be allowed to impose a levy of one per cent on all renovations; an additional cost to the cost of housing and provision of accommodation. Planning restrictions and taxes are the key. I think that the planning restrictions on the size of blocks in New South Wales have reduced the size of new outer suburb blocks to the size of inner city blocks. The prices, however, are North Shore prices. If you examine in detail the reason for that, you see that over 30 years the cost of the house and the house-land package has not increased. But if you look at the cost of the land, which has been changing in that period, you see that it has increased seven-fold over the same period of time—30 years—producing an environment for minimised exercise, minimised security and minimised quality of life for people living in the suburbs.

The anti-sprawl dogma, which seems to be believed by the Australian Labor Party, can best be illustrated by comparing the cost of land in Atlanta. There the cost of government charges is $6,500; in Sydney it is $150,000. The first home buyers are paying for the water pipes, the footpath, half the road, the curb and now the freeways. Out in the western suburbs of Sydney, they are going to pay for the railway line as well. The cost on the average home of a block of land in Rouse Hill is going up by 30 per cent to cover the railway line the New South Wales Labor Party says that it will build some time in the future. The government of New South Wales does nothing for the homeowner and charges them the lot. I think it is time that homeowners had the opportunity to live in the type of home— (Time expired)

David Hawker (Speaker) Share this | Link to this | Hansard source

Is the motion seconded?

Kerry Bartlett (Macquarie, Liberal Party) Share this | Link to this | Hansard source

I second the motion and seek leave to continue my comments at a later time.

Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Link to this | Hansard source

The first thing that strikes me as I rise to address this motion by the member for Mitchell is that, as usual, the Howard government wants to deal with this very important issue of housing affordability by yet again shifting blame to someone else: state and local governments. The problem was raised by the Productivity Commission back in 2004. When it correctly released a report on first home ownership, the government said exactly the same thing: ‘It’s someone else’s fault.’ It rejected pretty much all the recommendations that would have involved Commonwealth accountability, but called on the states to do everything the report recommended in their areas of responsibility. The issue is about the blame game; it is not a debate today about housing affordability, which is a national crisis from the Howard government’s point of view.

States and territories have unanimously supported the development of the Framework for National Action on Affordable Housing and are working cooperatively to actually try to implement it. By contrast—and this is what it is about—the Commonwealth had to be dragged to the altar to sign up to the framework and will have to be forced to commit to take any concrete action. It is true that states and territories hold some of the levers, but so does the Commonwealth. It is equally true that the state and territory governments are the ones who have actually taken steps to do something about housing affordability, such as introducing stamp duty concessions for first home buyers—

Alan Cadman (Mitchell, Liberal Party) Share this | Link to this | Hansard source

Oh, what?

Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Link to this | Hansard source

Tell us about the GST! There have also been additional first home owner grants, land banking and land use planning regulations to require a certain proportion of housing and new developments to be affordable. But what has the Howard government done? It will not take long to talk about this. It has reduced funding for housing programs and abandoned Australian cities, including abolishing Labor’s Better Cities program, which had a return of four to one in government dollars spent and provided infrastructure in the suburbs to assist first home buyers. It has also left state governments to carry the can for urban infrastructure which was not there 30 years ago when we had some of these packages. People now expect the infrastructure to be in place when they seek to build their first homes. The member for Mitchell ought to know something about this, because it was the Whitlam Labor government from 1972 to 1975 that in Western Sydney actually caught up with some of the infrastructure after 23 years of neglect by previous Liberal and Country Party governments. So this is not a debate about infrastructure and housing affordability.

In the middle of August, the Prime Minister and the Treasurer were complaining that the states were not spending enough on housing and transport infrastructure. By the end of August they were saying their spending was putting upward pressure on interest rates, wages and prices in the construction industry. Yet this is the same type of spending that the Reserve Bank governor, Ian Macfarlane, has said is needed to ease supply bottlenecks. What hypocrisy yet again from the masters of fiscal impropriety! Spending is now $20 billion by the Howard government in the last Commonwealth budget, compared to just $2 billion in savings, and not a cent on productive capacity or investment in Australia’s future. These big spenders want the states to subsidise property developers and scratch stamp duties. What would that do to the state budgets?

There has also been a lot of commentary over recent weeks suggesting that a choice has to be made between supporting the entry of low- and middle-income earners to homeownership and supporting the maintenance of asset values for existing homeowners. This is an interesting debate, but what absolute rubbish! Whilst the data analysis now suggests that policies for housing, planning, transport, land availability and service provision at all levels of government have contributed to today’s housing affordability crisis, it is ridiculous to suggest—as the member for Mitchell does—that a mature nation cannot take measured steps to get affordability back on track without pulling the rug out from under asset values.

It is the responsibility of the national government to lead, not to shift the blame. Instead of doing the hard yards to put downward pressure on interest rates and downward pressure on inflation, instead of investing in the productive capacity of the nation—skills and infrastructure—the Prime Minister is calling for wholesale land releases that could wipe $100,000 off house prices and undermine the assets of existing homeowners. He does not want to know about urban renewal, state-of-the-art public transport, suburban services, sustainable cities and all the assistance that the Commonwealth ought to be giving to the outer suburbs of our major capital cities.

The Howard government has to pull its weight in the urban debate rather than time and again saying it is the responsibility of state and territory and local government. This government is willing to do nothing in the suburbs of Brisbane, Sydney and Melbourne to provide the infrastructure and meet some of the costs that first home owners face. When people build their first home, there is a responsibility for government to meet some of the costs of providing the infrastructure that they expect in the suburbs, just like previous Labor governments did nationally. (Time expired)

Kerry Bartlett (Macquarie, Liberal Party) Share this | Link to this | Hansard source

It is self-evident that housing affordability depends on three factors: firstly, the prices of the houses themselves; secondly, interest rates and the cost of servicing a mortgage; and, thirdly, people’s incomes. If we look a little more closely at these in the context of the current debate—that is, the rhetoric and hyperbole emanating from those opposite—we can see what the facts are in the situation. The recent publication by the Housing Industry Association and the Institute of Public Affairs entitled The tragedy of planning: losing the great Australian dream sheds significant light on these three factors. Firstly, on housing prices, the report says:

According to the Demographia 2006 International Housing Affordability Survey, Sydney ranked seventh in the least affordable housing market from their study of 100 cities in North America, New Zealand, Australia and the United Kingdom.

…         …         …

The key cause of this disparity is planning constraints that have reduced the availability of land for housing, and house-tax measures often in the guise of development contributions.

The key factors in affordability are the restraints on planning and the house tax contributions forced on buyers by state governments. As a result of planning constraints and taxes and charges, land prices have risen dramatically in Sydney in the last 30 years—sevenfold, from an average of $59,000 a block to $461,000 a block—compared to a very modest increase in building costs of just four per cent in real terms over that time. As a result, the land component of a new house and land package in Western Sydney has risen from 33 per cent to 78 per cent in just 30 years, far higher than in other capital cities. The report says:

These trends—

that is, land price costs, land release issues and taxes and charges—

are at the heart of the blow-out of Australian housing affordability.

The report goes on to show, quoting Demographia again, that the direct and indirect tax charges and regulatory charges add up to $150,000 for a block of land in Sydney.

The second issue—and we have heard a lot about this from the other side—is that interest rates do affect the cost of servicing a mortgage. But the point made by this report is that they add only at the margins to the cost of housing. The report says:

The vast dispersion of prices and of price trends provides unassailable empirical evidence that price increases are not due to some general phenomenal-like shifts in interest rates.

The outgoing Governor of the Reserve Bank has reinforced the point that the fundamental issue is the cost of land and state government charges. But it is true that, around the edges, interest rates do make some difference. They are now at 7.8 per cent. Just imagine if interest rates were at the levels which prevailed during Labor’s 13 years in government. Just imagine what it would do to the affordability of land and houses if, instead of the current 7.8 per cent, interest rates were at the 12.75 per cent they averaged over those 13 years of ‘hard Labor’. That is an extra 4.95 per cent. On an average mortgage of around $200,000, it would mean a cost of an extra $825 a month if Labor’s interest rates prevailed rather than the low interest rate climate that we have at the moment.

The third factor in housing affordability is the level of people’s incomes and their ability to service mortgages. Again I make the point: compare the levels of incomes now to what they were under Labor. Real wages have risen in this country by 16.8 per cent over the last 10 years, compared to a miserable rise of 1.2 per cent in Labor’s 13 years and compared to a decline in minimum real wages under Labor. Housing affordability was far less under Labor because wages did not rise. At least under this government we have seen a rise in real wages.

The point is this: fundamental to housing affordability is the failure of state governments in their planning regimes and in their heavy imposts of taxes and charges on land. Secondly, if interest rates were at the level that prevailed during Labor’s 13 years it would be even more difficult to afford a home. Thirdly, if wages were not rising as fast as they are now then it would be even more difficult. This government is doing its part. The state governments are failing the homebuyers of this country.

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

This motion is nothing more or less than an exercise in blame shifting—trying to shift the blame for rising interest rates. There have been three interest rate rises since the last election, making seven successive interest rate rises, and there will almost certainly be another interest rate rise in this calendar year—and who knows what the new year will bring, such is the fiscal environment, the high-spending environment, that this government has created through its extravagant spending commitments.

I remember when the housing boom was well underway and the Treasurer began warning of the consequences of a housing bubble. But I do not recall him saying that the problem was land availability. The Treasurer was not saying that at the time, when the housing bubble was well underway. The Prime Minister did even worse: he welcomed the housing bubble. The Prime Minister said that it was terrific that house prices were going through the roof, because it meant that those people who were in houses were enjoying higher wealth as a result of the increase in house prices. He had absolutely no consideration, no regard and no sympathy for those people who were shut out of first home ownership. I thought that he was someone who would be interested in first home ownership, but, no; he did not care a toss about first homeowners and people trying to get a home. Instead he said, ‘This is great: housing prices are going up, so people’s wealth is going up.’ Now he is seeking to shift the blame onto the states.

The Productivity Commission report that came out in March 2004 had a fair bit to say about this. It is like the elephant in the room about which no-one wishes to speak and which no-one wants to acknowledge. The report talks about the tax changes which were implemented by this government and about the impact of those changes on housing affordability. It says:

Interactions between negative gearing, ‘capital works’ deductions, post-1999 capital gains provisions and marginal income tax rates have lent impetus to investment demand during the housing boom.

The report recommends that:

The Australian Government should, as soon as practicable, establish a review of those aspects of the personal income tax regime that may have recently contributed to excessive investment in rental housing. The focus of the review should be on the Capital Gains Tax provisions.

I know that members opposite and the Prime Minister will say, ‘That means that the member for Rankin is in favour of changing the capital gains tax regime.’ I am not. I am not arguing that; but members opposite and the Prime Minister need to recognise and acknowledge the contribution of those tax changes to the housing affordability issue. The same report talks about land release, and it is very interesting. It says:

Cheaper, more readily available housing finance in a booming economy, with some added policy stimulus, has resulted in a prolonged surge in demand.

It asks why supply has not responded quickly and then it says:

Even in a best-practice supply chain, it can take several years to bring new land on-stream, to provide the associated infrastructure and to construct new dwellings.

But even if this were not so, there would have been major price pressures in the recent cycle, because much of the surge in demand came from people seeking to upgrade their dwellings (mainly in established areas) in response to increased purchasing power.

The report says that there are some influences as a result of the inability of state governments to release land instantaneously. We know that, but the Prime Minister is trying to shift the blame by saying, ‘That is the whole story or almost the whole story.’ The Productivity Commission report goes on to say:

Constraints on the supply of land at the urban fringe have contributed to housing price pressures, particularly in Sydney. However, because recent price increases have been due mainly to the surge in demand in established areas, improvements to land release policies or planning approval processes could not have greatly alleviated them.

Of course, the government wishes to deny the existence of this report. It shows that the government is seeking to simply shift the blame onto the states for its culpability and its extravagant spending commitments which have resulted in three interest rate rises since an election when the Prime Minister promised to keep interest rates at record lows. Another interest rate rise is in prospect and the new year could bring even further increases in interest rates.

This government stands condemned for its economic culpability and its extravagant spending commitments which are putting upward pressure on interest rates. It always took the credit when interest rates were low but, now that interest rates are rising, it is everyone else’s fault. It is the states’ fault, it is the world economy and it is everyone else. It is time the Howard government took responsibility for its economic culpability and the interest rate rises that have occurred—at a time when it promised to keep interest rates at record lows. It stands condemned for its economic culpability.

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

I stand here today in support of the member for Mitchell’s motion before this House that ‘the cost of housing in Australia is often more than double what it should be’ and that ‘the main causes are state and local government planning restrictions and taxes’. That is a statement of fact. It surprises me that the member opposite is trying to defend state governments. We have belled the cat on these out-of-control state governments, because they are the ones that are out of control. Members opposite have defended the indefensible—but they have to, because all of the state and territory governments are Labor governments. Of course they would rush in to support their mates.

One of the greatest hypocrisies that has happened in the House this afternoon is this: in question time, the member for Lilley asked several questions regarding information provided by Alan Moran in his book The Tragedy of Planning: Losing the Great Australian Dream. The member for Lilley was trying to use this information to say that the Prime Minister’s outing of state governments is wrong. I want to use Dr Moran’s own words to demonstrate that not only the Prime Minister but also all the experts in this area are correct. In the foreword of the book, Ron Silberberg says quite clearly:

Unfortunately, housing has become much less affordable in recent times.

…         …         …

Why has this occurred? Alan Moran’s analysis dismisses interest rates as a significant factor … Nor is it the cost of building which … has remained remarkably stable over time in real terms.

He continues:

The increased costs largely relate to the rising price of land on our city fringes. Government-imposed restrictions on land supplies, ‘development levies’ to fund infrastructure and increasing layers of regulation all contribute. Planning restrictions in particular, are choking our cities and increasingly pushing up the prices in what were once the most affordable places to purchase a home.

This is from someone who is an expert in this area—not from someone who has got a latter-day economics degree and has then twisted it. At the end of the day, here we have an expert in this area who knows what he is talking about.

In terms of restriction of land supplies, there are about 240 hectares in Perth called the Bushmead Rifle Range which we tried to give the state government. We said to them, ‘Would you take this and develop it, because you have a shortage of land.’ The state government back in 2001 would not even get involved, so we had to take it back. The state government were not interested in developing a vast amount of inner-urban land.

As a result, the federal government is now trying to dispose of this land for housing. But what has happened? Alannah MacTiernan, the state Minister for Planning and Infrastructure, and her department, have put a go-slow on this and are coming up with ideas such as ‘the bush forever’ and other restrictions. This information about some of the impediments has been available for more than five years. They overlay the restrictions to land rollout with not only taxes and charges but a huge layer of bureaucracy and red tape, which forces up prices. Mr Moran, in the West Australian last week, in an article titled ‘Waking up to the great Australian nightmare’—instead of the great Australian dream—pointed out that in Perth the ratio of median house prices to median income now stands at 8.7, which is higher than in Sydney. In fact, he says that within the next 12 months 30,000 new home buyers are predicted to come into the market but that there are only 4,000 lots available. How does having 30,000 buyers and 4,000 lots available work?

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

Dr Emerson interjecting

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

If the great economist over there understands what he is talking about, he will know that there is a cost push on this and that will again force up the price of land. It is as plain as the nose on your face; you cannot get away from it. In Mr Moran’s comparisons, he is saying that if we had the more flexible laws that prevail, for example, in Texas we would halve the price. I support the motion. (Time expired)

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

This is a timely motion to come before the House, as it is about time that we made some attempt to, quite frankly, blow apart this notion that the government is trying to put around about housing prices and their connection to land releases. The notion that state and local governments are the cause of the housing affordability problem is nothing but a pathetic attempt by the Howard government to run away from the interest rate promise that it made at the last election. It is trying to prop up its failing state Liberal Party mates.

Housing affordability and its impact on realising the great Australian dream of owning your own house are not issues that should be trivialised by members opposite with the pathetic partisan politics that are being played out here. It is not an issue that should be dismissed as being the fault of another level of government. The aspirations of hardworking Australians in electorates like mine to homeownership should not be—in a bid to run away from the interest rate promises made at the last election—dismissed by the member for Mitchell, the Prime Minister, the member for Canning and others opposite as being the problem of state or local governments.

The Prime Minister’s claims that he did not promise low interest rates at the last election are only being made in the hope that people will not think that this is another broken promise. That is wishful thinking. The Prime Minister knows that those who went to the ballot box and voted for him did so in the belief that they were voting for low interest rates. Even the Reserve Bank governor knows that the government deliberately misled people about interest rates at the last election. Now, in a desperate bid to distance himself from the promise, the Prime Minister starts saying that housing affordability is a product of supply and demand and that more land should be released. With respect, the Prime Minister’s plan for improving housing affordability will lower housing prices by slashing the value of everybody else’s property. What is worse, outer metropolitan areas that already face declining values will carry a disproportionate burden.

The reason house prices have fallen is rising interest rates. The reason 2,189 repossessions have occurred in New South Wales since 2002 is rising interest rates. The reason why property prices in my electorate of Werriwa have fallen—according to the Sydney Morning Heraldby between one per cent and 18 per cent over the last 12 months is rising interest rates. The member for Mitchell would have done well to speak to the member for Macarthur, Pat Farmer, about the impact of rising interest rates. Pat Farmer has had some personal experience in this regard. He had plenty to say last week before he was ejected from the chamber on that very point but is silent today. Housing prices have fallen because of rising interest rates and interest rates have risen because of the policies of this government.

The government trots out the comparison of current interest rate levels with those of the Keating government. We all know that the headline mortgage rate is not the issue. Sure, the number might have been higher back in the Keating days, but an honest examination must also take into account the impact of mortgage repayments on the family budget—that is the bottom line. The real issue is how much of your take-home pay is needed to service your mortgage, and under this government that has hit record highs. Under this government, 9.1 per cent of the take-home pay of Australian households is required to service the mortgage. At the peak of interest rates under the Keating government, household commitment to servicing mortgages was 6.1 per cent of their income. That is the real situation and the government knows it and cannot avoid it.

Everyone knows that we are experiencing problems with housing affordability because of the incremental impact of interest rate rises overseen by this government. The front page of yesterday’s Sun Herald said, ‘Homes lost as interest rates bite.’ Low interest rates mean nothing if you are using a record proportion of your wage to pay off the mortgage.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is therefore adjourned and will be made an order of the day for the next sitting.