Experts have broken down the potential future of Australia’s worsening housing crisis amid mass property shortages and skyrocketing costs.
It comes as part of the Senate committee examining Labor’s legislation to establish the Housing Australia Future Fund and National Housing Supply and Affordability Council on Wednesday.
The fund would be a $10 billion investment to assist in building new social and affordable housing with a target of 30,000 new dwellings over five years.
Property Council of Australia Chief Executive Mike Zorbas told the hearing that estimates put the country “160,000 homes behind the national starting line over the next decade”.
“We’ve got a real supply cliff coming and that applies in the four capital cities which are likely to be the focus of population growth for the country for the next 40 or 50 years,” he said.
“That is a very, very worrying circumstance when we already know that right now, even before that drop off in supply we’re already experiencing pretty radical problems with affordability.”
Mr Zorbas said the housing gap won’t be close to being met until Australia unlocks a level investment playing field for alternative types of housing.
Included in these would be build-to-rent (BTR) housing, purpose-built student accommodation (PBSA) and retirement living communities.
“Currently there is a 30 per cent Australian Government withholding tax rate on overseas investment by pension, and public and private funds in build-to-rent housing, double the rate of tax on other property types like offices and logistics assets,” Mr Zorbas said.
“A 15 per cent managed investment trust (MIT) withholding tax rate would be comparable with the rate paid by our domestic super funds who invest in US, UK and Canadian real estate markets.”
Doubling-down on his fears for the future, Mr Zorbas said Australia runs the risk of ignoring the housing crisis enough that it worsens to a dysfunctional level.
“As that gets worse over the next two years, and most policy and decision makers have essentially chosen to bury their heads in the sand about this looming cliff,” Mr Zorbas said.
“The need for more rigorous and more balanced regional catchment and citywide planning about what is needed is going to intensify.
“We’re accidentally sleepwalking into what is going to be a critical period of time here … and we are concerned that a big part of that is a failure at the planning Minister level to grasp the severity of the problem.”
Since May last year, Australian borrowers have been hit with nine consecutive rate rises.
The RBA has aggressively raised interest rates in a bid to tame runaway inflation, which reached 7.8 per cent in December.
It was a peak not seen since 1990 in Australia.
Dr. Cameron K. Murray, Research Fellow at the University of Sydney said he had major questions about how the Future Fund would work in practice.
“I’ll start by saying how puzzling it is, that considering how obsessed this country is with property investment, the housing policy we’ve come up with to help households be squeezed in rental markets is to not invest in building housing but spend $10bn investing in non-housing financial assets instead,” Dr Murray said.
“I feel like satire and reality have met. This fund has been portrayed as a low risk, long term, politically insulated funding source but it is exactly the opposite.
“It is a high risk fund that defers tough housing spending decisions to future politicians and their discretion with a built-in excuse to limit housing funding to $500m.
Another perversity is that the fund is designed to create a funding source but the legislation will simply credit the fund with $10bn.
“Where is that money coming from and why doesn’t it need a fund. We’ve been captured by this crazy, non-economic magic.”
The Future Fund was an election promise from Labor in 2022 and sold to be an important step to ensure more Australians have safe and affordable housing.
Minister Housing and Minister Homelessness Julie Collins said when the legislation passed the lower house in February its intention was to address acute housing needs.
“This fund is a key part of our plan to help tackle the housing challenges Australia is facing, by ensuring that there is a secure, ongoing pipeline of funding for social and affordable housing,” she said.
“This will be a significant investment in the future of housing in our country, and a significant step forward for Australians looking for somewhere to call home.”
The goal of 30,000 homes in the fund’s first five years, includes 4,000 homes for women and children impacted by family and domestic violence or older women at risk of homelessness.
Article source: Queensland Property Investor