Government must act to make housing affordable

Government must act to make housing affordable

19th December 2020 Off By adpublisher

What is driving this? De-couple your predictions from reality. Predictions were only ever that – reading the tea leaves, guesses based on a string of assumptions most of which turned out to be wrong.

The greatest force driving the market upwards is the low price of money. While investors and aspiring home owners alike can borrow so cheaply, there is ample incentive to chance your arm and make yet another bid at auction, where investors have an unfair advantage – taxpayers subsidise their property portfolio.

No other country on earth makes it easier for you to buy a second, third or umpteenth property than your first.Credit:Tawar Razaghi

Negative gearing is evil. It pitches the baby boomers building a nest egg against their own offspring’s generation who are trying to get their first home. No other country on earth makes it easier for you to buy a second, third or umpteenth property than your first.

Any politician who claims to care about housing affordability but leaves negative gearing untouched ought to be laughed off the podium. It distorts the residential market, leaves a gaping hole in the budget, offers a subsidy to precisely the wrong people and entrenches intergenerational inequality. It ought be the first – and the only – reform needed. Unless it is reined in, all other measures are futile.

The “bank of Mum and Dad” is used by the well off to launch their kids into secure housing – with the Treasurer as their silent partner. The subsidy of the bourgeoisie dwarfs any first home buyer assistance, and is not just a one-off, but year after year. Too bad if your folks cannot help.

The Coalition is being urged to solve home-buying problems by changing superannuation so young people can withdraw their balance and use it as a housing deposit. Stupid ideas gain traction from time to time but this one takes the prize.


First, most young people have only enough superannuation for a fraction of a house deposit.

Second, super only provides real benefit through the power of compounding over an entire working life. Spending the nest egg early means having to start again, typically in your mid-30s. It will then be impossible to save enough by the end of a working life, leaving many people dependent on the age pension.

Third, if you allow struggling young home buyers to access their super you inject more liquidity into the market. Prices go up.

Fourth, you destroy the universality of superannuation, leaving exactly the rich/poor divide in old age that it was designed to tackle.

The truth of the Coalition’s war on industry superannuation is much simpler. The dirty secret is that industry superannuation funds – jointly run by employers and employees – have become investment giants. Collectively they own so much of the entire stock exchange that the business establishment are horrified. When industry super moves together, they shake the market. The fundamentals of power have changed and the old boys’ club hate it.

The Hayne royal commission scrutinised industry superannuation.

The Hayne royal commission scrutinised industry superannuation.Credit:Louie Douvis

The Hayne royal commission scrutinised industry superannuation and found next to nothing of concern. The scandals were 99 per cent in the “retail” funds owned by banks and insurers, which have bled customers ever since. The old directors’ club cannot abide the idea that they have been outperformed by their union-linked rivals. Capitalism is not supposed to work like that.

Earlier this year, the board of finance giant AMP was rolled, in large part by industry funds. The business establishment are terrified at the prospect of further muscle-flexing, particularly on what is called ESG – environmental, social and governance issues. ESG used to be condescendingly dismissed as fringe – but is now mainstream as industry funds combine their voting into a progressive bloc. Divesting from coal mining is the clearest example.


And homelessness? Rough sleeping vanished through winter. The state government magically found the millions of dollars that were needed to keep the homeless – and everyone else – COVID-safe. The state budget investment into social housing is the largest amount ever allocated– and despite Victoria spending more on social housing than the rest of the nation combined, it still only meets a fraction of the need. We need to try even harder.

Jon Faine is a former presenter on ABC Radio Melbourne.

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