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More Supply the Answer to Housing Affordability

One of the major policy challenges to improving housing affordability is increased supply, according to Master Builders Australia the peak body for the building and construction industry. Mr Wilhelm Harnisch, Master Builders Australia Chief Executive said, “Increased supply in the short to medium term is the critical factor in relation to housing affordability, not only the supply of new residential land, but also the supply of public and private rental housing stock.” Mr Harnisch said, “It is important to recognise that any proposed demand side measure should not be taken in isolation and will not be fully effective unless policies are working to get the supply side right.” He said, “Governments need to address the core problem causing the affordability crisis, lack of adequate land supply, costs and charges associated with planning and approval, and the need for a more appropriate funding mechanism for the delivery of infrastructure.” “Over the past ten years there has been a fundamental shift in infrastructure funding such that first home buyers are now unfairly shouldering a significant and increasing share of the cost burden which leads to social inequity.” “There needs to be a thorough and urgent review into the whole issue of urban infrastructure funding, not only on the urban fringe but also in middle and inner ring localities.” Mr Harnisch said, “The upfront loading of infrastructure costs onto new home buyers needs to be confronted and tackled head on to ensure that all levels of government are held accountable for their action.” “Any decline in home ownership would be of concern and should not be allowed to happen as a high level of home ownership provides important public benefits in the form of social cohesion and economic well being.” He said, “The debate should be quarantined to first home buyers and low income householders. Government leadership is crucial to ensure a coordinated approach to improving housing affordability.” “In considering policy alternatives, Master Builders calls for market based approaches given that band aid solutions only tinker around the edges without solving the underlying problem.” “The debate needs to come back to fundamental principles and one of the more immediate solutions is to increase the supply of housing by removing the structural barriers constraining supply at both the state and local government level.” Mr Harnisch said, “Put simply, unless policies are working to get the supply side right, any demand side measures taken in isolation will not be fully effective.” Master Builders welcomes the current focus on housing affordability, but reminds policy makers of the following: 1. The core of the problem is structural, to do with costs and inefficiencies related to supply. 2. The sustainable solution is to enable greater supply both horizontal and vertical i.e. greenfield and urban consolidation, including increased supply of private and public rental stock. 3. The planning and development process should be reformed to reduce costs and delays. 4. Inefficient infrastructure charges and levies should be urgently reviewed because they threaten intergenerational equity. 5. The First Home Owners Grant should be increased and targeted to ‘green’ dwellings. 6. The Capital Gains Tax should be reformed whereby the rate of tax reduces to zero over time, boosting investment. 7. Negative gearing should stay to maintain the incentive to invest in rental housing and affordable housing. 8. Sound economic policy needs to be maintained in order to keep downward pressure on inflation and interest rates. 9. A dedicated federal minister should be appointed with responsibility for building and construction, housing and urban planning. 10. Housing affordability assistance measures should be limited to first home buyers and low income renters, both private and public. Master Builders
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