Coalition Senators' Dissenting Report

1.1Labor’s Help to Buy Scheme is not a home ownership policy. It’s a home nationalisation policy.

1.2This legislation is all about helping the Government buy your home, not you, which is an entirely warped approach.

1.3Labor has given up on home ownership.

1.4This shared equity scheme is utterly underwhelming. It will be eligible to a mere 10,000 households per year and will cost the Commonwealth $5.5 billion, while the Government retains an up to 40 per cent stake in the homes purchased.[1]

1.5This scheme is tiny compared with the 240,000 new houses required every year if the Government is to fulfil its 1.2 million homes target by 2029.

1.6The proposed scheme’s restrictions, such as cutting off eligibility to people with an income of more than $90,000 and capping eligible homes to roughly half the average house price in cities such as Sydney, means the policy is shuffling deck chairs as the Titanic sinks.[2]

1.7The scheme simply replicates state government shared equity schemes that already exist and have largely been rejected by Australians. For example, 94 per cent of places in the virtually identical New South Wales scheme (Shared Equity Home Buyer Helper) are still unused as of March 2024, such is the lack of demand.[3]

1.8It’s no wonder the Government gagged debate of the Help to Buy Bill in the House of Representatives as it was likely unable to convince its backbenchers to even speak in support of this shambolic proposal.

1.9This scheme was an election promise which was due to commence on 1 January 2023, but was only introduced into the Parliament on 27 November 2023.[4] Its implementation is largely a box-ticking exercise for the Labor Government in terms of fulfilling its election commitments.

1.10No public consultation was undertaken in the drafting of this legislation.

1.11The Bill is poorly targeted, badly designed and offers poor value for taxpayers’ money.

The state of home ownership in Australia

1.12The Grattan Institute, in submitting to this inquiry, has boldly stated that:

Within living memory, all Australians had a reasonable chance to own a home. But now, for many Australians the Great Australian Dream of home ownership is becoming a nightmare.[5]

1.13Australians are faced with an unacceptable situation where homeownership is far out of reach. There are a number of factors to be blamed for this crisis:

(a)Not enough homes have been built;

(b)State planning laws have held back development;

(c)Our population is growing at a faster rate than properties are being constructed; and

(d)The current policy approach by the Government prioritises advancing corporate home ownership over individual ownership.

1.14A mortgage-holder earning the median income will now use just under 60% of their income to service a loan on a median value dwelling in Sydney.[6]

1.15At the public hearing, the Grattan Institute said we would need to build a lot more houses each year if we want to tackle housing supply:

Senator BRAGG: How many houses are required to be built each year for us to meet the supply challenge?

Mr Coates: Taking the National Cabinet housing plan, if we did get 240,000 homes a year, we would both meet population growth and make a dent in the shortage of housing that we're seeing in Australia today. If we want prices to come down, that's a pretty good measure of what we should be aiming for in the long term.[7]

1.16The Housing Industry Association (HIA) agreed, noting that this year will be a historic low in terms of construction:

How many should be built? I would say certainly the 1.2 million target—if were able to build that on an annual basis, the 240,000, that rate would take five to 10 years to meet the pent-up demand for housing. How many will be built? It's less than 200,000 in the course of the next 12 months, and we can see that, given the impact of interest rates and the building approvals data that was mentioned a little earlier, we're looking at one of the lowest years for building in more than a decade.[8]

1.17However, even the 240,000 figure, according to the Housing Industry Association, may not be sufficient given the current policy settings:

If we have population growth at 1½ per cent and we have economic growth at 2½ per cent, then 240,000 homes per year will not be sufficient to meet underlying demand.[9]

1.18HIA also explained to the Committee how increased taxes, regulatory, industry and planning costs have slowed the construction of new homes:

It's a combination of all of the factors. First up, if you continue to increase the taxation on houses, which at a federal and a state level has occurred, then you will increase the cost of housing, and demand will decline. … You put a tax on housing; you get less housing. Second, increased regulatory costs increase the cost of construction. Then we enter into a discussion around the capacity—industry supply chain constraints over recent years—and, of course, as has been well discussed and debated, there's the topic of planning regimes. … They have constrained the supply of housing, both greenfields and brownfields, and high rise, medium rise and low rise. In all forms of housing, it has slowed down the construction of new homes.[10]

1.19On the task of building supply and therefore improving affordability, the Grattan Institute recommended that the Commonwealth “push state governments to relax planning rules that prevent more homes being built in inner and middle-ring suburbs of our large cities”.[11]

1.20What is needed is a comprehensive policy agenda to address supply and demand side hurdles that is carefully calibrated alongside state and local government, and totally focused on individual ownership.

1.21Instead, the Labor Government is offering Australians:

(a)A target of 1.2 million new homes which, with the current rates of building approvals and constructions commencing, will never be achieved.

(b)The Housing Australia Future Fund, a thinly veiled excuse to give institutional investors and super funds a leg up to invest in the housing market, by purchasing homes for Australians to rent.

(c)A National Housing Supply and Affordability Council that has only met once in this Parliament.

1.22NSW Labor Premier Chris Minns has already said that NSW will not meet its required target of 75,000 new dwellings constructed per year under the agreed national housing targets.[12]

1.23The Albanese Government’s latest addition to this offering is the Bill before us: an opportunity to co-own a home with the Prime Minister and the Housing Minister.

A ‘very small solution’ for a national crisis

1.24Various issues with the scheme were canvassed by the Committee, four of which will be outlined here.

1.25First, the policy is about helping the government own your home, not you. Under Help to Buy, the Government will make an equity contribution of up to 40% in new homes, and up to 30% in existing dwellings.

1.26Coalition Senators believe that this is the wrong approach. The Government should be removing the barriers to home ownership for young Australians, not inserting themselves into the process.

1.27This scheme will cost an enormous $5.5 billion, but it will only help 40,000 people into a home at a maximum. The evidence to the Committee suggested that despite the small scale of the scheme, like all demand-side measures, there will be some inflationary impact:

…although SSE schemes should prove budget-positive in the longer term, they tie up capital in the short-to-medium term. Calibrated on a per beneficiary basis, this short-to-medium term cost is relatively high. For example, assisting a purchaser acquiring a new-build dwelling valued at $950,000 under the Help to Buy scheme might entail a government contribution to the cost of $380,000.[13]

1.28This money could be far better used by driving the supply of housing, rather than the approach proposed through this scheme.

1.29Furthermore, Coalition Senators believe that the Government should be empowering people by letting people use their superannuation to purchase a home. In principle, letting people use their own money to purchase a home is a far better strategy than putting the Government on your title deed through an expensive subsidy.

1.30Second, the size of the scheme renders its effect on the housing crisis trivial.

1.31The scheme is largely trivial, and as it applies also to existing homes, it is not a supply side policy. As the Grattan Institute have noted, that it is not a high priority policy in terms of supply:

The No. 1 priority is: build more. That's No. 1; this is probably No. 5 or 6.[14]

1.32Economist Peter Tulip agreed that the scheme was immaterial, and that Help to Buy, along with misguided proposals to abolish negative gearing, are a distraction from the broader supply challenge:

Senator BRAGG: Your advice to us is to focus on trying to get more houses built; is that right?

Dr Tulip: That's exactly right. Everything else is a distraction.[15]

1.33Furthermore, Mr Tulip said that the scheme, even though it is trivial, will have the effect of increasing demand through a government subsidy, and will only benefit a select few:

It's going to increase the demand for housing without doing much to increase supply. It's going to increase prices and rents across the board. But, as we were just saying, the effects will be tiny. It doesn't have much effect at all on affordability. On the effect it does have, it's good for the 40,000 lucky recipients of it and worse for everybody else.[16]

1.34When asked, the Treasury witnesses at the public hearing said that they were not aware of any modelling on property prices with respect to Help to Buy, saying that “I don’t know that we have a model that would model the impact of a program like this on property prices”.[17]

1.35Economist Professor John Quiggin told the committee that this scheme was a very small solution for a big problem that has been designed with budget cosmetics in mind:

Senator BRAGG: In the Sydney Morning Herald on 1 March, there was an article that said that the Help to Buy scheme 'is a very small solution' and: Australia has a big problem with housing, and that means Labor needs a bigger solution. Do you agree with this characterisation?

Prof. Quiggin: Yes.

Senator BRAGG: Do you want to expand on your reasoning for that?

Prof. Quiggin: The smallness of it has been pointed out by lots of witnesses. We're talking of, perhaps, 40,000 beneficiaries in a population of 25 million people that need housing. Of course, lots own housing, so we're really talking about something which has been designed, I think, on the basis of budgetary cosmetics rather than on saying, 'What's the scale of the problem, and what do we need?'[18]

1.36The Property Council of Australia said in their submission that the focus by the Government should be on increasing supply, and that this scheme alone was not a sufficient solution to removing barriers to home ownership:

...we call on the Australian Government to address the greatest barrier to home ownership – the need to rapidly increase housing supply. … Without a clear and continued focus on these issues, and an environment of cooperation between federal, state and territory governments as well as between government and industry, the initiative of the Bills will not result in long-term positive impacts to the same extent as they otherwise would.[19]

1.37HomeSuper, submitting to the inquiry, said that this Bill “makes no consideration for the state of supply” and is a band-aid solution that does not treat the cause.[20]

1.38Third, the legislation is void of any detail on the role and functionality of the scheme.

1.39The Treasury has confirmed that the Help to Buy scheme relies constitutionally on consent from State governments:

To ensure Help to Buy has the most solid constitutional footing, it will be established in reliance on referrals of power from the states. States must pass legislation to refer power to the Commonwealth. The scheme can only operate in states that have referred power to the Commonwealth.[21]

1.40The Treasury has provided no schedule or update on when the States will pass the required legislation through their parliaments.

1.41Despite this, the proposed legislation is lacking in detail, and we are left to assume that the implementation of the scheme will be determined by administrative arrangements that have been left unspecified.

1.42Fourth, the scheme will create unnecessary complexity in its interaction with existing state shared equity schemes.

1.43Shared equity schemes exist in New South Wales, Victoria, South Australia and Western Australia. The New South Wales Shared Equity Home Buyer Helper scheme, virtually identical in its design to the Help to Buy proposal, has 94 per cent of its places available. We know that places are also available in the Victorian, South Australian and Western Australian schemes.

1.44Given there are opportunities open to individuals to engage with shared equity schemes already, it is unclear what gap this proposed scheme is addressing.

1.45The UNSW City Futures Research Centre expressed its concern about the overlap between the proposed scheme and the state schemes, noting the potential for confusion for users:

…the Help to Buy scheme will sit alongside a wide range of other Commonwealth Government and state/territory FHB assistance measures. Apart from anything else, this risks adding to confusing complexity faced by potential service users. There is a need for a clearly articulated rationale for HtB within this broader context. …

1.46Such a rationale will need to explain the complementary roles of all the relevant schemes. How will the HtB schemes relate to the existing (and substantially larger) First Home Guarantee program? How will the national HtB scheme relate to SE schemes already operated by state governments – notably in Western Australia, Victoria and New South Wales? What is the thinking that underlies proposed HtB scheme rules where these differ from those state government-run SE schemes?”[22]

1.47If the scheme was sitting alongside a range of other supply-side measures, the Government could perhaps be forgiven.

1.48However, this scheme is ultimately a waste of taxpayers’ money, and the $5.5 billion would be better deployed by the Commonwealth in driving housing supply and supporting first home buyers with more effective policies.

1.49That the Help to Buy Bill 2023 and Help to Buy (Consequential Provisions) Bill 2023 not be passed.

Senator Andrew Bragg Senator Dean Smith

Deputy ChairSenator for Western Australia

Senator for New South Wales

Footnotes

[1]Treasury 001 - answers to Written Questions on Notice from the Treasury, asked by Senator Andrew Bragg (received 9 April 2024), p. 2.

[2]Treasury 001 - answers to Written Questions on Notice from the Treasury, asked by Senator Andrew Bragg (received 9 April 2024), p. 2.

[3]John Rolfe, ‘Home Buyer Helper ‘spectacularly failed’, in warning for federal Help to Buy scheme’, The Daily Telegraph, 23 February 2024, https://www.dailytelegraph.com.au/news/nsw/home-buyer-helper-spectacularly-failed-in-warning-for-federal-help-to-buy-scheme/news-story/cc411646368a6cf57fe802445d4bac76 (accessed 16 April 2024).

[4]PBO,HelptoBuy(ECR163),2022ElectionCommitmentCostings, https://www.pbo.gov.au/elections/2022-general-election/2022-election-commitment-costings/help-buy-ecr163 (accessed 16 April 2024).

[5]Grattan Institute, Submission 8, p. 2.

[6]CoreLogic, ANZ CoreLogic Housing Affordability Report, April 2024, p. 13.

[7]Mr Brendan Coates, Economic Policy Director, Grattan Institute, Committee Hansard, 5 March 2024, pp. 4-5.

[8]Mr Tim Reardon, Chief Economist, Housing Industry Association, Committee Hansard, 5 March 2024, p. 9.

[9]Mr Tim Reardon, Chief Economist, Housing Industry Association, Committee Hansard, 5 March 2024, p. 10.

[10]Mr Tim Reardon, Chief Economist, Housing Industry Association, Committee Hansard, 5 March 2024, p. 10.

[11]Grattan Institute, Submission 8, p. 4.

[12]Jesse Hyland, ‘NSW Premier Chris Minns says state will not meet its housing target, but is doing its best to boost supply’, ABC, 18 January 2024, https://www.abc.net.au/news/2024-01-18/nsw-sydney-chris-minns-government-housing-target/103362944 (accessed 16 April 2024).

[13]Jesse Hyland, ‘NSW Premier Chris Minns says state will not meet its housing target, but is doing its best to boost supply’, ABC, 18 January 2024, https://www.abc.net.au/news/2024-01-18/nsw-sydney-chris-minns-government-housing-target/103362944 (accessed 16 April 2024).

[14]Mr Brendan Coates, Economic Policy Director, Grattan Institute, Committee Hansard, 5 March 2024, p. 5.

[15]Mr Peter Tulip, Chief Economist, Centre for Independent Studies, Committee Hansard, 5 March 2024, p. 15.

[16]Mr Peter Tulip, Chief Economist, Centre for Independent Studies, Committee Hansard, 5 March 2024, p. 14.

[17]Ms Kerren Crosthwaite, First Assistant Secretary, Housing Division, Small Business, Housing, Corporate and Law Group, Department of the Treasury, CommitteeHansard, 5 March 2024, p. 34.

[18]Professor John Quiggin, Private Capacity, Committee Hansard, 5 March 2024, p. 19.

[19]Property Council of Australia, Submission 7, pp. 1-2.

[20]HomeSuper, Submission 10, pp. 1­‑3.

[21]Treasury 001 - answers to Written Questions on Notice from the Treasury, asked by Senator Andrew Bragg (received 9 April 2024), p. 3.

[22]UNSW City Futures Research Centre, Submission 1, p. 4.