A new plan outlines how COVID-19 provides a unique opportunity to readdress housing affordability in Australia through government stimulus measures.
Research commissioned by Industry Super Australia (ISA) chief economist Stephen Anthony has found that the shortfall in community and social housing looks set to rise to 1 million properties nationally by 2036.
He argues there is a need for better targeted tax subsidies that will allow community housing providers to build large-scale developments with a strong return rate that is attractive to institutional investors.
The paper, which was commissioned by the NSW Community Housing Industry Council, says housing tax subsidies contribute to the housing gap by fuelling demand and should be redirected to stimulate supply.
“Commonwealth and state governments already spend at least $7 billion annually on housing in NSW. The problem is that most dollars are targeted at mum and dad investors rather than the disadvantaged,” the paper notes.
The publication also finds that governments need to work together to help solve housing affordability.
“The remaining dollars are spent on a ‘mishmash’ of disparate programs spread across layers of governments with no overarching coordination. There has been no overarching planning process for settlement in Australia since the 1990s.”
As the nation faces the onset of a double-digit unemployment rate, the federal government has signalled its desire to ramp up infrastructure spending to kick-start the post-pandemic recovery phase.
ISA argues that one of the best ways to help stimulate the economy and boost jobs and demand is through construction of affordable houses.
“Affordable housing construction during periods of economic downturn such as the present COVID-19 pandemic can have a significant positive impact on regional output and employment. Such countercyclical investment creates additional demand for materials and labour, leading to increased economic activity as suppliers and contractors gear up to increase supply,” Mr Anthony said.
To bridge housing affordability gap, ISA proposes an “Affordable Housing Tax Credit” – which allows equity investors – like super funds – to purchase tradable tax credits in exchange for equity funding directed to regulated CHPs. This embeds affordable housing tax credit into the tax code (just like negative gearing).
They also suggest a “Financial Corporation Investment Fund” – an independent entity that could be established by the Commonwealth (or by state or local governments) existing outside of the general government that could invest in affordable housing developments guided by a concrete rate-of-return benchmark.
“Failing to address current affordable housing supply shortfall will have disastrous intergenerational consequences, but the COVID-19 stimulus measures could be shaped to address the 30-year decline in affordable housing while helping rebuild the economy,” Mr Anthony concluded.