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Australia High house prices ‘a risk for all state governments': Housing Minister wants premiers' feet held to the fire

22:50  30 april  2021
22:50  30 april  2021 Source:   smh.com.au

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The federal government says the states and territories must take responsibility for Australia's housing affordability crisis, saying it is local levies imposed on new developments that are hurting first homebuyers.

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In a salvo that caused the NSW government to fire back, federal Housing Minister Michael Sukkar said the states need their "feet held to the fire" to address rising house prices and it was not up to the Commonwealth to fix the problem.

He warned that every additional burden placed onto developers by the states is passed onto consumers and exacerbates the affordability challenge.

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The rebuke of the states prompted NSW Planning Minister Rob Stokes to blame interest rates and federal tax rules for pushing up prices, opening a new front in the debate over how to make housing more affordable for young Australians.

Sydney and Melbourne property prices have been rising at their fastest rates in decades, raising concerns among economists and MPs about housing affordability.

Sydney's median house price reached a record $1.3 million in March after the fastest increase on Domain records, while Melbourne's median price increased to $974,000.

Residential developers in outer suburban and regional growth areas must pay levies for infrastructure such as roads, parks and local services to the state government, as well as developer contributions collected by councils but are overseen by state planning policies.

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In new housing developments in western Sydney, contributions can amount to more than $80,000.

"What we need to do is draw [the] nexus a bit closer to, I think, hold state and territory governments' feet to the fire a little more," Mr Sukkar said at an Urban Development Institute of Australia conference in response to a question about whether the federal government had any levers available to collaborate with the states and territories to reduce the impost on first home buyers.

Mr Sukkar told the conference on Thursday he would never say the Commonwealth "could ride in on its white horse and fix it or convince state governments of the merits of reform or fund the reform" and that GST was the main federal contribution.

"The much bigger issue we have here is the affordability challenges in our major cities, which is a real and present risk for all state governments," he said.

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The federal minister's comments prompted Mr Stokes to raise the Commonwealth taxes applied to players in the burgeoning build-to-rent sector as a thorn in the side of its viability.

Build-to-rent refers to residential developments leased out by developers typically for the benefit of long-term renters and are presented as an alternative to home ownership.

"Let's tear down the myth that supply is the determinant of housing affordability. Planning plays an important and significant role in getting new housing to market but let's not pretend tax rules and interest rates don't also push up prices," Mr Stokes said.

"The emerging build-to-rent sector is a prime example. While our recently announced policy to introduce build-to-rent development in our market has been welcomed, industry tells us that the Commonwealth tax treatment makes projects unfeasible."

Mr Stokes said he wrote to Mr Sukkar on this issue, and he failed to respond.

He said NSW was fast-tracking projects through planning reforms and adopting recommendations from the Productivity Commissioner to enable more certainty and transparency surrounding infrastructure contributions.

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Mr Sukkar used the federal government's decision to waive Tasmania's historic $158 million housing debt in late 2019 as an example of intervention, saying it was on the basis the state undertake planning reform. Last year, Reserve Bank of Australia research found planning and zoning restrictions add hundreds of thousands of dollars to the total cost of a home in some states.

"So we will use those opportunities where we can but I would certainly not want to create the impression that we are able to step in and usurp those responsibilities for the states. We just don't have the power to, and it lets them off the hook a bit too, so we just need to focus where the decision-making lies," he said.

After promoting the success of the HomeBuilder grant scheme, which provided up to $25,000 for new home builders and mainly benefited detached dwellings, Mr Sukkar said the federal government would have to respond to the apartment market.

"It is such an integral part of the housing strategy now, we are keeping a very close eye on it as it's very exposed to factors of international students and migration," he said.

UDIA NSW CEO Steve Mann said there was an opportunity for the NSW government to work with local councils to unlock funding from unused developer contributions, "to fund the gap and get a double dividend from critical infrastructure projects which then unlock housing and jobs.

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"The federal government needs to get better at putting conditions on the infrastructure investment it puts into states so that urban planning, transport and other infrastructure is delivered in a timely and integrated way, delivering the world class housing we need for our cities to thrive," he said.

Property Council of Australia's NSW executive director Jane Fitzgerald said that with housing affordability firmly back in the spotlight, there needed to be faster, more streamlined approvals for homes Sydney "desperately needs".

"With low interest rates and strong recovery it's more important than ever that we've got a planning system that ensures supply can meet demand," she said.

Rising house prices in major cities such as Sydney and Melbourne have prompted Coalition MPs to propose using superannuation funds to help first-home buyers save up for a deposit. Liberal MP Tim Wilson launched a campaign last year pushing for an inquiry into housing affordability and the ability for first-timers to be able to pull money out of their mandatory super savings for a property.

When asked about the appetite for such a scheme the federal government has previously referred to an existing program allowing first-home buyers to make extra savings within their superannuation, which can later be withdrawn for a deposit.

Independent MP Craig Kelly, who left the Liberal Party in February, said he might now be prepared to take up the mantle. "I might introduce a private members bill," Mr Kelly said, adding he was "disappointed" the Liberal Party had not progressed with the idea.

"One thing lost in this super debate is the money has to come from somewhere. Every dollar of super has to be earned by the employer or the employee. It takes a dollar out of current expenditure and away from young people struggling to get into the housing market," he said.

"If you retire and don't own your own home you will struggle financially. You can have the super money when you're 65, 66 or 67 but you can't get it when you need it," he said. "It seems to be back-to-front.

"Housing is very important and home ownership is a building block of society."

Monetary policy is not the right 'tool' to address runaway house prices, Reserve Bank says .
The RBA says the rebound in economic activity has been remarkable, but wages growth is a long way off.But monetary policy is not the appropriate tool to address the problem, because it is designed to encourage employment and inflation, it said.

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This is interesting!