Michael Sukkar MP

Australian Institute of Architects Breakfast

Introduction

Good morning everyone, it’s a pleasure to be here.

It’s only fitting that we gather in one of the biggest houses in Australia to talk about one of the biggest issues facing us today: housing affordability.

The competition to design our Parliament is the stuff of legend.

It’s said that in designing this place architects ‘faced one of the most complex design briefs imaginable — a total of 20 volumes, forming a pile about a metre high — which took seven years to develop.’

What’s even more remarkable is that the government of the day received more than 320 entrants to design the Parliament.

Now, this says something about architects. It says you have a very healthy appetite for solving complex problems. It says you’ve got attention to detail and creativity on your side.

On behalf of my parliamentary colleagues, we welcome your contribution to addressing housing affordability challenges, which is what I will be discussing further this morning.

Housing affordability

Home ownership is part of the fabric of our society and every Australian should have the realistic opportunity of owning their own home.

But for so many Australians, this is becoming increasingly unattainable.

Housing affordability is not a new problem. It has never been easy to buy a home, especially in our major metropolitan areas. And over the years there have been many attempts to address this issue. Some have helped, many have failed and taxpayers have paid for it.

The challenge of not being able to access secure and affordable housing has flow on effects to so many other social and economic policy areas. It impacts educational outcomes, health, work force participation, social cohesion, welfare dependency, family formation and household consumption to name a few.

Improving housing affordability right across the housing spectrum must therefore be a key policy goal for governments at all levels, including the Commonwealth. Our response must be well targeted and ensure that the actions of each level of Government is integrated and uses the levers they have in a way that best addresses the challenges faced.

The Turnbull Government recognises this, and that’s why housing affordability will be a central part of this year’s Budget.

This issue has not silently crept up on us; housing affordability has progressively got more difficult over the past 20 years, largely driven by the disparity between wages growth and house price growth during that time.

This is exemplified in Sydney and Melbourne, where prices have risen around 65 per cent and 40 per cent, respectively, since their 2012 lows. It’s a different story for Perth and Darwin, where they have fallen by up to 7 per cent over the past year.

So, challenges in this area are complicated on several levels. What we see in Sydney and Melbourne isn’t necessarily what we see in other parts of the country — and it involves multiple layers of government.

As I’ve often pointed out, there is no silver bullet to addressing these issues. And we can’t wave a magic wand and fix things overnight.

In this regard, we take the position that policy changes need to be finely calibrated and targeted.

As you would appreciate, I won’t be outlining the Government’s solutions today – it’s that challenging time before the budget where I’m constrained in what I can say.

I will however take this opportunity to talk though the state-of-play of this issue as it stands, and look into some of the specific challenges we’re facing.

Housing supply

It is widely recognised that a lack of housing supply – especially in our capital cities – has led to most of the issues that we face in this area.

We just don’t have enough housing stock to sustain a rapidly growing and highly concentrated population.

This is especially apparent given the huge numbers of people flocking to our capital cities each year. In Sydney, the population grew by 83,300 people in the year to June 2015. In Melbourne, population growth was higher again, growing by 91,600 people in the same period.

Supply has to better respond to this increased demand to achieve long-term results.

The federal government has an important role to play when it comes to housing.

But when it comes to housing supply, the states and territories have primary responsibility for most of the levers – particularly planning, land use and infrastructure – so, it’s vital that they continue to work with the Commonwealth to implement policies to drive supply. Independent research has also demonstrated that complicated regulatory compliance and associated state taxes impose a significant burden on the cost of building a new home.

In Sydney, for example, an average of 17,000 homes were constructed each year over the decade from 2005 to 2014 – that is almost half the number of homes required to keep pace with growth over that period.

In that respect, I welcome recent moves by the Victorian Government to unlock 100,000 new lots on the urban fringes of Melbourne, and the New South Wales Government’s comments just last week to encourage housing developments around rail infrastructure in Sydney. I urge other states and territories to follow suit.

City Deals

A constructive way in which we’re partnering with state, territory and local governments is through City Deals — an initiative, spearheaded by my colleague Angus Taylor, which aims to make ‘our cities better places to live in and do business’.

The deals also acknowledge the role infrastructure can play in addressing housing supply, through increased public transport and measures to decrease road congestion, making suburbs more accessible.

The Western Sydney and Townsville City Deals have already been struck, with discussions also well underway with the Tasmanian Government for a similar deal in Launceston.

The Western Sydney deal, for example, will improve housing affordability through support for increased supply and housing diversity. This includes streamlining of planning and zoning regulations and an increase in infrastructure investment, as well as making way for higher density developments in appropriate locations.

We will also be keen to undertake precinct specific deals that seek to utilise greenfield and brownfield government sites.

We will continue to work with state and territory governments across the country to identify locations to engage in further agreements.

State-of-play

First-home buyers

Now, turning to the state-of-play when it comes to housing affordability.

There are many challenges faced by people looking to buy their own home and enter the property market for the first time.

One of the most telling signs of this is the downturn in the proportion of home loans provided to first home buyers.

The proportion of loans provided to first home buyers in August 2016 was 13.4 per cent — well below the long-term average of 19.4 per cent.

As the Treasurer has said, the real pinch point for Australians is being able to get into the housing market in the first place.

With wages growing slower than house prices, saving a deposit is becoming more and more onerous.

In some regions of Sydney, median house prices are as much as nine times higher than disposable income.

And between June 2010 and June 2016, the time taken for a two-income couple to save for a 20 per cent deposit in Sydney increased from 5.8 years to 8.4 years.

In Melbourne, it increased from 5.3 years to 6.2 years.

This delay means people are needing to rent for longer, putting increased pressure on the rental market.

Renters

I’ve often said that renters are unfairly left out of this story.

Renters make up around 30 per cent of Australia’s housing market, and often renting is a natural step before entering the property market.

Just like house prices, rents are continuing to rise, and unfortunately many people are struggling to keep up.

Levels of rental stress are rising as well.

The 2016 COAG Report on Performance found no progress when it comes to this – low-income households experiencing rental stress increased 7 per cent to 42 per cent in 2013–14.

When rents are high, it makes it even more difficult to save for a deposit.

Policies that focus on demand-side quick fixes at the expense of supply-side solutions just perpetuate this.

Labor’s policy to abolish negative gearing on all existing dwellings – and, in effect, implement a housing tax – will hurt renters the most.

In fact, it will lead to a trifecta of negative consequences – rents will go up; investors will flock to purchase new dwellings, which in turn will block out first home buyers; and to top it off, it will skew the housing market to the rich, by allowing those with investment income to deduct net rental losses against that income.

It is middle income Australians, like nurses, teacher and police officers, who benefit the most from negative gearing.

We can’t achieve solutions to our housing affordability crisis through reckless policies that will hit the people fighting hardest to get into the market.

Social Housing

As younger people and families are delayed or frustrated in purchasing their first home, this is placing pressure on the private rental market and, in turn, concessional or affordable housing accommodation and ultimately social housing.

While we are always reviewing our funding commitment and making sure they are fit for purpose, we are investing heavily in housing and homelessness funding.

In 2016-17, the Commonwealth has contributed over $6 billion through:

• Commonwealth Rent Assistance
• the National Affordable Housing Agreement
• the National Rental Affordability Scheme, and
• the National Partnership Agreement on Homelessness.

In some cases, affordable housing outcomes haven’t improved. And in other cases, they’ve gone backwards.

For example, the National Affordable Housing Agreement aimed for a seven per cent reduction in the number of homeless from 2006 to 2013. But from 2006 to 2011, there was actually a 17 per cent increase in the number of homeless.

Obviously, we need to do things differently and better. The current arrangements aren’t getting results.

As you may have read, this month we established the Affordable Housing Implementation Taskforce.

The Taskforce will look at harnessing large-scale private investment through a bond aggregator concept.

The bond aggregator would issue bonds to the market, and on-lend these funds to community housing providers — allowing them to access cheaper and longer term finance.

It’s about boosting the supply of affordable community housing.

The United Kingdom successfully implemented an aggregator model.

The Housing Finance Corporation recently borrowed at rates below that of the Government and in 2016 had £4.4 billion in loans to housing associations.

We’ve appointed an expert panel to guide the work of the Taskforce. The expert panel will draw on their broad experience from the financial, affordable housing and public sector.

 Closing remarks

I want to conclude by reiterating our commitment to addressing Australia’s housing affordability challenges.

While the challenges Australians are facing in this space are not new, it’s clear that they are becoming increasingly difficult to overcome.

We must work constructively with state, territory and local governments to develop policies to drive supply into the market.

And, of course, we look forward to working with key stakeholders, like all of you in the room today, to find realistic solutions to address this issue and get more Australians into their own homes.

Thank you.