Friday, May 15, 2015

Senate's Affordable Housing Inquiry Reports

Last week the Senate Economic References Committee released its report on the Affordable Housing Inquiry, and its a doozy.

Of course, it hasn't made a dent on the policy landscape, but as with all documents of this type there's hope that one day it might. We certainly plan to keep a copy of it in the top draw, along with Ken Henry's 2010 review of the tax system.

Anyway, the Committee has made a number of recommendations that have made us very, very happy - at least in this one brief moment. There are 40 recommendations in total, but we've managed to identify our top five:

1. Recommendation 18 - As a national policy issue, affordable home ownership tends to overshadow affordable renting even though many Australians struggle to access affordable and appropriate housing in the rental market. With this in mind, the committee recommends that the Australian Government recognise affordable renting as a mainstream form of tenure in Australia and place it prominently on the national policy agenda.

Given that renting will be the only form of housing for many Australians, one of the key challenges for government is to change the traditional view of renting as a short-term transitional phase. The committee recommends that the Australian Government in collaboration with the states and territories, through the recommended ministerial council on housing and homelessness within COAG (see recommendation 2) start the urgent process of turning around this acceptance of short-term insecure tenure as normal. As a first step, the committee recommends that the proposed ministerial council consider tenancy regulations in the various jurisdictions with a view to delivering greater security for long-term renters.

2. Recommendation 20 - The committee also recommends the Australian Government:

  • together with the states and territories, investigate national minimum standards that would set specific minimum standards including security of tenure, stability of fairness of rent prices, a new efficiency and comfort standard, safety and security of the home, and better protection for groups in marginal housing;
  • review (and increase) funding levels and access to tenancy advice services;
  • in recognition of the value of tenancy advice services, make funding through the National Affordable Housing Agreement conditional on the states and territories ensuring that they have in place adequate tenancy advisory services; and
  • include as a priority for a re-established Housing Supply Council to review and publish detail on the current national rental affordability gap.

3. Recommendation 29 - The committee recommends that housing should be included in the Prime Minister's Closing the Gap report: that access to affordable and appropriate housing must be regarded in the same context as Indigenous education, health and employment.

4. Recommendation 5 - The committee recommends that state and territory governments phase out conveyancing stamp duties, and that as per the recommendations of the Henry Review, this be achieved through a transition to more efficient taxes, potentially including land taxation levied on a broader base than is currently the case.

5. Recommendation 13 - The committee recommends that, to the extent that such matters are not addressed by the White Paper on the Reform of Australia's Tax System, the Treasury should prepare and publish a study of the influence of negative gearing and the capital gains tax discount on home purchase affordability and on the rental market (including the effect on security of tenure for renters), the effect of these arrangements on revenue, and their effect (if any) on economic productivity. This study should examine the likely effects of alternative taxation treatments of investor housing. Alternative approaches in this study (including, where appropriate, in combination) should include:

  1. a housing specific 'quarantine' approach, wherein losses for investment properties can only be deducted against rental income, with provision for losses in excess of rental income to be carried forward and deducted against future rental income and capital gains;
  2. a broader 'quarantine' approach, wherein interest expenses on all investments, including but not limited to housing assets, are only deductible in any given year up to the amount of investment income earned in that year, with provision for losses in excess of this amount to be carried forward and deducted against future investment income and capital gains.
  3. limiting the application of negative gearing arrangements to new housing stock, or designated new affordable housing stock;
  4. limiting the application of negative gearing to a certain number of properties (assessing options for various limits in this regard);
  5. options for phasing out negative gearing on investment housing;
  6. applying the savings income discount recommended in the Henry Review to investment housing, with consideration given to the impact of this approach both with and without the implementation of the Henry Review's recommendations in relation to housing supply and housing assistance; and
  7. reducing or removing the capital gains tax discount for investment properties, or reverting to the pre-1999 system of taxing real rather than nominal gains on investment assets.
The report is worth a look - you can find it here. For National Shelter's initial response to the report, check out their press release.

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