Thank you for the opportunity to submit for budget and governance support to assist Grounded’s mission – to provide more community led development (CLD) and therefore perpetually affordable housing.
We note Treasurer Mullighan’s budget speech and his powerful statement that “home ownership has never felt further from their grasp.”
Our perspective comes from a strong understanding of monopoly rents and their damaging effect on housing affordability. We note the experience from Victoria where 12 years of stamp duty discounts (SDDs) and 20+ years of first home buyer grants (FHBG’s) have done little to reduce pricing pressures. FHB mortgage sizes have continued to increase.
In addition to the standard FHBG, we note South Australia has HomeSeeker SA and HomeStart Finance as additional vehicles to assist low to moderate income earners access home ownership.
The savings from the FHBG and SDD subsidies of $44,580, while promoted as cost savers, actually act as demand side incentives that enable extra bidding power. Instead of benefitting buyers, they act instead as a seller’s subsidy.
Further, the SDD will see a transfer of revenue away from the state and towards banking profits. The pricing threshold of $650,000 will hold back the tide for a few years, until the threshold requires further increases.
The largest land supply increase in South Australia’s history of 25,000 lots will be celebrated by supply siders, who recognise the increased value of their land banks. However, unless there is serious oversight of the supply rollout, it will be drip-fed to maximise profits.
Research released in 2022 showed how nine master-planned communities on the east coast manipulated supply aggressively when auction clearance rates and days on market increased. A 48.7% reduction in supply occurred in order to place a floor under land prices.
Developers no longer need to meet in a clandestine manner when they have similar data points being fed into their own algorithms.
Treasury SA and the Housing Minister must have the same data points on their screen whenever they meet with needy developers. Infrastructure gifts to developers should be held back until appropriate supply rates, at some 5% of the land bank, are met.
Decades of misinformation by well funded property lobby groups have egged bureaucracies on to believe that property developers prioritise home buyers over their corporate economic interests. However, their own CEO remuneration package, alongside fiduciary duties to both shareholders and financiers means that PR promises are easily pushed to the side.
We understand the property sector’s concern that planning has become burdensome, but once planning approval has been given, there is little excuse for manufactured scarcity via drip feeding.
Likewise the 2% deposit for a HomeStart loan is as if policy is written by the property lobby. With each and every property bubble crash, low deposit rates extenuate the bubble. With this land cycle pushing prices ever higher, we see that this policy framework has terminology to paper over the systemic risk. Such policies are part of the growing housing accessibility frame, supplanting what is really needed to stabilise the housing system – genuine perpetually affordable housing.
The 50% Land Tax Discounts for Build to Rent Projects are another sector that needs careful oversight. While initially touted as a much needed affordability and security of tenure reform to the rental market, the reality is that BTR is predominantly a high end luxury housing product that delivers neither. Tenants in a Fitzroy BTR were shocked as 12 months of expected long term, stable renting was nearing. 33% of tenants faced either a 9-17% rent increase, or were evicted.
This will be disheartening for renters who had hoped such BTR supply would deliver stable housing. Many would prefer to remain in stable affordable housing like they were promised.
A minimum occupancy rate calculated monthly would ensure such rental supply is putting downward pressure on rents. The high eviction and rental increase rate in the Fitzroy example requires further investigation, but perhaps a maximum tenant turnover rate would lock in stable supply for longer, curbing the ability to charge higher market rents to new tenants.
Continual housing pressures are adding to mental health costs, domestic violence costs and acute health issues. Insecure housing has a flow on impact for educational and employment outcomes and a recent study showed that insecure tenure is linked to faster ageing.
The benefits of social and affordable housing are significant and until recently have been unmeasured. The new Social Housing and Green Measures for Affordable Housing (SIGMAH) calculator quantifies the health, policing and community services savings that such housing can provide. They found a benefit of $27,500 per year over 40 years. This indicates that overall government expenditure can be reduced when stable housing is provided. These metrics must be more closely assessed when making budgetary allocations.
Building on this, the University of Washington’s Health Olympics compares UN indicators on life expectancy, health spends per GDP and inequality. It finds that inequality is the driving determinant of health outcomes. It is time governments ensured they weren’t being duped by self-interest rather than economic science.
South Australia has an opportunity to be a national leader in housing policy by shifting away from subsidies and initiatives that benefit developers and push affordability further out of reach. As the housing crisis continues to escalate, the policy framework appears to be sliding to housing accessibility rather than affordability. We need to focus on housing models that permanently correct the course of the housing market. As Alan Kohler recently emphasised, there needs to be a realignment between housing costs and median household incomes.
Community Land Trusts are a useful housing vehicle South Australia urgently needs. They operate with a pricing lock that ensures land costs do not outstrip wage growth.
