Hansard transcript
FITZGERALD, Mr Karl, Managing Director, Grounded Community Land Trust Advocacy [by video link]
O’CONNELL, Ms Kristin, Research and Policy, Antipoverty Centre [by video link]
[13:12]
CHAIR: Welcome. I understand information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. Do you have a brief opening statement you’d like to give?
Mr Fitzgerald: Grounded is an advocacy body established to assist the growth of community land trusts, which we see as the gold standard in shared equity, where community ownership is carefully managed to retain public subsidies over time and to scale this upward. If we want Help to Buy to work, we must recognise that any increase in income, whether it be by subsidy, deposit, supplementation or a hefty ACTU wage agreement—if any of those things occur, then land prices inevitably take the gains. We saw that during the pandemic with Australian land prices increasing by a gobsmacking $2.7 trillion in just two years.
To see the Help to Buy legislation boasting, if you like, that it will help all Australians was a little concerning. We feel that it may well endanger more Australians than it helps. This is because of the danger of what it will do to prices on the margin. The thresholds of $850,000 and $950,000 are not only too high; they will signal to developers that they can continue to push prices higher. We have seen that in Victoria with the stamp duty discount; after eight years, that pricing threshold was very quietly increased from $600,000 to $750,000. The same thing is going to happen here. We believe these thresholds should be $150,000 lower across the board. Importantly, if there is to be any increase it should be indexed to wage growth. If we don’t do that, we know land prices will just take those wins.
As our submission pointed out, ‘helping all Australians’ is only limited to 10,000 participants. Concerning for us is it’s being sold as a housing affordability tool. We’d love to see the housing minister and everyone in government explain this difference between this recent phenomenon of housing accessibility and how different that is from housing affordability policies. Accessibility has become the bane of affordability, as the music is kept going through these policies. The treadmill this encourages cannot be sped up much further than where it is at present, as we’re seeing with the number of single mums sleeping in cars and of grandparents giving up their homes for their kids and residing in a caravan in their driveway. When we see the First Home Guarantee and associated policies encouraging five per cent deposits as the new norm, this will keep the music playing.
When it comes to Help to Buy, we have concerns that the equity is being lent without interest charged over that time—which is good for the affordability pressures, but the orientation of the program relies on that homebuyer selling into a higher-priced market. Therefore, the subsidy is largely sequestered to the open market, resulting in further responsibilities for governments of the future to fund even larger sums to enable housing accessibility. We’d love to see an affordability lock in place. We talked about those thresholds being indexed to wage growth. A way this occurs in the community land trust world is that indexation is limited to the income of the bottom two quintiles and capitalised over 20 years.
Whilst we believe strongly in shared equity, we feel that a decentralised approach with the community holding the equity is likely to get a stronger buy-in from voters. This will see a community groundswell build, revealing the goodwill that occurs in our communities, enticing local tradies, underutilised resources and neighbourhood philanthropists to come together. We look forward to subsidy retention being maintained in the public estate, enabling for-purpose housing to gain a further foothold in the market.
Ms O’Connell: I start by acknowledging elders here on Gadigal country, where I am living and working, and across the continent, and I acknowledge that we are once again here arguing about housing on land that is stolen, arguing about who gets to do what with it, and that we are not centring First Nations people or land back and there will be no justice for First Nations people without land back.
Once again, we have a bill that seeks to put in place some technocratic things that aren’t going to be particularly meaningful on a structural level, piled on top of other technocratic changes that have been made over the past year or so. It’s fetishising homeownership, and, at a time when we are facing such an enormous housing crisis, this is not the thing we need. We don’t have any objection to shared equity schemes; in fact, we think they can be particularly useful in protecting people in poverty and on the lowest incomes especially from losing their homes. But, currently, that is not what this scheme sets out to do.
We have a lot of proposals. I would particularly urge the committee to look back at the things we put in our HAFF inquiry submission, particularly the recommendations on pages 11 to 13. However, I want to briefly start by saying, to demonstrate how perverse the situation is right now, I am sitting here in a rental property that is not up to legal standard. I am paying enough in rent—as a disability support pension recipient, I am paying 78 per cent of my DSP. That would enable me, according to the Commonwealth Bank, to throw $360,000, if I was paying that, on a mortgage instead of paying it to a landlord who is taking advantage of me and presumably other people too. On the other hand, we have many welfare recipients who we work with, and 15 per cent of people on the JobSeeker payment are homeowners either with a mortgage or without one. People report to us that they lose their homes because they cannot afford to maintain those mortgages, even when they are small, on the rate of JobSeeker that they’re receiving, and that includes the cohort discussed in the previous session, particularly older women. So we have a situation where people don’t have enough to live and are being taken advantage of. A scheme like this could actually assist people on really low incomes to get out of the situation I am in, where we have no hope of getting into public housing, even though we should be in it, and it could also protect people from losing their homes.
In addition, there are other sorts of suggestions we would make to improve a shared-equity scheme. One would be to have a public lender of option so that we’re not benefiting banks and we’re actually giving people an ongoing benefit to interacting with the government through their pursuit of purchasing and owning a home. We’d like to see a dedicated allocation for First Nations people to try and redress some of that inequity that currently exists. We’d like to see the two per cent deposit requirement waived for people who are paying more in rent than their mortgage would be or people who have a capacity to pay a mortgage but do not have that capacity to save. And there shouldn’t be a requirement for people to purchase equity back from the government after a certain time period. That shouldn’t be a compulsion.
We have a lot more that we’d like to discuss; hopefully there’ll be an opportunity here. But it’s frustrating once again to be in front of a committee that’s dealing with a bill that completely ignores the scale of the problem when there is much more urgent, significant action needed. Of course, as always, we come back to the point that a massive investment in public housing and strong protections for renters will have the effect and, in fact, a larger benefit for people seeking to enter the property market and buy their own home than a scheme like this.
CHAIR: Senator Faruqi.
Senator FARUQI: Good afternoon, Ms O’Connell and Mr Fitzgerald. I will start with you, Ms O’Connell. I was reading in a Guardian article a couple of years ago that you were making some comments about negative gearing and capital gains tax rules. I think your quote was:
… politicians’ refusal to … rein in apparently untouchable negative gearing and capital gains rules that stack the entire housing market in landlords’ favour.
How important do you think it is to scrap these schemes that create such an inequity in the housing system but also have the potential to raise huge revenues to be able to invest in public housing? How important do you think they are in the scheme of addressing the structural issues with the housing system at the moment?
Ms O’Connell: First and foremost, I just want to say that the government can spend money without raising more money. We do think that they should raise revenue in lots of ways, but it’s absolutely no excuse for not doing what’s necessary and doing it right now. I note that this scheme will be funded through consolidated revenue, yet there has been an absolute refusal to do that for far more urgent and necessary investment in public housing.
In terms of specific comments around tax incentives for property investors, yes, it’s obscene. It’s quite sickening to be a welfare recipient and have the government consistently tell us that they can’t afford to give us enough money to live or to invest in public housing and also see hundreds of billions of dollars being handed out to people who are already wealthy.
In addition to those incentives, I also noted in past submissions that we are seeing around 80 per cent of the total payment for JobSeeker going to rent for the people who receive Commonwealth rent assistance, which is about 38 per cent of people on JobSeeker. So we have $5 billion or so in Commonwealth rent assistance, plus almost all of the JobSeeker payment, going through to landlords, in addition to these incentives. That’s why we prioritise not only getting rid of all of that money being handed out to landlords but also doing things that will mean that welfare payments are also not being sent through to landlords.
Senator FARUQI: Mr Fitzgerald, do you have a view that scrapping negative gearing and capital gains tax discounts would scrapping them would make the housing system fairer?
Mr Fitzgerald: It certainly would. The property-flipping nature of Australian real estate really has to be questioned, and I think either halving the capital gains tax discount or limiting it to properties that are sold outside of three years would be a step in the right direction. But certainly that is the big ticket agenda item we need to deal with. Help to Buy is a step towards a fairer housing model, but there are certainly some refinements that are required.
Senator FARUQI: If everyone took advantage of it, the Help to Buy scheme would, at best, help 0.2 per cent of the five million renters. Some have said this morning that it could actually hurt the other 99.8 per cent of renters. We have heard some describe it as trivial. Others have said it’s tinkering around the edges. Others have said it does not actually do anything to structurally reform the issues that we have which have led to the housing crisis. Would you agree with these statements? This is a question for both of you. Maybe we can start with you, Ms O’Connell.
Ms O’Connell: Yes. I just want to add something—sorry, I’m appearing 90 minutes earlier than I was told, so I’ve not had the time to prepare that I would have liked. One of the recommendations we would like to make is for there to be an option within this scheme or a way of incentivising or supporting people to buy directly from their landlord as a mechanism for helping people to actually avoid some of the issues that may come from moving around the system. We also have a broader recommendation around capping the number of investment properties a person can own at four, with a government buyback option for landlords seeking to divest to meet that requirement. They can sell either on the private market or to government. But overall we are putting more constraints on the issues that you’re referring to. I don’t know if we can directly say that it will definitely hurt renters, but I certainly don’t think it’s going to offer any help for the 99.8 per cent of renters who won’t be able to access it, because it is not doing anything to constrain our existing landlords or to restrict their capacity to acquire more properties and place further upward pressure on the rental market.
Senator FARUQI: How about you, Mr Fitzgerald? Do you have any comments on that?
Mr Fitzgerald: It’s certainly not going to help the wider market. In terms of showing that there is a role for government to have a greater influence in the housing market, we would love to see a system where—for example, government owns a lot of surplus land. They could easily be renting that land to community housing providers or local community groups under the community land trust model and receiving some income under a vendor finance arrangement that helps the community reduce the sort of pressure that we see within the affordability market. So, yes, it’s certainly a step in the right direction. With the developments in Victoria with the ground lease model, it feels like we’re getting closer to a situation where, instead of renting the land off our banks through these jumbo sized mortgages, we could be, in effect, renting it off government and from that saving a heap of interest. At the same time, it would be reducing some of the vacant land that we see throughout the community.
Senator FARUQI: Thank you, both.
Senator DAVID POCOCK: Mr Fitzgerald, I’m interested in what ways you believe the community land trust model of shared equity would have advantages over the Help to Buy model as it’s proposed by the government.
Mr Fitzgerald: Already the media scare stories are out there in Victoria saying that the government’s sitting down at your kitchen table owning 30 or 40 per cent of it. But, when it comes to working with your local community who owns the land in trust for future generations, it brings people together because we are working as a localised grassroots movement, finding those great tradies or finding people who may have acres of incredible wood for fences or wharf posts. I have a neighbour across the road with five acres of incredible wood that could be used in housing. Every community has those stories. They have their local philanthropist, and we need Housing Australia to join us in providing some guarantee of last resort for loans and aspects like that so that the financial sector can have greater confidence in the community coming together to provide affordable outcomes.
When we saw what was happening in America during the GFC, the foreclosure rate was 80 per cent lower in community land trusts, because financial planning is embedded within that community structure. In the UK over 30 years, the return on investment was not 0.1 per cent or 0.2 per cent like we see with housing affordability policies in Australia; it was 3.1 to one. So there are huge benefits—when you include the social outcomes, the income distribution outcomes and the health outcomes—when you have a vehicle that helps the community connect and grow together, retain public subsidy and then reinvest that over time so that we can become like Sweden, which after 50 or 60 years has a huge social housing sector because of government support over time.
Senator DAVID POCOCK: What would need to happen to this current legislation to make it work for CLTs?
Mr Fitzgerald: It would need an angle that encouraged and allowed not-for-profit community groups to access the low two to five per cent deposit requirements. That would certainly help. That would be a starting point. Hopefully, Housing Australia is going to come to the party sometime soon and assist from their side.
Senator DAVID POCOCK: In your submission you referred to the potential for shared equity under the CLT model to facilitate homeownership in Indigenous communities.
Mr Fitzgerald: That’s right.
Senator DAVID POCOCK: Can you explain that a little bit more—how would that be achieved?
Mr Fitzgerald: In some charters for Indigenous communities they can’t actually sell the land, but under a community land trust you lease the land under a trust structure. By doing that, we can help bring the community together, to help build appropriate housing in Indigenous communities.
Senator DAVID POCOCK: Thank you very much.
CHAIR: Thank you very much, Senator Pocock. Thank you both for coming and giving your evidence before the committee today. We very much appreciate your contributions, and you go with our thanks.
Mr Fitzgerald: Thank you.
