When John Alexander was re-elected at a December byelection – saving the Liberal and National parties’ majority – Malcolm Turnbull said he was Bennelong’s champion and Australia’s champion.
But when Alexander gets on a roll talking about housing affordability, the MP sounds less like a Liberal hero and more like a class warrior.
“You’ve got this insane situation in the United States where the top 2% of people own more than [the bottom] 90% in terms of wealth,” Alexander told Guardian Australia. (It’s even worse than that – the top 1% has the bottom 90% more than covered).
“To an Australian that is grotesque, and if we’re not careful we’ll have their society’s wealth inequality. And I don’t think anybody – except somebody who aspires to be king – wants that. It’s not my cup of tea.”
Australia’s $6tn housing market must be recalibrated towards home ownership, Alexander says, so that it pits wage earners who aspire to be owner-occupiers against other wage earners, not investors.
At the National Press Club on Tuesday, housing expert Julian Disney blamed Australia’s “exceptionally high housing costs” on tax policy: negative gearing, the capital gains tax (CGT) exemption for owner-occupied housing and the halving of CGT for property in 1999.
This last change triggered “a frenzy of negatively geared property investment,” he said. The outcome was “perverse but entirely predictable” – tax structures touted to increase home ownership, in fact, decreased it as investors piled in.
Labor went to the 2016 election promising to halve the capital gains tax discount and to restrict negative gearing to new properties, proposals rejected by the Turnbull government, which said they would apply a chainsaw to the market when a scalpel was required.
Treasury documents revealed in January contradicted the scare campaign, rating the price impact of Labor’s policies “relatively modest”.
But Alexander toes the Liberal line, insisting that Labor’s policies “would crash the market”. His preferred solution is to give the Reserve Bank of Australia a new economic lever to adjust the tax deductibility of housing. They could decide, for example, that investors can deduct only 70% of the cost of their borrowings.
That would curb the “excesses” of negative gearing that even the treasurer, Scott Morrison, once railed against without crashing the market.
Bold solutions were also on the menu at the National Press Club – where Disney and the Everybody’s Home campaign director, Kate Colvin, sounded the alarm on the crisis of housing affordability.
Colvin said 1.5 million Australians – one in five households – spent more than 30% of their income on housing costs, and three-quarters of those were in the rental market where “housing stress is the deepest”.
Australian Bureau of Statistics data shows homelessness has increased 14% between the 2011 and 2016 censuses, and 116,427 people now are thought to have no permanent home.
Disney said the tax system was “upside down and back to front – it helps the richest the most and helps those who have already got in the market … rather than those trying to get in”.
Victims include hundreds of thousands in unaffordable housing, with unmanageable debt, working excessive hours and “hidden victims” living long distances from urban centres away from jobs, services, family and friends.
The Everybody’s Home campaign is an initiative of the housing and community services sectors to end homelessness.
The campaign endorses changes to negative gearing and capital gains tax. Colvin praised Labor’s policy but said it “does not go far enough” because it should reinvest the revenue raised into increasing public and affordable housing stock.
“If there is a magic bullet to transforming housing affordability, it is to address the market failure at the low-cost end of the rental market by investing in low-cost housing,” she said.
The housing plan calls for capital investment in 300,000 new social and Aboriginal housing properties and a new tax incentive or direct subsidy to leverage super fund and other private-sector investment in 200,000 low-cost rental properties.
Colvin said superannuation funds did not invest in affordable housing because it did not generate big enough returns. A subsidy could make up the difference between the 2% return it generated and the 5% to 6% super demanded, she said.
She suggested the plan would cost up to $4.8bn a year for 20 years – a “substantial sum” but “far less” than the $11bn that the negative gearing and capital gains tax cost the budget. In the meantime, the government should increase rent assistance.
Instead of these bolder ideas, the 2017 budget contained a package of incremental measures, including increasing the capital gains tax discount for affordable housing and allowing first-home buyers to use the tax benefits of superannuation to save a deposit.
In March 2017, the Australian Prudential Regulation Authority put limits on interest-only loans favoured by negatively geared investors.
The proportion of new interest-only loans as a share of total new residential lending fell in the December quarter to 15.2%, well below APRA’s 30% limit. Loans to first-home buyers have increased to their highest level in five years.
The assistant minister to the treasurer, Michael Sukkar, said: “It’s clear that after several years of very strong growth in prices, we have seen a cooling in the national housing market in the last six months, particularly in Sydney and Melbourne.”
But he said the government could not “rest on its laurels”, and measures to address housing affordability would be “a permanent feature of Turnbull government budgets”.
On Thursday, the Senate passed the government’s $4.6bn National Housing and Homelessness Agreement bill, which replaced earlier agreements and contained $375.3m of new funding for homelessness, matched by state and territory governments.
In addition to its tax policies, Labor has announced that it will establish a bond aggregator to increase investment in affordable housing and use the Council of Australian Governments (Coag) to get the states to introduce uniform taxes on empty properties.
In a speech to superannuation trustees on 16 March, Labor’s housing and homelessness spokesman, Doug Cameron, signalled that the part would make more announcements before the next election.
“Australian superannuation funds should be investing at scale in new affordable and social rental housing – here in Australia, not just in the United States,” he said.
Alexander has his own scheme to attract private investment in affordable housing. He wants to create an Australian Housing Trust for investors to buy units that will finance affordable housing.
“Investors would get a safe haven for their money, capital appreciation and a 1% dividend,” he said, referring to the modest rent charged to long-term occupiers.
Renters could reduce their rent by taking part-ownership in the properties they occupied and eventually become full owners, making the scheme an equity mortgage rather than debt mortgage for the owner-occupier.
Alexander concedes his ideas have “not got much traction” in the government because some think they’re not in line with Liberal values.
But the value of fairness seems to require something to be done – the equity of income distribution and the Australian way of life depends on solving housing affordability, ending homelessness, the liveability of cities, the structure of work and social life, and saving for a self-sufficient retirement.