Jane-Frances Kelly

21 October 2013 — A new report has found Australia’s tax and welfare policies are heavily skewed towards current homeowners, and they are making it increasingly difficult for aspiring homeowners to buy.

The Grattan Institute’s latest report, Renovating Housing Policy, found that the government was providing $36 billion a year in benefits to homeowners through policies including exemption from land and capital gains taxes.

Investors were also favoured with close to $7 billion a year benefits thanks to negative gearing and the capital gains discount.

The 2.1 million private renters in Australia received next to no government assistance, despite making up almost one in four households.

Over half had been renting for more than five years and a third for more than 10, which made the idea that renting was a transitional state inaccurate, the report stated.

“By driving up prices and shaping a culture focused on capital gains, these measures hurt renters, while locking potential homeowners out of the benefits of ownership,” the report stated.

The was also limited ability for renters to “make a home”, including support for increasing housing energy efficiency, with “few rewards for tenants who improve their housing or devote time and money to keeping it in good condition”.

The policies were increasing the divide between haves and have-nots, said Jane-Frances Kelly, Grattan Institute Cities program director and report author.

“The divide is income-based and it is generational,” she said.

“While home ownership is stable or declining slightly in Australia, there are sharp falls in ownership rates among households with low incomes or aged under 45.”

The policies, Ms Kelly said, were pushing up property prices and relegating many home buyers to fringe suburbs, where access to transport and jobs was lower.

“It’s a rising form of inequality that damages economic productivity and the fair go,” she said.

The report said we needed a national conversation about winding back some of these policies that were having little effect on rates of home ownership and pricing people out of the market.

“First we need a public conversation about who wins and loses from current policy, and how the playing field can be made more fair,” Ms Kelly said.

“If governments want to increase home ownership and at the same time give the many renters a better deal, they should reject policies that reward those who already own homes while making life harder for those who don’t.”

The report provided three recommendations:

  • Elimination of stamp duty and introduction of a broad-based annual property tax
  • Reform of tax incentives for property investment, including rethinking negative gearing
  • Reform of the private rental sector, including looking at increasing tenants’ freedom to make modifications