OPINION: The property industry is fighting for more supply to bring down the price of housing. But if this actually worked it would be a threat to the industry’s very existence. What we need is more housing supply that’s affordable and more social housing. And we need a new tax regime.
We never did catch up with Susan Lloyd-Hurwitz while she headed Mirvac and was president of the Property Council of Australia. Now that she’s stepped down, we can see it was a missed opportunity for the scoop of the decade.
Or maybe not. Because it’s clear the comments she’s made this week, as a new adviser to the feds on housing, would never have passed muster with the protectors of the property brands she fronted.
Regardless, it was impressive to read her views – strictly personal and not as chair of the National Housing Supply and Affordability Council –that negative gearing and capital gains tax exemption on the family home should probably be wound back a bit.
It was a step into the place where property angels and now Labor governments fear to tread. The reactions to her thoughts were illuminating.
Here was a was a much admired and respected doyen of the property industry. But from the Property Council came quiet controlled cancelling. From the Real Estate Institute of Australia (mute as a mouse usually) came ballistic missiles: fire her!
Back in rum rebellion land (New South Wales), where rum was code for property development, another coup was underway.
The Urban Taskforce led by generalissimo Tom Forrest ordered the summary execution/sacking/termination/byebye-y of the Greater Cities Commission.
This, through his favoured media mouthpiece The Sydney Morning Herald – in a big bold article alongside pix showing who was wielding the axe and who was receiving it.
This group of inconvenient planning people was putting up too many roadblocks to unleashing the magic pudding of housing supply that would solve our housing crisis, he claimed.
Not so long ago, the same urban force majeure lobbied hard for the termination of another democratically appointed threat to its idea of how the world should run – a state environmental planning policy that a small army of planning professionals and voluntary supporters had developed with much care and hard work, led by planning minister at the time Rob Stokes, who was moved from his portfolio not long before the SEPP was in fact ditched.
So, in short shrift, we have three cases of the property industry attempting to and, in at least in one case so far, succeeding, to get its way, over a democratically installed agency or the personal view of someone in such an agency.
The Fifth Estate called Forrest for comment to see if The Sydney Morning Herald maybe got the slant wrong and he was “misquoted” because we heard that’s what he later claimed.
We also heard that he and GCC boss Geoff Roberts had a nice, polite little chat over an hour and a half to discuss the issue. (Although it’s hard to fathom that niceties can last for so long. In our experience, these are quickly dispatched lest they end up obsequious and messy. But invectives? They can go on for a long, long time.)
The upshot from the swipe at the GCC is unnerving.
Forrest responded to our query with a text: “Following a meeting today between Geoff Roberts [GCC chief executive] and myself, we are working constructively together on a how best to deliver on housing supply which is supported by infrastructure.
“I do not wish to make further comment.”
He didn’t have to.
What’s going on you might ask?
Is the real estate industry watching videos of January 6 in Washington DC on speed replay?
Is what Lloyd- Hurwitz said so terribly offensive, wrong, and destructive (and if so for whom?)
Is the GCC single-handedly responsible for the housing crisis, runaway prices in our supermarkets, population growth, and interest rates, all at the same time and right around the country?
You’d think so, from the fear and brimstone dutifully reported by the formerly venerable SMH.
Was former planning minister Rob Stokes so radical and wrong to suggest some protection from the heat for the folk of Western Sydney might be in order (while the developers themselves enjoy the shade of their leafy burbs or the breezes of Sydney’s coastline)?
Nope.
The SEPP was trying to provide a skerrick of protection with our most precious resource – our Country, our land, our homes.
OK it might be at the cost of a lower yield for the developer. Or a smaller yacht at retirement for the landowner.
Right around the country under cover of the “housing crisis,” urban sprawl has been unleashed.
What’s unfortunate is that the general populace – spurred by the media moguls – are pushing a generic notion of housing supply as the magic pudding to bring prices down.
But here’s a thought: if we get so much new supply that the price of housing actually comes down do we expect property developers to enthusiastically build more housing?
Probably not.
Not if it’s more $2 million apartments or cheaper houses in the west that require you to spend your children’s inheritance to drive to work every day and to heat and cool .
Maybe what we need is more social and more genuinely affordable housing.
Back to Lloyd-Hurwitz
As Susan Lloyd-Hurwitz told The AFR this week, in a bit of a bombshell, she “favours curbs on negative gearing and capital gains tax deductions”.
“My personal opinion is that negative gearing and capital gains tax concessions do contribute to Australians investing in real estate for capital gain rather than for income.”
These are policies that fuel speculative investment in real estate, or capital gains, rather than for stabilised income purposes, she added.
The smart rich people already know this. Rental income is almost incidental. It’s the capital gains that will give you a nice lifestyle.
She went on to say it was a “little awkward” to voice these ideas in her last jobs.
Of course, it didn’t take long for the Property Council to swipe back and say that it was housing supply that would make housing affordable not different tax policies.
“We have differing views on ideal tax settings and, equally, agree on matching housing delivery to community need as the single best way of solving our national housing crisis,” said Property Council chief executive Michael Zorbas in a polite, non-declamatory kind of way.
The Real Estate Institute of Australia was not so polite. It called for Lloyd-Hurwitz to be sacked from her new role as chair of the federal government’s new National Housing Supply and Affordability Council.
Zorbas said talk of negative gearing would weaken the new supply pipeline and he would rather see higher GST to achieve better economic and social outcomes (but probably not if the higher GST went to affordable/social housing?).
Why winding back tax breaks is more equitable
Whatever the demographic reason for the housing crisis, (the flood of new arrivals by the way, is only now putting us back to pre COVID-19 numbers, and since Covid the word is that people are taking more space for themselves, mostly to work from home) we also have a clear tax policy that shovels more and more property ownership into smaller and smaller pockets of wealth.
The extraordinary capital gains tax exemption on the family home means money is poured into bigger and bigger houses and we get convoys of tradies driving to Sydney’s eastern suburbs for instance, not to build more housing but to enlarge and engorge already giant mansions, as Philip Bull so eloquently put it in an article for us not so long ago.
This means labour and materials are siphoned off for those who can pay ever higher prices leaving those on ordinary incomes struggling to pay for the renovation that looked modest when they started it two years ago.
Same for home buyers competing with investors who get a tax deduction for their nice new asset.
And that’s before the rising interest rates that will be best carried by those who, again, are already well-heeled. In the brutal commercial world, they call such industry shifts consolidation. In other words, opportunities for the whales to swallow the small fry.
It’s no surprise there are growing noises of a return to feudalism alongside rising political agitation from the disenfranchised who can see the wealth gap widen by the day. All government and tax enabled.
But just try to get a property industry person to agree that this is a fair assessment of the property market: it just won’t happen.
For the property industry to allow property prices to actually fall, by intent, is analogous to suicide. No one will willingly do that. We need to understand and respect this.
It’s why we need a brave government, supported and egged on by We the People, to bring change through reform to the tax regime.
There’s another way.
Build more social and genuinely affordable housing.
Generally, it’s government housing suppliers that can best do that, and they used to do it very well indeed.
But the property industry fought tooth and nail to get government out of property development: “not government’s job; inefficient poorly resourced, and unfair competition with the private sector (huh?).”
The property industry said: we are the experts, leave it to us.
We did. And here we are.