You can almost wrap a bow around some years and consign them to the storage unit, but 2018 has not been one of them. Many of the hottest issues that were in the spotlight remain unresolved or have been investigated to near death. We can only hope for real and meaningful action in 2019.
Non-conforming products. The long-running Senate Inquiry has finally delivered its final report, and the general feeling from industry is “tell us something we didn’t know already”.
The NCP inquiry along with the Shergold and Weir report, the new policy of the Australian Institute of Building Surveyors and submissions to both the NSW and Queensland draft supply chain responsibility legislation consultation processes have all pointed to one thing – we need regulatory oversight coupled with enforcement.
There’s no getting around the reality that until there are meaningful processes that enforce compliance, the best building code in the world is not going to deliver the high-performing buildings we so desperately need for a low-carbon future.
One of the sticking points with regulation and enforcement is ever the cost-burden – that gnarly question of who should pay for adding extra inspections.
Who should pay for checks and balances?
Senior economist at The Australia Institute, Matt Grudnoff, has some ideas on this front.
He told The Fifth Estate we should be looking at the people who are making large profits from new properties. An obvious sector is the developers.
The traditional process of getting zoning and planning laws changed, then buying a parcel of land, then having it rezoned and building on it generates enormous profits, he says.
However, if developers had to pay the cost of additional compliance inspections, this cost would inevitably be promptly passed on to the buyers, he says.
The insurance industry also makes a considerable sum from property. Surely it is in their interests for properties to be compliant.
Grudnoff notes the whole financial services sector is highly profitable because it is not highly competitive. But again, it has a tendency to pass any costs onto consumers, even though “they could definitely afford it”.
He uses the example of the proposal five years ago to eliminate bank transaction fees. The banks responded by saying they would pass the costs straight onto consumers.
“I found that a fascinating thing for them to say,” Grudnoff says. It illustrates the power that comes with lack of competition, he says.
Grudnoff says a tool he favours for capturing some of the bank’s profit gains for redeployment is what he terms a “super profits tax” which could then be used to fund initiatives such as an improved and national building compliance regime.
Grudnoff says another possible source of the funds could be the state governments, as they collect a range of taxes from housing including stamp duty and land taxes.
The introduction of a land tax, as the ACT has done, could be a smart move for all states, he says.
This is a “highly unpopular” form of tax in many quarters but, he points out it is easy to value land and unlike income, the value of land cannot be hidden.
“You can’t pretend it isn’t worth anything.”
He suggests that an agreement could be brokered through COAG to implement land taxes and use the resulting windfall to fund compliance inspections and enforcement.
The panic about negative gearing
Vast swathes of the digital media have been consumed with debate about negative gearing, in particular Labor’s proposal to potentially scrap it and also to scrap the capital gains tax discount.
The mantra of “affordable housing” has been chanted and raised the spectre of investment property owners running screaming from the market leaving potential tenants roofless and desperate.
Grudnoff says that the Labor proposals are similar to a report he authored in 2015 that suggested negative gearing should only apply to new-build properties and the capital gains discount should be axed.
He points out that the current negative gearing regime means the tax department effectively pays part of the property owners loss, however, property owners will only be keen to make a loss if they hope to make the capital gain windfall at the end of their ownership.
He recalls the explosion in people claiming losses on rental properties following Costello halving the capital gains tax in 1999.
The thing to keep in mind, he says, that when it comes to housing, a dwelling can either be occupied by an owner, or by a tenant. So, if the loss of the capital gains tax discount or negative gearing means investors sell up, then people who would otherwise be renting might be more likely to become owner-occupiers of those properties.
There might also be fewer properties left vacant by investors until the right time to sell for the capital gain.
“If sitting on it is not a gain, then you will either sell or get income from renting it,” Grudnoff says.
The end result could possibly be more affordable properties on the market for first home buyers.
Grudnoff says the current downward trend of prices in Sydney and Melbourne is also no cause for alarm.
“Housing is becoming more affordable. Sydney property prices over the past 10 years have almost doubled. They are falling now because they went up by a stupid amount. Of course, it’s going to fall.
“The fact we’re all surprised is what surprises me.”
Labor promises replacement for NRAS
With the National Rental Affordability Scheme to start winding up next year and no replacement in sight from the current government, Labor have made its pitch for the moral high ground with a $6.6 billion affordable housing pledge at their National Conference this month.
The package of measures includes the delivery of 250,000 new affordable rental properties over 10 years.
The community housing sector have reacted with relief and optimism.
National Everybody’s Home campaign spokeswoman, Kate Colvin, says ahead of next year’s Federal election voters expect all parties to address the cost of housing – the biggest single cost of living for low and middle income households.
“Analysis by the University of NSW shows that across the country 811,000 Australian households are in rental stress, in every state and territory and in every electorate.
“The narrow focus on real estate prices and home buyers means they’ve been totally ignored in the housing debate until now. “
Ms Colvin said Australia has dropped the ball on social housing investment over the past two decades.
“Recent research by AHURI clearly shows that upfront investment in social and affordable housing is the most effective way to improve rental affordability and ensure there is enough affordable rental housing for low paid workers as our population grows.
“This election we need all parties to support a national housing strategy that includes a plan to deliver social and affordable rental homes Australians need,
“We asked Labor to step up to the plate this and they’ve totally knocked it out of the park.”
Waiting for action on existing property energy efficiency
The results of a survey by Energy Consumers Australia released this week show that only 26 per cent of households think their home is energy efficient.
A further 36 per cent say they don’t know if they have a problem, and close to half of all households believe their home is not efficient and are struggling with heating, cooling and bill costs.
The Energy Consumer Sentiment Survey also found that 48 per cent of consumers support a mandatory labelling scheme for home energy efficiency, and 60 per cent say energy efficiency ratings would be a factor when buying a home. Only 15 per cent of consumers did not support mandatory home energy rating disclosure.
A majority – 60 per cent – support increasing minimum energy efficiency standards for rental properties, with only 10 per cent not supporting the idea.
One initiative that may go some way towards getting some momentum around upgrading the efficiency of rental properties is SA independent senator Tim Storer’s proposal for reforms of the negative gearing rules that would enable landlords to claim up to $2000 a year in costs for initiatives that improve the property’s performance.
The Treasury Laws Reform Bill is currently being considered by a standing committee inquiry and is due to deliver its final report next year.
Submissions to the inquiry have on the whole been supportive, including submissions from the Property Council of Australia and the Housing Industry Association, which both recognised the massive carbon saving we stand to gain if existing properties perform better.
One part of the bill that has drawn some concern is the proposal the reforms should only apply to properties renting for $300 per week or less. Submissions observed this would rule out the majority of capital city properties, and would also preclude landlords of large shared house properties that are often extremely energy-inefficient from benefiting.
Watch this space in 2019 – members of Storer’s team told The Fifth Estate they are optimistic about the possibility of the Bill becoming law.
Have your say on Fair Dinkum Power
Eyes rolled and social media went into satire meltdown when the Prime Minister used the phrase “fair dinkum power” to describe its coal-friendly agenda for our national energy supply.
The Greens responded by launching a Senate Inquiry into Fair Dinkum Power, with representation from all the major parties.
Among other things, the Inquiry is looking at renewable energy, demand management measures and new technologies for managing the energy supply including peer-to-peer trading. Submissions are now being called for and will be received until 15 February 2019. Find all the details about the terms of reference and how to lodge a submission here.