Industry pushes government to address affordability

Judith Yates, an economist specialising in housing issues and an honorary associate professor in economics at the University of Sydney, told the federal Inquiry into Home Ownership that it should consider reforms to the first home owner grant system, investor lending practices and pension rules.

Ms Yates used her submission to suggest restructuring first home buyer subsidies so that property is promoted as a form of shelter rather than an economic asset.

This could be done by mandating that any assistance is eventually repaid, for example from the capital gains made once the property is sold.

Governments could also take an equity share in the first property bought by new entrants to the housing market, to be repaid when the dwelling was sold.

“Such changes could begin to change attitudes amongst home buyers about their inalienable right to the unearned gains that come from rising dwelling prices and would provide a risk-sharing solution for any losses when prices fell,” she said.

Ms Yates’ submission also raised the possibility of lending reform to make it easier for first home buyers to enter the market.

One possible rule change might be for lenders to provide more flexible repayment schedules to younger households that would correspond to their increasing capacity to repay over time.

Ms Yates’ submission also examined ways to reduce speculative housing investment and thereby take heat out of the market.

One possible reform would be to reduce the amount of money that could be loaned to investors.

The submission comes after Mortgage Choice CEO John Flavell criticised the government for failing to consult with consumers in order to fully grasp the severity of the housing affordability issue.

“The government is just sort of gesturing to public opinion rather than delivering positive incomes. Where is the voice of the consumer?” Mr Flavell told Mortgage Business’ sister publication, The Adviser.

“At Mortgage Choice, we really believe in listening to the voice of the consumer, and so we’re launching our own campaign…so that people can have their say. We’re trying to get meaningful feedback.

“What we want to do is get a critical mass of opinions and feedback, and keep it going as long as it takes. The more voices and the more real stories we can get, the more useful this is.”

Comments from the ‘Have Your Say’ campaign will be collated and provided to the government as evidence of the real-life impacts of housing stress and the need to act on addressing affordability constraints.