Labor and the Greens dug their trenches on Monday in preparation for what looms as another lengthy battle in their housing war.
The immediate cause is the government's shared home ownership scheme, Help To Buy, which would see the government stump up to co-purchase houses with 40,000 low-income households.
The Coalition is flat out against the idea, which makes the Greens' support a requirement. Their opening bid is that they want negative gearing scrapped and rents capped. The government's opening bid is that it won't negotiate at all.
It is not uncommon for the two parties to begin poles apart and eventually reach a moderate compromise. But the last time they clashed on housing – over the government's social housing investment fund – it made for a bitter, protracted struggle.
A similar outcome looms. Housing brings an unusual degree of heat to the Labor-Greens contest, as was apparent on Monday when Greens housing spokesperson Max Chandler-Mather again lashed the prime minister for owning investment properties, and the PM called him "juvenile" and a "student politician".
What's at stake and where will the debate go?
Help to Buy
The government's proposal is a "shared equity" scheme, a policy taken to the last election. Eligible participants — 10,000 a year for four years — would co-own their homes with Housing Australia, a federal government housing body.
Housing Australia would contribute up to 40 per cent of the value of a new home, or 30 per cent of the value of an existing one.
Participation in the scheme would be limited by income ($90,000 for singles, $120,000 for couples) and by home value (capped by region to a maximum of $950,000 in Sydney).
The government would own the share it pays for, and recoup it upon sale, along with its share of any appreciation in the property value.
The upside for the buyer would be a smaller deposit (as little as 2 per cent of the property value) and avoiding expensive lenders' mortgage insurance.
Similar schemes already exist, or will soon exist, in most states and territories.
The government says the scheme will help low-income renters into home ownership instead of being priced out of the market.
Some economists are concerned the scheme would push up house prices across the board by adding to demand. The government acknowledges this demand effect but believes any effect would be minimal given the program is limited to 40,000 places.
But there are other complications.
For example, it is not yet clear what happens if the home owner funds a renovation. Would the government be entitled to its share of the extra value resulting from that renovation, despite not having chipped in?
It's also unclear what arrangements will be in place if the property value goes down, or in the event of mortgage foreclosure.
The government has flagged requiring home owners to repay the government if they get a significant pay rise and move above the income threshold for two years in a row. But the details of this repayment are also yet to be determined.
None of those details will be in the legislation — they will instead be kicked to the minister for housing to determine, which on the one hand gives greater flexibility but on the other creates uncertainty for the impending debate.
The Coalition's objection is to the principle, which it lampooned during the election campaign as "Anthony Albanese at the kitchen table with you buying your property".
The Greens have been lukewarm for a different reason. Last year, leader Adam Bandt said the party was concerned it would allow "a tiny proportion of applicants" to buy while pushing up prices elsewhere and framed the scheme as a boost to the profits of property developers.
Negative gearing and capital gains tax
But instead of focusing directly on the policy, the Greens have used their leverage to reheat demands from the social housing debate, including their call for a limit on rent increases, and have added to that the flavour of the month: negative gearing.
Negative gearing is shorthand for the feature of Australia's income tax system that allows property investors to deduct losses made on their investments from their taxable income, including their ordinary wage income.
That means if a property investor pays more in mortgage interest than they make from their tenants, for example, they can reduce the tax paid not just on the property, but overall.
A "negatively geared" property is one set up to make a loss in this way. Of course, a negatively geared property is losing its owner money.
But in an environment where house prices almost always go up, the owner can make that money back upon the sale of their property thanks to another feature of the tax system: the 50 per cent discount on capital gains tax applied to property (and other assets, such as shares) upon sale.
The two measures "cost" the budget tens of billions of dollars a year, and politicians of all stripes have contemplated change.
In the 2019 election, Labor promised to restrict negative gearing to newly constructed houses only, a policy which would not have affected any pre-existing negatively geared properties.
That policy has since been abandoned, but a shadow debate has erupted in recent weeks after the government avoided explicitly ruling out change in the future.
Such a change is almost certain not to be adopted before the next election, at least not in the form proposed in 2019. But the Greens are hopeful the government may be willing to contemplate some halfway point, such as a limit on the number of properties that can be negatively geared, or a change to the capital gains tax discount only.
For its part, the government has been emphatic that it has no plans to negotiate. "The idea that there will be a discussion with the sort of juvenile approach of [the Greens] – that will not occur because this is a parliament, not a student council," the prime minister said in Question Time on Monday.
He also accused the Greens of standing in the way of more housing supply by objecting to new developments in their own electorates, citing a recent such objection by Brisbane MP Stephen Bates.
But the Greens see housing as a winning issue with young voters and believe they can push Labor to do more.
Whether negative gearing changes would do much for housing prices is an open question – a Grattan Institute analysis from a few years ago found a price effect of a modest 2 per cent.
But public anger about the housing crisis is growing, especially among the young, and suggests this latest housing battle will not be the last.
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2024-02-12 23:59:26Z
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