The big parties’ solution to the housing crisis will shock you.
The brain farts are coming thick and fast now.
It’s an election year after all. And the housing crisis is the top voter concern, alongside the cost-of-living crisis.
But if housing is too expensive, how do you fix that?
D’uh. You make houses more expensive. Obviously.
And so the bidding war begins. Labour says $95,000. The Coalition says 9%.
In the labour corner we have the move to allow banks to ignore HECS debts in mortgage serviceability calculations, in certain situations.
In exactly what situations wasn’t exactly clear (and no media reporting that I saw bothered to make it exactly clear.) The idea seems to be student debt will be excluded from mortgage serviceability tests where a bank anticipates the borrower to pay off the amount in “the near term”.
(Pretty vague.)
But there are millions of Aussies out there with student debts, so it could be substantial.
According to Compare the Market, a tertiary-educated single professional earning $125,000 would be able to borrow an additional $95,900 under the announced policy.
Someone earning $100,000 would have an extra borrowing capacity of $56,000, whereas someone earning $75,000 would be able to borrow an additional $26,800.
I don’t really see the logic here. Unless the government is saying that it’s going to let people pause their HECS repayments if they get into trouble with their mortgage, I don’t see why they should be excluded from serviceability calculations. It’s still debt you have to pay.
Otherwise, what’s the point of the serviceability calculations.
But, logic is probably only a secondary concern, and what we’re saying here is that people in their prime buying age, now have an extra $90,000 in their pocket.
And since everyone in a HECS debt is in the same boat, this will add competition to entry-level homes, and push up prices.
… probably by about $95,000.
Not to be outdone though, the Coalition is pushing ahead with their plan to let young people raid their super to help them buy a house.
The current plan is to let them access $50,000 of their super for a house.
For a couple, that gets us quite close to Labor’s $95,000.
And since this too applies to everyone, the net effect is a more competitive market, and higher prices:
Modelling by the Australian Super Members Council (SMC) suggests that Australian home values could rise by an average of $75,000 (9%) in the five major capital cities if the super-for-housing policy went ahead.
“There is broad consensus among the overwhelming majority of leading economists, and policymakers, that demand-side measures such as allowing super to be used to purchase a home are poorly targeted and won’t arrest the systemic decline in home ownership for younger Australians”, the SMC report says.
According to SMC’s analysis, New Zealand, which implemented a similar policy 15 years ago via its KiwiSaver scheme, experienced a sharp increase in prices and falling home ownership.
“This data shows starkly that KiwiSaver withdrawals have failed to achieve any improvement in home ownership rates for New Zealanders and, instead, have contributed to making housing more unaffordable”, SMC said.
SMC is talking their own book here. They’d prefer to keep the super in the super accounts where they’re earning fees on it, but still, the logic is sound.
But as I said, logic is only a secondary concern.
The primary concern is making sure house prices find new and innovative ways to go up.
That’s how you fix a housing crisis.
Got to love an election year.
DB