Greens passing bills won’t solve housing crisis

Scott Kuru November 26, 2024 6 min read

Image by Mike Bowers/The Guardian

KEY POINTS

The Australian Greens have withdrawn their opposition to Labor’s “Help to Buy” and “Build to Rent” housing initiatives
The legislation had been stalled for a year, with the Coalition opposed and the Greens demanding concessions
While the bills are set to pass, there are concerns that “Help to Buy” could actually force up home prices at the affordable end of the market, doing little to solve the housing crisis

The Albanese government has scored a major win in the last sitting week of federal parliament for 2024, with the Greens Party caving in to pressure to pass two signature pieces of housing legislation.

The bills, which will be passed by the Senate, will give the green light to Labor’s “Help to Buy” scheme and also make it easier for the Build-to-Rent industry to become more established in Australia.

However, both housing initiatives are likely to deliver little in the way of truly affordable housing, with the “Help to Buy” scheme likely to keep upward price pressure on the cheaper homes favoured by first-home buyers and property investors.

Claims the Build-to-Rent sector will also deliver a significant amount of affordable housing are also highly questionable.

The details

Labor first unveiled its “Help to Buy” scheme and Build-to-Rent package last year, together with a suite of other policies designed to boost housing construction.

With the Coalition opposed to both pieces of legislation, Labor looked to the Senate cross-bench for the numbers to get the legislation that sets up both schemes through parliament.

However, emboldened by concessions they extracted in return for supporting previous housing legislation, the Greens held out, originally demanding the winding back of negative gearing provisions and the capital gains tax discount for property investors and the imposition of rent caps.

Just last week, they put forward a new ambit claim which called for the construction of 25,000 “shovel-ready” social homes.

With the Albanese government making clear it wouldn’t make any concessions and would bring the legislation into parliament this week for a vote, the Greens capitulated, announcing they’d “wave through” the two bills.

The Greens housing spokesman Max Chandler-Mather made clear the minor party wasn’t enthusiastic about delivering the government the numbers in parliament, claiming the two schemes were “tinkering at the edges” of the housing crisis and that “Labor doesn't care enough about renters to do anything meaningful for them.”

While clearly pleased two of Labor’s signature housing bills would be passed, Housing Minister Clare O’Neil was in no mood to thank the Greens.

“The impact of this delay has affected real Australians and given them fewer housing options, and the Greens need to be accountable for that,” she told the ABC.

Some political analysts say the Greens about-face is a de facto admission that they’ve overplayed their hand.

Pollster Tony Barry from the Redbridge political consultancy believes that after a disastrous showing in the recent Queensland state election, the Greens are trying to avoid being further punished by voters for delaying much-needed assistance.

“They’ve realised they’ve got a bit of a perception problem among their older voters, in particular those who are now perceiving them as being too obstructionist and too extreme,” he told the Financial Review.

“I think the change in policy is more about them being seen to be contributing to public policy rather than being obstructionist.”

So what exactly have the Greens agreed to green-light?

Help to Buy scheme

The “Help to Buy” enables eligible buyers to purchase a home with as little as a 2% deposit, in return for the government holding “shared equity” in the property.

The scheme would allow 40,000 low-and middle-income families to get into the property market with small deposits.

Eligible families would receive what’s called an "equity contribution" from the government of up to 40% of the cost of a new home, or 30% for existing homes.

One of the great ongoing advantages for people who take part in the scheme is that they don’t need to pay rent on the share of their house, which is owned by the government.

However, if they sell the property, they have to pay the government back its original stake, plus a share (corresponding to the government’s stake) of any capital gains.

As people build up equity in their homes and build their own wealth, they can also progressively “buy out” the government’s stake at an agreed market rate.

However, there are plenty of eligibility rules.

Firstly, you must have enough money for at least a 2% home deposit.

You must be an Australian citizen, and at the time of purchase, you can’t own any other property in Australia or overseas.

To qualify, you must earn less than $90,000 a year if you are single or $120,000 if you are a couple, and you must live in the home.

You cannot treat it as an investment property.

There are also limits on the price of a home you can apply to buy.

That’s calculated based on median home values in the state where you live, and the cap is smaller if you live outside a capital or large regional city.

Property-Price-Cap (1)

With only 10,000 places available nationally each year, “Help to Buy” will assist relatively few Australians into home ownership at a time of a chronic housing shortage and very high population growth.

However, as with all schemes designed to assist first-home buyers, there is a danger the scheme could put upward price pressure on some of Australia’s most affordable housing, putting it out of reach of buyers who may not qualify under the scheme’s rules.

As noted, independent economist Saul Eslake has said, “ever-increasing and more generously-defined grants to would-be first home buyers … do nothing to increase the homeownership rate, but inflate the price of existing houses and end up in the pocket of either vendors or in the profit margins of builders and land developers.”

Build-to-rent

While it’s a significant form of housing in Europe and North America, the Build-to-rent (BTR) sector in Australia is still in its infancy, comprising only 0.2% of the national housing market.

The Build to Rent bill will provide tax concessions to encourage more of this type of construction, with the Property Council of Australia claiming the move could unlock 105,000 rental homes in the next decade.

The Property Council also says 10% of these homes would be “affordable”.

However, critics point out that the rise of the BTR sector could lead to more foreign ownership of housing and the “corporatisation” of Australia’s rental market.

BTR apartments are owned by companies and run for a profit, unlike a traditional not-for-profit strata association or owners corporation, where individual unit owners get a say in the running of the building in which they live or they own a property.

Rents in BTR properties are usually more expensive.

For example, real estate advisor Charter Keck Cramer found in 2022 that advertised rents at a BTR development at Sydney Olympic Park were between 19% and 27% more expensive than similar private rental apartments in the same location.

More recently, community housing group Grounded reported that rents at the Smith Collective, Australia’s first large-scale BTR project at Southport on the Gold Coast, have grown 50% in just two years.

Proponents of BTR have made a lot of claims about how the sector will revolutionise housing in Australia, but with builders and developers complaining that many big apartment projects are not viable in the current economic environment, it will be interesting to see whether this expensive sector lives up to its hype and actually delivers some affordable housing.