Sharri Markson: First up, cut the housing tax bite

THE uncomfortable truth for treasurers is that the simplest way to improve housing affordability is to lower excessive state and federal taxes and charges.

Treasurer Scott Morrison has put the heat on the NSW government to look at stamp duty. Picture: Kym Smith

THE great Australian dream of owning your own home is dying and the Turnbull government knows it.

With prices climbing by up to 16 per cent in some Sydney suburbs over the past year, it’s a hot topic that ministers know plays well politically — even if the solutions can be fraught with danger..

Ahead of the budget, the federal government is looking at rent-to-buy schemes similar to those in the UK. They’re thinking about whether to ­investigate foreigners’ water usage and then hit them with steep taxes if they leave their investment properties empty.

Glen Stevens.

Planning minister Anthony Roberts.

They’re even weighing up policy around allowing young-uns to access their retirement nest egg. Yes, letting first-home owners dip into their super for a deposit is a live ­option under consideration by the Turnbull Government.

There are panels of advisers and working groups with names reminiscent of the Rudd era, like the ‘Affordable Housing Implementation task force’ and complex option ­papers to answer the question of how to improve housing ­affordability.

The states, especially NSW and Victoria, have also hopped on board the issue.

Gladys Berejiklian has appointed former Reserve Bank Governor Glen Stevens to ­advise her.

Experts such as Stevens have warned that giving first-home buyers ready access to deposits will have the reverse impact intended.

Today, Morrison will put housing on the agenda at a Canberra meeting with state treasurers, who will have to give the federal treasurer an update on what steps they have taken to “improve housing outcomes for their residents”.

But the uncomfortable truth for these treasurers is that the simplest way to improve affordability is to lower the excessive state and federal taxes and charges when buying a house.

Centre for Independent Studies research shows Government taxes and charges directly add, on average, about 12 per cent to the cost of a new home.

John Tiedemann

CIS’ Economics Program research fellow Michael Potter says that when you factor in other hidden taxes and slow planning processes, the total cost imposed by government climbs far higher — to up to 44 per cent of a new home.

“This is mainly the GST, with a smaller impost from stamp duty and other taxes,” he said.

“It is estimated that the price of new homes is increased by about 17 per cent by slow planning processes, restrictive zoning rules, and excessive costs of infrastructure.

“There are a number of hidden taxes included in the costs of homes, such as payroll tax and import duty, which add another 14 per cent.

“This means the total impost, direct and indirect, from governments on housing could add as much as 44 per cent to the purchase price of homes.”

People in the government are well aware of this research.

But when presented with this answer — lower some of your own bloody taxes — the ministers all look the other way.

“Perhaps the Commonwealth can also look at foreign investment rules to protect first home buyers.”

“What we really need the Commonwealth to do is maintain their commitment to fiscal discipline so our economy grows, so wages grow, and people can afford houses,” NSW Planning Minister Anthony Roberts told me this week.

“Perhaps the Commonwealth can also look at foreign investment rules to protect first home buyers.”

And Morrison has put the heat on NSW to look at stamp duty.

In an interview late last year, the Prime Minister told me there was an argument for abolishing the transactional tax of stamp duty.

That’s going to be a tough sell when the NSW Government will this year bring in $7 billion in revenue from residential stamp duty.

Roberts is probably going to encourage ScoMo to allow first-home buyers to access part of their superannuation for a deposit.

And Morrison’s team are actively ­discussing it, despite strong objections from superannuation funds — and Paul Keating.

Glen Stevens, meanwhile, has already warned the NSW Government of unintended consequences from increasing liquidity to first home buyers, pointing out that when NSW introduced its $14,000 first-home buyer grant, it contributed to the ­explosion in housing prices in 2003-2004.

“Making housing more affordable will ultimately reduce the value of houses for existing homeowners.”

Experts such as Stevens have warned that giving first-home buyers ready access to deposits will have the reverse impact intended — it will lift prices even higher.

Another major idea being discussed is to slow down the immigration intake of 190,000 a year to ease the pressure on housing.

A number of government sources have in very strong terms said the immigration level needs to be reduced, particularly in Sydney.

Liberal MP Alex Hawke this week said migrants should be diverted from Sydney into regional areas — but others argue the level needs to come down ­nationally.

One pointed out that in the early years of the ­Howard Government immigration levels dropped substantially to under 100,000 new arrivals a year.

But it’s so controversial that no one wants to put their name to it publicly, lest they be lumped into the same basket as characters such as Pauline Hanson.

Given it would cause uproar in ethnic communities, it’s an idea unlikely to attract support from Malcolm Turnbull.

But here comes the major contradiction in the Turnbull government argument.

They want to make houses more affordable. And yet they’ve argued against bringing house prices lower when objecting to Labor’s negative gearing push.

As Potter points out, “There is one important issue, however: making housing more affordable will ultimately reduce the value of houses for existing homeowners. This makes the political challenge of housing affordability even more ­difficult.”