Homebuyers grant: Why money should go to social housing instead

It’s supposed to boost the economy and prop up the ailing construction industry – but critics say it could end up backfiring, and badly.

The Government’s new homebuyers grant hasn’t been formally announced yet – but that hasn’t stopped critics from pointing out glaring holes in the scheme.

So far, details are scant, but we do know eligible Aussies will be able to pocket around $25,000 for new homes and certain home renovations.

It’s part of a big plan to help Australia’s COVID-19 economic recovery, and specifically to boost the construction industry and protect tradies’ jobs.

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But it has also raised concerns the scheme could end up backfiring, and that the money could be more effectively spent in other areas.

PROPERTY PRICES

Speaking to news.com.au earlier this week, AMP Capital chief economist Shane Oliver said the policy could “detract demand from established housing” which “could actually be a bit of a negative on property prices”.

In other words, buyers could end up turning their backs on established homes in a rush to take up the scheme, which could impact home values.

“It switches demand from established homes to new homes and over time it will lead to an increase in supply of new property, which will put upwards pressure on vacancy rates which have already gone up as a result of the coronavirus shock,” he said.

Some say the grants could push up house prices.

SOCIAL HOUSING

In an article published in The Conversation this week, the Grattan Institute’s Brendan Coates argued the nation would get more economic bang for its buck if the money was poured into social housing instead of residential.

He said the current plan would end up “giving grants to people who would have bought a home anyway”, which would result in “a lot of spending for little economic gain”.

He estimated the scheme could cost “$2.2 billion without adding a single construction job” and claimed the grants would ultimately benefit developers and not buyers, as they would do little to make housing cheaper for the everyday Aussie.

“(Grants) are typically passed through into higher house prices, which benefits sellers more than buyers. In this case, that is likely to include developers eager to clear their existing stock of both newly and nearly built homes,” he said.

Referring to the Social Housing Initiative of more than a decade ago, which led to the construction of 19,500 social housing units and the refurbishment of an extra 80,000 over two years, at a cost of $A5.2 billion, Mr Coates said the cash would be better spent on social housing.

“Under the initiative the federal government funded the states to build social housing units directly or contract community housing providers to act as housing developers,” Mr Coates wrote.

“Public residential construction approvals spiked within months of the announcement.

“Building 30,000 new social housing units today would cost between $A10 billion an $A15 billion. Because state governments and community housing providers won’t have to worry about finance, marketing and sales, they’ll be able to get to work building homes much quicker than the private sector. The boost to the economy would be pretty immediate.”

SCOMO SPEAKS

So far, the Government has remained tight-lipped about the scheme, which is yet to be formally announced.

But on Monday, Prime Minister Scott Morrison did provide a few details on the reasoning behind it.

“House building, residential construction, is going to be one of those gaps we need to address,” Mr Morrison said.

“We’ll have more to say about this once the details are finalised, but it is about creating jobs and supporting jobs in our residential construction sector.

“The tradies and all the others, the apprentices and others who work in that home building sector, are a sector we know are going to feel a lot of pain unless we can keep a continuity in the business with house construction.”