It’s no secret that there’s a housing crisis in Australia, with a lack of supply in both the transaction market and the rental sector. Here, LJ Hooker Head of Research Mathew Tiller reveals his wish list for housing from tonight’s Federal Budget, including the tax incentives and innovative program he says could go some way to rectifying the nation’s desperate need for more homes.
The need for space since the onset of the pandemic has led more people to look to rent or buy their own home.
These demand pressures are expected to be exacerbated by record levels of international migration and population growth over coming years. This has put pressure on an already undersupplied housing market.
Therefore, the government will need to focus on supply. The real estate market in Australia needs more:
- rental supply (investor incentives to build and buy)
- more new homes (incentives to build)
- more existing homes (incentives to downsize/list property for sale).
More social and affordable homes
The government should prioritise providing safe, secure, and affordable homes for disadvantaged individuals, low-income families, and essential workers.
The government can do this by becoming a developer themselves or by partnering, and/or increasing the funding of, with private developers, community housing providers and not-for-profit organisations.
The government can offer subsidies, grants, and tax incentives to incentivise private investment in social and affordable housing projects.
Increase rental supply
To increase rental supply, the government can take various measures.
One such measure could be building and providing rental properties themselves.
This can be done through public-private partnerships, where the government partners with private developers to construct new homes for rent.
Additionally, the government can encourage institutional investors and developers to invest in and build rental stock through initiatives like ‘build-to-rent’ schemes.
The recently announced changes to the MIT (managed investment trust) withholding tax and depreciation rate will assist but more is needed to support and encourage large scale investment.
Another option is to encourage more ‘mum and dad’ investors to purchase newly built properties to increase the supply of rental stock.
Increase existing home supply
To increase the supply of existing homes, the government can encourage homeowners to downsize. This would help free up under-utilised homes and help people relocate and ‘right-size’ their homes.
The government announced two such measures in their mini-budget in October last year that can be expanded on, these include:
- More time to downsize. The budget can extend from 12 month to 24 months the exemption of home sale proceeds from pension asset testing. Giving pensioners more time to move into their next home before their pension is affected. The government is also expanding access to downsizer superannuation contributions for people aged 55 to 59.
- Downsizer contributions. The government can allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute, and contributions do not count towards non-concessional contribution caps.
Secondary home incentive
The government could provide grants and incentives for homeowners to construct secondary dwellings, such as granny flats or backyard homes, on their properties.
This would increase the supply of housing in established low-density suburbs and regional areas, while also providing additional income for homeowners who could rent out the secondary dwelling.
Make housing more sustainable
The government could provide financial incentives for homeowners to make eco-friendly upgrades to their homes, such as through rebates or tax credits.
This would help reduce the cost of owning and renting a home, while also promoting sustainability and reducing Australia’s carbon footprint.
Additionally, the government could invest in energy-efficient housing projects and work with the construction industry to promote the use of sustainable building materials and practices.
