Govt to blame for affordability crisis

Speaking at the UDIA National Congress, chairman of MacroPlan Dimasi Brian Haratsis said it was time for the government to take a radical approach to the issue and look at potentially purchasing land from the private sector.

“The high prices discourage first home buyers from entering the market and drive high rental costs. Urban fringe land and housing underpin prices and rentals for metropolitan areas,” Mr Haratsis said.

According to MacroPlan Dimasi research, the root cause of the problem is land prices. Over 90 per cent of the real increase in new housing prices is due to land price increases.

The problem has been caused by federal, state and local government through taxes on development (which now account for 50 per cent of subdivision costs), gold plated development standards and the under-provision of infrastructure.

The ‘Great Australian Dream’ has been attacked continually by anti-growth groups, green groups and  urban planners who believe in compact, high-rise cities which are claimed to be unaffordable.

“It is time to stop ‘tinkering around the edges’, sipping champagne at housing conferences and promoting the blame game through the introduction of a radical new approach to home purchase,” Mr Haratsis said.

“The key to the program is free land for 10 years for first home buyers. After 10 years, home owners would be given the choice of buying the land (at the original price, having by that point broken the back of their housing construction mortgage), selling the house and land package or renting the land,” he said.

“The key to the program is that it is a long-term not a short-term first home owner scheme where the money generally results in high housing prices.”

Such a scheme, Mr Haratsis argues, would have a dampening effect on land prices. The scheme envisages the federal government initiating a rolling fund of $3 billion over three years to purchase land from the private sector.

Mr Haratsis believes all stakeholders would benefit: for example, the federal government would enter into long-term contracts with the private sector for land supply. Annual demand over the period is likely to be around 10,000 to 15,000 lots and this would mean that major developers could be offered contracts for upwards of 1,000 lots each, annually.

“We can buy pork bellies for delivery on the futures markets but we can’t buy residential lots for delivery in 2020 at today’s prices,” he said.

“If mature households could purchase land for their children at today’s prices for delivery in 10 or 15 years then over time land price increase will slow down.”