This blog will discuss the Australian housing affordability disaster, which is aggravated by property spruikers, lobbyists, and corrupt governments with their misguided tax rorts like the negative gearing loophole.
The term 'affordable housing' describes homes where costs are considered affordable to people earning a median wage. The term can be applied to rental and owner-occupied housing, however this blog concentrates on affordability for owner-occupiers.
There have been several material trends over previous years, related to household income levels and household formation, that have worked together to excessively and unsustainably force up property prices to unfair levels.
1. Increased female workforce participation has led to far more dual-income families 2. Competitive bidding for property, driven by the amount banks are willing to lend based on joint income 3. Reduced family sizes, as a result of personal preferences and higher participation in the workforce
This factors are combined with unchecked commodification of shelter for the population. This is caused by misguided governments who omit to regulate house prices, while unfairly allowing over-leveraged bidders to force up housing costs so they, the government, can benefit from vast streams of land tax, stamp duty, and council rates revenue. Australia's dangerously unregulated property environment includes these elements:
Liberalization of debt at higher risk profiles for lenders The ascent of non-bank lenders and their reckless low-docs loans and non-conforming (sub-prime) loans Dominance of interest-only loans among investors and speculators Equalization of interest rates on credit for IPs and PPRs Inappropriately low mortgage rates Prevalence of spruikers' who promote 'get rich quick' rorts based on speculation and exploiting others especially renters Unfair tax breaks, in particular negative gearing Capitalization of interest and buying costs such as stamp duty Desperate buyers, hysterically outbidding each other to get 'on the ladder' Speculative irrational exuberance, faith that house prices can only go up and unending capital gains will bail out their ongoing losses Greedy real estate agents, baby boomers, and developers cashing in on this hysteria Low costs for property purchase compared to other nations A rental market that favors landlords and unfairly gives few rights to tenants
Sadly these factors all mean that every spare dollar of household income is spent on overpriced housing and capitalized into ever increasing house prices as young families battle for decent shelter while speculators unfairly hoard the available housing stock.
Australians buying a home for the first time are eligible for a first home owner grant. These grants were introduced on 1 July 2000 and are jointly funded by the Commonwealth government and the state and territory governments. First home buyers are currently eligible for a grant of A$7000 to alleviate the costs of entering the housing market.
The Commonwealth government in 2008 introduced first home saver accounts, whereby those saving for a new home are eligible for government contributions to their savings account, subject to conditions.
Australians who rent may receive some Centrelink benefits such as rent assistance, which is a subsidy paid directly to renters on top of the normal Centrelink benefit. The value of rent assistance depends on the rent payable by the recipient and on the number of dependents of the recipient.
Many believe low income households (lower 40% of households) shouldn't spend more than 30% of their income on housing costs.
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