One of Australia’s leading economists has criticised the federal government’s plan to offer the private sector cheap capital in return for affordable housing.
The bond aggregation scheme, which will be designed by an Affordable Housing Implementation Taskforce, was announced by Treasurer Scott Morrison on Friday.
“It's not the whole solution, but it has certainly been parts of the solution in many parts of the world,” Mr Morrison said of the scheme.
"I’d be raising the unemployment benefit before I did this.”
“One of the things that has been concerning me now for some time is the growing number of people on low incomes who are facing rental stress.”
Sydney is one of the most expensive cities in the world for renters, with an average asking price of $480 a week for a one bedroom unit.
It's not much cheaper in the rest of the country, with similar rents ranging anywhere from from $250 to $390 each week.
"For those on very low incomes who might be facing many other life challenges, if they can't be in sustainable, reliable accommodation, then all of the other problems get harder," Mr Morrison said.
The proposed bond aggregator system would extend the funding source for community housing by up to 20 years, with the sector as it currently stands funded through high-interest, short-term loans from government grants.
The government bank would fund community housing and help the growing number of Australians experiencing, or at risk of, housing stress.
But Deloitte Access Economics economist, Chris Richardson, said while it’s important for rich countries to “take care of the least well off”, there are better ways for the Turnbull Government to do so.
“In terms of the average Australian and those concerns over housing affordability, this particular thing won’t really move that dial,” Mr Richardson said.
“Most things that government - state and federal - can do won’t really have a big impact on housing affordability... I’d be raising the unemployment benefit before I did this.
"Housing affordability is not driven by governments, it's driven by interest rates."
Mr Morrison has confirmed the government is working on a housing affordability package for the May budget but has not provided any more information.
Opposition Leader Bill Shorten said Labor would consider and work with the government on sensible solutions but the system as it stands benefits investors.
"You cannot have fair dinkum housing affordability until you deal with the elephant in the room and that is the unsustainable tax concessions of negative gearing and capital gains tax discounts,” Mr Shorten said.
Data released by the Australian Bureau of Statistics on Friday revealed finance to housing investors rose by more than 27 per cent in the last 12 months.
Shadow Treasurer Chris Bowen is urging the federal government to take a bipartisan approach to negative gearing, "the most generous tax concessions for property investment in the world".
"Any housing affordability package that excludes reforms to negative gearing and capital gains tax discount, will be a complete sham and fail to deal with these risks in the housing market and Australian economy.
"[It's] not just a matter of helping first home buyers get into the market, but it’s about reducing incentives which encourage investors to take on leverage and speculate leading to an inflating of house prices," Mr Bowen said.
