Dear Senator Nick Xenophon,
I’m writing to you in regards to your announcement on 28th of July 2014 to introduce legislation allowing first home buyers to access their superannuation funds for housing deposits. As you may be aware, nearly 500 voters have signed a petition asking you to reconsider your proposal and instead, advocate for one or more of the real evidence-based solutions to housing affordability.
I began this petition because like you, I’m deeply concerned about housing affordability, but having closely researched the housing market for the last four years, I understand that this would actually be a significant blow to affordability, and add to a very long list of policy failures in this area. Despite being an average income earner, and possessing not insignificant savings, I am personally excluded from home ownership without taking on unacceptable levels of risk.
When my wife and I sought pre-approval for a loan in early 2011, we were told that we could make up the additional deposit required to reach the 10% minimum by putting $10,000 on a credit card. This loan was for a very modest unit 15km from where I work with a value roughly 9 times my income. As a consequence, we withdrew from such unacceptable levels of risk, and began years of research and advocacy into the causes for grossly unaffordable housing in Australia. If anyone is convinced of what will and won’t work, its people like me that have been personally affected by decades of bad policy and excuses.
The petition signatories and many economists and experts believe that there is very overwhelming evidence that allowing home buyers to use retirement savings to fund housing deposits would lead to higher prices. As explained by Garth Turner in his letter to you, when this idea was used in Canada, the additional funds available to buyers were wholly captured by vendors. First home buyers’ lending capacity was increased by a significant multiple of the additional deposit funds, and prices unsurprisingly responded to the additional demand by rising to become the second most overvalued in the world. Indeed, Garth explained that this was the primary intention of the policy.
It is therefore with great hope that this week we heard you addressing the giant elephants in the room of negative gearing on residential property and wealthy superannuation concessions in your open letter to Tony Abbott. You could add in capital gains tax concessions and plenty of other policies favouring housing investment and ownership. You could also push for supply side reforms and replacement of punitive and inefficient stamp duties with a broad based land tax. You could address the land bankers that drive up prices via lobbying, as revealed by ICAC in NSW and your colleague Senator Bob Day in your own state. You could advocate for stricter oversight of foreign ownership rules and reintroducing the ban on the use of leverage for residential real-estate in SMSFs.
You clearly understand that the preferential tax treatment of housing is one of the key reasons that young Australians can’t afford to own a home, and that scrapping or phasing out these tax lurks presents a unique and mostly ignored political opportunity to improve the budget and address affordability. Win win. The big parties don’t have the courage to address these issues, either because they believe that roughly 1.2 million negative gearers would revolt, or because they are protecting their mates – as you suggested in your open letter. But there’s a massive political opportunity in the forgotten 4.5 million renting voters out here.
Further, it is very encouraging to see you disclose your interests in investment properties in discussing these options. I’m therefore happy to admit that I may initially have misjudged your motivations and openness to discuss the real issues around housing affordability. We believe that your independence as a senator presents a unique opportunity to create an evidence-based discussion to challenge the taboo status of these subjects, and better yet, to make an important move towards genuine budgetary and housing reform.
You would be a hero to a whole generation Senator. You would also have the backing of countless economists, affordable housing experts and journalists who understand and fight against the real causes of unaffordable housing on a daily basis. We implore you to push hard against those that want to see prices remain forever out of reach, simply to protect existing beneficiaries of these distortionary and inequitable tax transfers.
I would be very glad to discuss these issues in further detail, and to support your responsible and courageous moves in this direction. We will rally behind you if you take this on. It is only a small petition, but there are many more Australians that understand a raw deal when they see one, or when it is explained to them properly. Please put aside your previous plans for superannuation, and let us know how we can help to achieve the first actual reforms in the interests of young home buyers for decades. Let’s change the narrative and challenge the old parties to get on board with genuine housing reform.
P.S. For further detail about the causes and solutions to unaffordable housing, please refer to the original article supporting the petition, and in particular the detailed references to the researchers, economists and journalists who genuinely advocate for first home buyers and housing affordability:
And the petition itself: