Petition to Senator Nick Xenophon: Scrap your super funds for housing plan, it’s a con-job

Introduction

I’m one of many young Australians currently locked out of home ownership by record high prices. My friends know me as very vocal and frequently angry about housing affordability issues. Well the latest development in the saga that is the Ozzie housing market truly has my blood boiling. So for once I decided to get up from my armchair rage, and do something about it. And that development is Senator Nick Xenophon’s plan to lock out even more youngsters from buying their own home. So in the spirit of grass-roots Democratic action, I’ve created a petition, which I will deliver to Nick Xenophon and as many other Australian politicians as I can.

 

Sign the Petition

Petition to Senator Nick Xenophon

Scrap your dangerous and self-serving plans for first home buyers to use superannuation for housing deposits and instead push for the real solutions to housing affordability.

Nick Xenophon has recently announced plans to introduce a bill that would allow first home buyers access to their superannuation savings in order to help fund a home loan deposit. His plan is based on the Canadian Home Buyer’s Plan. But Senator Xenophon has clearly failed to do his homework, because the scheme actually worsened housing affordability, with Canada now one of only two countries in the world more overvalued than Australia. In fact, the politician responsible for this Canadian policy disaster recently decried the scheme, and openly admitted that it was actually designed to stop house prices from falling.

This dangerous scheme, which has been widely condemned by media, economists and housing experts, will simply be the latest government intervention to ensure that house prices remain forever out of reach from a whole generation, and to prevent market forces from returning house prices to rational levels. Additionally, this plan will massively endanger the retirement savings of young Australians, as proven by the 35% of Canadian participants that have not paid back their retirement funds in the allowed time-frame, and further highlighted by existing rules in Australian allowing self-managed super funds to invest in property – a practice in which some participants have lost up to 75% of their investment and have gone bankrupt.

Canadian Real House Price Index 1970 - 2014
Canadian Real House Price Index 1970 – 2014 – Home Buyer’s Plan was designed to stop price falls, and succeeded
IMF Housing Watch - House Price to Income Ratios 2013
IMF Housing Watch – House Price to Income Ratios 2013 – Australia and Canada 3rd and 2nd most overvalued.

Housing affordability is the single biggest issue facing the current generation of young Australians and has devastated their ability to establish families and secure their future. They are being held to ransom by a system that wants to maintain high prices at any cost. Like most Australian politicians, Nick Xenophon stands to benefit from the rise in prices that this policy will cause, having personal interests in 8 investment properties and associated mortgages. The motivation for this policy must therefore be openly questioned and viewed with scepticism. Politicians of all stripes have recently been shown to posses vested interests in property investments totalling about $300 million.

So is it any surprise that despite decades of attention and research on the issue, politicians have repeatedly passed policies to ensure that ever increasing values are enjoyed by existing landowners (including themselves), rather than ensuring reasonable access to all. We have been sold down the river on a boat of lifelong crippling and dangerous mortgages with promises of future price rises, price rises that even the RBA admits will be hard to come by in future, and will therefore need to be supported by devious policies such as this.

Nick Xenophon - Statement of Interests Excerpt
Nick Xenophon – Parliamentary Statement of Interests Excerpt – 8 investment properties

 

Parliamentary Property Holdings 2013
Parliamentary Property Holdings 2013 – Nick Xenophon in 8th place out of $300 million of real estate assets. Source: Australia: Boom to Bust by Lindsay David, Paul D. Egan and Philip Soos

Young Australians have endured decades of myths about the causes and solutions for high house prices, and have been lectured by countless politicians, economists, bankers, spruikers and landowners of the need to “just save more and expect less”. They believe that young Australians don’t understand basic economics and will continue to vote for policies that are against their own interests. But young people know that affordable housing is a crucial aspect of a healthy economy, and that there are many obvious solutions.

They could start with scrapping negative gearing on investment property, a policy that has added at least an estimated 9% ($44,000) to current median values, and coupled with capital gains tax concessions, has fuelled 2 decades of speculative demand for housing and cost taxpayers billions every year. We know that housing supply must be freed up, and the obstructive urban planning system reformed. We want proper oversight of foreign ownership laws and the banning of self-managed super funds from investing in housing. We want punitive and inefficient stamp duties to be replaced with a broad based land tax. The list goes on (see below). If Nick Xenophon were serious about housing affordability, he would advocate for any or all of these well researched solutions, but they would directly threaten his personal investments, so they’re not likely to be considered.

Bubble Economics: Estimates of Housing Tax Expenditures
Tax breaks for housing cost $42.4 billion in 2012. Source: Bubble Economics by Paul D. Egan and Philip Soos

How much longer will young Australians be punished for being born on the wrong side of the current 20 year housing boom? Don’t let policy makers convince you that there are no solutions, or worse, that throwing more money at young people won’t just get absorbed into prices and fuel excessive demand like all the other ‘free’ cash for housing. Instead, let’s view this is a rare opportunity for an independent senator to challenge the status quo and push for real change. It’s long overdue, it’s time now. Let’s make this petition viral and deliver it to every politician in Canberra, every newspaper in the country, and every hard-working blogger in the country that writes about these issues on a daily basis. We must send politicians like Nick Xenophon a very strong message that we are many, we are watching, we vote, and we will not be taken for fools.

It’s time that the Australian government and Australian politicians finally stood up for the mountains of evidence and research into the real causes and solutions for housing affordability in this country. It’s time that young Australians told politicians that we DO understand the real causes of sky-high house prices, and we will NOT be conned by yet another policy designed to keep prices rising forever. We must let them know that there are real solutions that get ignored time and time again, and that we suspect that the protection of personal and political interests are the only reason that they are ignored. We know that Australia’s future economic stability, prosperity and equality depends on solving the housing affordability crisis, and it’s time to listen to the evidence and for the first time in history, pass a policy that represents the interests of the 4.5 million voters that don’t own a home.

Thank you, a generation of excluded Australians will be grateful for your support.

 

Sign the Petition

Further information:

A long history of policy ‘failures’ designed to prop up house prices

  • Negative gearing of investment properties
  • Capital gains tax concessions and exemptions for residential real estate
  • Numerous first home buyer grants and concessions
  • Aged Pension means test exemptions for primary place of residence
  • Relaxation of rules for foreign investment in real estate
  • Allowing self-managed super funds to borrow money to invest in real estate
  • Strict urban containment policies coupled with ‘neighbourhood character’ low density standards
  • Intentionally obstructive planning approval processes
  • Upfront infrastructure charges on new housing
  • Failure to adequately tax land bankers and land speculators
  • Systemic enabling of political donations from property developers and land bankers
  • Long term relaxation of lending standards and prudent financial regulation

Nearly all of these policies or regulatory settings have been sold as innovative ways to improve affordability, but as a direct consequence, we now have the third most expensive housing in the world, close to the lowest proportion of first home buyer lending  in history (9%) and the highest proportion of investor lending (45%). Are we foolish enough to believe that these policies have helped first home buyers, or do we acknowledge that they were actually designed to maintain high prices? Are we going to stand by and let another policy con-job be added to this shameful list? Or are we going to finally force parliamentarians to face facts and provide some real solutions?

The real evidence-based solutions

  • Scrap all remaining first home buyer grants and stamp duty concessions. Artificially giving buyers access to larger deposits – and by extension larger loans – has long been proven to simply add to the price of housing by at least as much as the additional funds. The long running First Home Buyer’s Grant has been referred to as the “First Home Vendor’s Boost” because it was simply built into sale prices and then some, as buyer’s borrowing capacity was increased by orders of magnitude above the grant amount.
  • Phase out negative gearing on investment properties, which currently add at least an estimated 9% premium to prices, and has helped to create an entrenched culture of real estate speculation.
  • Phase out the capital gains tax exemptions and concessions on residential real estate, which make negative gearing an attractive investment strategy.
  • Restore rules disallowing self managed super funds from borrowing to invest in real estate, which has added to investor demand and destroyed savings in the process.
  • Restore stricter rules and oversight on foreign investment in real estate, which account for an estimated 20% of current property transactions.
  • Introduce a maximum asset value threshold for the home exemption from the pension assets test, which currently discourages down-sizing and efficient use of housing stock.
  • Root and branch reform of the urban planning system to free up the supply of new housing and enable increased development of appropriate, responsible and sustainable medium density housing in existing urban areas.
  • Replace volatile and distortionary stamp duties with a broad based land tax (as is already happening in the ACT), to improve the efficiency and fairness of the housing market, discourage speculation and land banking, and help to fund much needed infrastructure.
  • Implement macro-prudential controls to curb speculative investment and enforce higher lending standards.
  • Review of current capital reserve conditions and other financial regulations that govern the levels of risk in our banking system, which are currently extremely high according to some ratings agencies and independent bodies such as the IMF; mostly thanks to runaway mortgage lending in the order of 60% of our major banks’ assets.

This is not even an exhaustive list, but these well-researched and ideas have long been advocated by countless independent economists, analysts, commentators and housing experts, but are never mentioned openly by politicians in power, because they would actually address the problem of housing affordability, the very opposite of the intention of policies like that proposed by Nick Xenophon. Truly affordable housing would rejuvenate long-term economic activity and prosperity, and would also go a very long way towards addressing inequality. Perhaps more importantly, these policies would help to reduce the very real risks to economic and financial stability that overvalued housing presents, risks whose consequences could be devastating for all Australians, including landowners, if (when) we finally go down the path of other notable historic housing market corrections.

References

  1. IMF: Global Housing Watch
  2. Greater Fool: An open letter to Nick Xenophon
  3. Michael Janda, ABC: Using retirement savings for homes a super bad idea
  4. Callam Pickering, Business Spectator: A worrisome debt trap for first-home buyers
  5. Catherine Cashmore: Nick Xenophon “Home affordability: a Super idea” – Really?
  6. Sydney Morning Herald: Warnings sound on DIY-super property
  7. Callam Pickering, Business Spectator: The conflict of interest killing housing reform
  8. Australian Parliament House: Senator Register of Interests
  9. Lindsay David, Paul Egan & Phillip Soos: Aussie Politicians and their $300 Million Property Portfolio
  10. MacroBusiness: The RBA is expecting a property correction
  11. Leith van Onselen, MacroBusiness: Moodys – Negative gearing adds 9% to prices
  12. Catherine Cashmore: Housing hoarders – Where the rich pay less and the poor pay more
  13. Catherine Cashmore: The complexities of urban zoning by State governments, who openly advocate affordable housing initiatives, yet in truth are doing quite the reverse.
  14. Leith van Onselen, MacroBusiness: Treasury shows foreign property buying rocket
  15. Prosper Australia: Land Tax Primer
  16. Phillip Soos, Paul Egan and David Collyer, Prosper Australia: Australia’s Land Bubble – The Cause of Unaffordable Housing, 2014 submission to Senate inquiry into affordable housing
  17. Steve Keen, Business Spectator: Built on the backs of first home buyers
  18. Catherine Cashmore, MacroBusiness: Housing question the Senate must address
  19. Leith van Onselen, MacroBusiness: Saul Eslake – 50 years of housing policy failure
  20. Sydney Morning Herald: Generation Rent battles to get in the game

One thought on “Petition to Senator Nick Xenophon: Scrap your super funds for housing plan, it’s a con-job

  1. Well said, Matt Ellis! Did Senator Xenophon really think that one through, because if he did he’d KNOW that meant an even greater uplift in the prices of his investment properties.

    C’mon Senator Nick, why not vote AGAINST your hip pocket and FOR future generations of Australians? As Matt says, a reformed land tax provides scope to abolish stamp duty AND to keep the lid on ridiculously escalating land prices. It’s a REAL solution!

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