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Government's Help to Buy Scheme will increase house prices as experts call for changes to NG & CGT

The Greens have slammed the government for failing to model how much their critically panned ‘housing lottery’ will raise the price of homes, saying Labor was ‘irresponsible’ for failing to even ask about the negative impacts of their scheme.

In a dissenting report to the Senate Economics Legislation Committee inquiry report into Labor’s Help to Buy legislation, the Greens say Labor must listen to the majority of Australians' calls for the government to directly build homes.

The evidence heard by the committee was clear. This scheme would only benefit a tiny fraction of potential first homeowners, while increasing house prices for everyone not lucky enough to win Labor’s housing lottery, through increasing demand.

It was revealed at the inquiry hearing that the Department of Treasury has not undertaken any modelling as to the effects this scheme would likely have on house prices.

The dissenting report’s primary recommendation was that the bill not pass unless Labor shifted on negative gearing and the capital gains tax discount, rent caps and more investment in public housing.

Lines attributable to Max Chandler-Mather MP, Australian Greens spokesperson for housing and homelessness:

“It is frankly a sick joke that Labor’s one policy offering on the housing crisis this year will push up house prices and help almost no one," Mr Chandler-Mather MP said.

“Whether small or large, any increase to house prices hurts renters trying to buy a home, and almost every expert agreed, Labor’s Help to Buy scheme will push up house prices.

“Despite this overwhelming expert testimony, Labor hasn’t even asked Treasury to model the impact the scheme will have on house prices and that is deeply irresponsible.

“As multiple experts said, the reality is we will never tackle the housing crisis until we phase out negative gearing and the capital gains tax discount, the massive tax handouts for property investors, denying millions of renters the chance to buy a home.”

“With the money saved from phasing out the big tax handouts for property investors, we could fully fund the Greens plan to establish a public property developer to build 610,000 good quality homes to be sold and rented at below market prices.

“The majority of the public now support capping rents, scrapping tax handouts for property investors and establishing a public developer to build, sell and rent homes at below market prices, so the question is why does Labor keep siding with property investors instead?

“Every day Labor refuses to take real action on the rental and housing crisis is another day someone is evicted because they can’t afford their rent, or forced to choose between feeding their kid or paying the rent increase, and Labor should know this will have electoral consequences.”


Quotes from the witnesses at the hearing

Dr John Quiggin, Professor of Economics at the University of Queensland:
“...these schemes have been around forever, but the money is eventually capitalised into house prices, so the beneficiaries gain at the expense of everyone else.”

Mr Matt Grudnoff, Senior Economist at the Australia Institute said:
“The Help to Buy scheme, like many previous housing affordability schemes from both major parties, is a policy to boost the financial position of a particular group, usually first home buyers. The problem with these kinds of policies is that they simply increase demand for housing, and this increases the price of housing. The result is that it makes housing less affordable. With regard to the Help to Buy scheme, at 10,000 properties per year this is so small it's unlikely to have a significant impact on overall house prices. It might have some impact on the price of the kind of properties that first home buyers might want to purchase.”

“...the most effective policy for housing affordability that the Federal Government could pursue is to limit negative gearing and scrap the capital gains tax discount. This would discourage property speculators and reduce the demand for housing.”

Dr Peter Tulip, Centre of Independent Studies:
“When you stimulate demand, it puts up prices and makes housing more expensive for everybody else.”... “We have a housing affordability crisis, and this makes that problem worse for the majority of people entering the market.”

Ms Maiy Azize, spokesperson for Everybody’s Home:
“Scrapping negative gearing and capital gains tax discounts are not just 'nice to haves' or levers that we could pull, it is absolutely critical if we want to make housing affordable in Australia…”


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