“I ‘heart’ the Grattan Institute,” Peter Verwer told the room.
At a forum in Melbourne last night, the CEO of the Property Council of Australia said the Institute was thought-provoking and open to discussion. “But that’s where the good news ends.”
The forum was an opportunity to discuss the findings of this week’s Grattan Institute report, which found that many government policies did little to make housing more affordable for those who do not already own home.
The Institute invited along the body most likely to be critical of such a view. The match-up did not disappoint. Verwer and the report’s author, Grattan Institute Cities Program director Jane-Frances Kelly, clashed over many of the report’s key findings.
Verwer, who jokingly claimed he was at the forum representing “the dark side of the force”, took issue with the report’s claim that homeowners received a $36 billion subsidy from the government.
“That figure is a load of cobblers,” Verwer said. “The report moves from talking of theoretical taxes, then calls them subsidies, then outlays. There are no subsidies. But that line is fed to the media.”
Kelly, however, defended adding up the “generosity of the taxpayer”.
“The numbers are on government budget papers,” she said. “Sure they’re theoretical, but they are counted in the economic accounts.”
Both Verwer and Kelly agreed the tax system surrounding housing was badly designed, and both said the lack of housing supply was a crucial issue keeping home ownership out of the reach of many.
“The relationship between housing supply, economic growth and population grown has been moving out of sync,” Verwer said.
The warring duo also agreed that taxes like stamp duty made little sense, and discouraged people from selling up and moving homes to dwellings more in tune with their needs.
However, they clashed on the issue of negative gearing.
Kelly said that the policy, which allows investors to offset the loan repayments not covered by a rental income against their taxable income, acted to increase the demand for housing stock, pushing prices up, creating a “zero sum game” with taxpayers and those outside the housing market being the losers.
Verwer strongly disagreed, saying that negative gearing, while doing little to create new housing stock, did create new rental stock.
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“The earnings from rent are not desirable,” he said. Faced with yields of around 4%, he argued, small and medium-sized investors needed negative gearing to make the ownership of rental stock desirable.
The tax break was used by small investors, he said, claiming that just 10% of those using negative gearing to minimise their tax earn more than $180,000 a year. Because of that deduction, there were 1.8 million homes available relatively cheaply for rent that would otherwise not be available.
“It’s not a monumental benefit anyway,” he said. “On the Grattan Institute’s numbers, it works out to $25 a week in most cases.
“Frankly, it’s the deal of the century [for the government]. If you didn’t have negative gearing, you’d have to invent it.”
But Kelly questioned whether having a high proportion of the population renting was a good thing.
For the past few decades, she said, home ownership had hovered around 70%. It’s only 68.5% overall now, she said, but the figure had plummeted among those under 45 and those on low incomes.
Today, a quarter of Australians rent. The median age of renters is 37.
Despite this, she said, there persisted an attitude that renters were layabouts and vagrants.
“The thought of renting as only a transitional thing is out-dated. People are renting further into their lifetime, and there are more children in rental households.”
Despite this, she said renters here have few rights, with Australia having some of the shortest lease terms in the world and the shortest mandated notice periods.
“Kids benefit from stability,” Kelly said. “And we restrict how much renters can have a sense of creating a home. Things like hanging up pictures, or having pets, are often not allowed.
“That’s the effect of this capital gains culture. We treat tenants almost as an accident of people using that investment instrument. But renters want to be treated with respect. They’re not just an income stream for real people living elsewhere.”