This week, the housing affordability crisis was solved when both the Labor and Liberal parties discovered that the key was to give people more money so they can bid a higher price for a home. Phew. Our long national nightmare is over.
Cripes. What a joke.
Here we are in 2025, and the major political parties continue to say that the way to make homes cheaper is to increase the amount that people will be able to pay to buy a home.
It’s not like we lack about 25 years’ worth of evidence that this approach has failed.
In 2000, as a way of bribing people to think that they would be better off after the introduction of the GST, John Howard increased the long-running first homeowners’ grant to $7,000. A year later, with an election to win, he doubled it to $14,000.
Since then, it has been the go-to policy by federal and state governments to solve the crisis of housing affordability. Pick your state, pick your grant. In New South Wales, for example, you can get $10,000 for newly built or substantially renovated homes.
And that is why no one in Sydney has any problem buying a first home.
Am I too cynical?
In 1999 Howard also introduced a 50% capital gains tax discount that made investing in housing a speculator’s delight, and he laughed about how no one ever complained to him about the value of their house going up.
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On Monday, Peter Dutton told reporters that he wanted “to see [house prices] steadily increase”. And when asked on Tuesday if he wanted to see wages rise faster than house prices (the key to improving housing affordability, and something even his shadow housing minister, Michael Sukkar, admits is needed) he dodged the question and instead talked about wanting house values to rise.
Nearly 70% of people born in 1947-51 owned a home when they were in their early 30s; now it is less than half.
If you are not cynical, you are not paying attention:
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Weirdly, first home buyers make up a pretty high percentage of new home loans:
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But they are getting older, and the number is falling.
Back in June 2007, 30,607 people took out a first-home loan. In December last year, just 29,788 people took out one:
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A smaller share of our population is taking out home loans than in the past:
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Not good.
The Liberal party has decided to give a tax break to those few people who are lucky enough to be a first home buyer for the first five years of their loan.
Will that help people who previously could not get a loan, get a loan? Nope.
Will that help people who could not afford the deposit, get a deposit? Nope.
Will that give a tax break to people rich enough to buy a home – and who are very likely getting help from their parents? Yep.
It says it all about the pathetic state of affairs that this idiocy is being put up as a housing policy.
At least be honest and just say you want to give high-income earners in their 30s and 40s a tax cut.
Add in allowing people to access $50,000 of their super and reducing the lending buffers for home loans and you have a raft of policies geared toward pushing up demand.
The Labor party, meanwhile, will allow first home buyers a 5% deposit. And sure, as I noted last month, the deposit hurdle is extremely tough to clear. But this is just a different version of the first home buyer grant. All it will do is help push up house prices.
One good thing for first home buyers is that the size of their home loans (and presumably the price of their houses) has not increased as fast as it has for non-first home buyers.
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But this suggests they are buying fewer houses than in the past and more (cheaper) apartments, and that they are also buying them further away from the CBD.
At least the ALP is planning to build more homes – 100,000 over eight years, reserved for first home buyers. It is good to see a government realise that building homes is a good investment. That used to be taken for granted; now it is rare:
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The aim to build 10,000 to 12,000 more homes a year has been met with scepticism by some – suggesting we don’t have enough people to do it. And yet in the past, building 10,000 public-sector dwellings was common. So, what happened?
Well, one thing is we shifted what builders and construction workers were doing.
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Back in the period where housing was much more affordable and more public-sector dwellings were built, about 46% of all construction work was building or renovating homes – now it is just 32%.
The big change is how much work is now done on private sector engineering construction – especially mining.
We do have a skills shortage in construction – there are roughly only 1.2 unemployed construction workers for every job vacancy in the industry. That’s essentially full employment.
It means when governments approve new coal and gas mines or their extensions, they are not “creating jobs”; they are just taking workers away from building homes and getting them to build mines – mines that produce greenhouse gas emissions.
We have housing policies that fuel demand and bipartisan policies of mining approval that reduce the supply of workers available to build homes and all the while neither the ALP nor LNP will touch capital gains tax.
Excuse my cynicism, but after 25 years of the same policies it is justified.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
