The decrease in accessibility to affordable home ownership, especially for young adults, has wide ranging implications for our society.
§ The loss of a right of passage into adulthood for young adults with attendant ambivalence about their role in society
§ Lowering of fertility rates as couples delay child bearing
§ Loss of traditional means of accumulating family wealth
§ Low security for families
§ Higher housing costs over the life cycle
§ Loss of an asset which would provide low cost accommodation in retirement and/or finance nursing home care should the need arise.
The advantages of home ownership for most families are clear and widely accepted. Research published by the Australian Institute of Family Studies indicates that home ownership is still the preferred housing tenure for all sections of the Australian population. However the number of young people who have entered home ownership by the age of thirty has decreased by over 30% in the past forty years and it has become increasingly difficult to achieve for the single income household.
Public housing waiting lists grew by 48% between 1987 & 1997. Something needs to be done to arrest this trend.
This proposal is specifically aimed at assisting families who have mortgages with their payments during periods of unemployment or withdrawal of one spouse from the paid workforce through illness or to undertake caring responsibilities. It would remove the inequity between low income earners who rent privately and those who choose to buy their own home.
Currently low income earners who rent privately are entitled to Rent Assistance of up to $50 per week depending on how much rent they pay, their income, the number of dependent children they have and whether they are single people or a couple.
Our concern about Rent Assistance is that because it makes private rent more affordable for low income earners, thus lowering the burden on private housing, it increases the demand for private rental property. This means the returns for landlord investors are higher and more secure, creating an environment conducive to investment in rental property. This increases the demand for private housing stock and pushes up the prices of housing especially in the major capitals (Sydney and Melbourne). Would-be home buyers are then forced to compete with investors for the same properties.
While we are concerned about fall in home ownership and affordability our policy is designed to
§ Help existing homebuyers through hard times
§ Be fair to those who have chosen home ownership over renting as their preferred option
§ Protest against the indirect subsidies to investors which make investment property more affordable to the investor (through the income availability from rents) and reduces available housing stock for home buyers
Most people who can afford to pay private rent can afford to service a home loan. The acquisition of an adequate deposit is another story. Many people experience great difficulty in doing this. For most it would be the major hurdle in achieving home ownership.
There are be those who will never be able to own their own home. Home ownership is often not the best option for the poorest members of society and the affordable public rental option must be maintained. We are concerned with a different group of people i.e. ordinary Australian families with about average incomes, rather than the poorest in our society. We believe that encouraging home ownership will actually prevent some people from ending their lives in poverty.
People who are considering the purchase of a home need to understand how a home loan operates, especially regarding the two components of the loan i.e. interest payments and payments off the principal. Buyers also need to be aware of life cycle changes which alter their capacity to service and repay mortgages.
Home ownership is expected to fall dramatically over the next few years. This poses a problem for government in the future when a lot of older people may be dependent on a pension as their only form of income and therefore in need of housing assistance either in the form of public housing or rent assistance. There is a resistance in government to schemes using taxpayers' money to help others gain an asset. This is not sensible when Rent Assistance indirectly assists investors to accumulate investment property.
Government objects to further subsidising housing on the grounds that there are already generous tax advantages to home ownership These include no tax on imputed rent, no capital gains tax on the family home and exemption of the family home form assets tests. But another problem for Government is that those people who have no assets in their retirement have nothing to contribute to the cost of nursing home or hostel accommodation should they need it. Thus assisting people to achieve home ownership can still be viewed as an investment in the future.