The conflict of interest killing housing reform

The extensive property holdings of our politicians highlight how difficult it will be to enact reforms that make housing more affordable for ordinary Australians.

Can Australians expect sensible housing reform when politicians have so much skin in the game? Or will self-interest continue to make Australian housing increasingly unaffordable for younger Australians?

Last week Independent Senator Nick Xenophon announced a plan to let first home buyers access their superannuation savings to pay for a housing deposit. His stated intention was to improve housing affordability, but by boosting housing demand, his plan would mainly benefit existing home owners and investors (A worrisome debt trap for first home buyers, July 29). Real estate agents and property developers would also be big winners.

If passed, Xenophon’s plan would be a continuation of decades of housing policy that has boosted prices but failed to increase home ownership or improve housing affordability. It would follow in the footsteps of negative gearing, the capital gains tax concession and the first home owner grant: three policies that have contributed to some of the most unaffordable real estate in the world.

But the question is why? Are our politicians simply ignorant? Are they naïve to the effects that these policies have on house prices and affordability? Or is there something more despicable going on?

Recent work by housing researchers Paul Egan and Philip Soos and former strategy consultant Lindsay David (whose previous work I touched upon here), assesses the housing assets held by Australian politicians.

In 2013, the 226 members of parliament (150 in the House of Representatives and 76 in the Senate) owned 563 properties (an average of around 2.5 properties per member), which the researchers value at around $300 million.

The Coalition and Labor Party agree on little but they are a united ticket on property investment. Around 91 per cent of all Senators own real estate, while 95 per cent of members in the House of Representatives own property. Both numbers greatly exceed property ownership among the general public.

The members with the largest property holdings are Barry O’Sullivan (NP, 50 properties), David Gillespie (NP, 18 properties), Clive Palmer (PUP, 13 properties) Natasha Griggs (CLP, 12 properties) and Karen Andrews (LIB, 12 properties).

Graph for The conflict of interest killing housing reform

Home ownership is not a bad thing, nor is housing investment. But the extensive property holdings of our members of parliament highlight how difficult it will be to get meaningful housing reform through both houses.

With so much skin in the game, our parliamentarians have millions at stake. Do you trust our politicians to put the public interest ahead of their own financial interest? I certainly don’t.

That might seem unfair, but decades of housing policy points in that direction. It is hard to justify negative gearing or the first home buyer grant based on the available evidence and yet they provide the key foundations of Australia’s misguided housing policy.

Negative gearing is one of Australia’s greatest policy failures and yet no political party will touch it (Why negative gearing is Australia’s biggest policy failure, July 9). One reason is that there would be some voter backlash, particularly since many voters wouldn’t recognise the long-term benefits of cheaper housing and broader home ownership, but most politicians have their own incentives to maintain the status quo.

Housing affordability is one of our more pressing social issues but we lack a parliament with sufficient leadership or political courage to tackle the problem. By taking a short-term approach to policy, our politicians have failed to grasp the big picture.

The simple reality is this: the Australians who now find housing unaffordable will one day be the group of people who dictate property prices across the country. Consequently, housing unaffordability will eventually ease but that transition will be smoother if our politicians take a more proactive and evidence-based approach to affordability.

What we don’t need is more policies, such as the recent proposal by Senator Xenophon, that pretend to ease affordability but instead boost the value of our politicians’ property holdings.

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