The right levers
The biggest risk to maintaining the Hunter’s current growth trajectory is the dramatic decline in housing affordability.
Of course, the key issues driving housing prices higher are record low interest rates and housing supply not keeping pace with our growing population.
And despite the supply side problems being endemic, Governments at all levels continue to fumble with the various levers that could see more houses built sooner to help ease the affordability crisis.
So, what are those levers?
The first is delivering certainty. We know from the experience of Newcastle’s city centre that once Government confirms strategic priorities through legislated policy settings and supports them with infrastructure funding, the private sector becomes motivated.
This was certainly the case after the Government ended decades of uncertainty over urban design and set out their vision for a more liveable and globally competitive city.
Once the enabling planning frameworks were in place to provide the means for implementation, an unprecedented wave of investment in new inner city housing was unleashed.
In less than three years, 1,702 new dwellings have been built or are approved with a total construction value of $924 million.
But leave the certainty of the urban renewal precinct mandated by the state and it is a very different story. Less than 10km away, in the Charlestown Catchment Area, only 167 dwellings per year were provided in the period 2009-2015.
This is well below the 560 per annum needed to meet forecast demand over the next 10 years and provide the funding needed for sports fields, parks, road upgrades, playgrounds, cycleways and trails.
Put simply, investors have been reluctant to undertake greenfield residential development because they need more certainty over the wider region’s strategic direction, more coherent infrastructure provision and a smarter approach to developer contributions.
The current regional strategy, first released in 2006, cannot be relied upon for investment decisions. Now overdue for review by 4 years, the strategy lacked industry credibility and failed dismally to deliver on housing targets.
That’s why the NSW Government needs to fast-track release of a new Hunter Growth & Infrastructure Plan. Without it, the Lower Hunter will have a deficit of 30,000 homes within a decade.
Other obvious levers available to Government are within the tax system.
The abolition of stamp duty – too long ignored in the national housing affordability debate – is now well and truly on the agenda.
And for good reason.
New research showing increases of almost 800% in the last decade, prove that stamp duty bills have well and truly spiralled out of control.
Treasury and two major tax reviews have concluded that conveyancing stamp duty is Australia’s most economically harmful tax.
In fact Treasury's own analysis shows that for every dollar of stamp duty revenue collected, Australia’s economic welfare is reduced by 73 cents.
It’s a cost Australia can’t afford.
And neither could Australia afford to abolish negative gearing. A well established tax lever, it is helping to support construction of a record 200,000 new dwellings. Yet The Greens want it gone to fund just 3,125 new social housing units a year.
Analysis of Australian Taxation Office data underscores the fact that negative gearing is used by middle Australia to help build their household wealth. It shows more than 157,000 people claiming negative gearing concessions earn under $80,000 per annum.
What the economy needs is for Governments to pull the right levers decisively before the great Australian dream is beyond the reach of most.
Media contact: Andrew Fletcher | M 0407 410 017 | E firstname.lastname@example.org