Opening Address to the 3rd Annual Housing Congress 2008
E & O E – PROOF ONLY
Thanks Karen, Chairperson, SGS Consulting.
Good morning conference speakers – in particular my colleagues the State Housing Ministers from NSW, WA and QLD, delegates and ladies and gentlemen.
Acknowledge traditional owners of the land, the Turrbal people.
I am very pleased to be here at the 3rd Annual Housing Congress.
I had the pleasure of speaking at last year’s fascinating 2nd Annual Housing Congress in Melbourne. I was of course the Federal Shadow Minister for Housing at that time.
It is with great delight to be returning to speak at this year’s Annual Housing Congress as Australia’s first Housing Minister in a decade.
It is also – to be honest – with some trepidation.
I say ‘some trepidation’– because anyone who knows anything about housing would understand that we have, as a nation, a formidable task ahead.
We are faced with a significant housing affordability challenge.
When it comes to housing affordability: economists, developers, researchers and the not for profit sector are all in agreement.
They paint a stark picture of the difficulties for people to find and keep a home.
They say the task is huge and the needs are great.
And they say that to turn this around will take time and cooperation.
There has never been a more critical time to work hard and work together to build a national housing agenda.
Australia’s housing market is one of the least affordable housing markets in the developed world.
Over the past decade the price of the average house has risen from 5 to 7.5 times the average annual wage.
The people who are experiencing the greatest levels of housing stress are our young Australians: more than a third of Gen Ys (35%) and Gen Xs (32%) are paying more than 30% of their disposable income on housing.
The number of older Australians over 60 still paying off a mortgage has doubled over the last decade.
Recently, I asked NATSEM to undertake modelling to give the government a clearer evidence base upon which to proceed with its housing agenda.
The results of this modelling showed that the picture was worse than we thought.
This NATSEM modelling showed that there are 1.1 million low to moderate income households paying more than 30% of their disposable income on housing. This is an increase of 220,000 since 2004.
It showed that there more than half a million low to moderate income families with children in housing stress – an increase of 300,000 since 2004.
It showed that there are 112,000 households headed by a person over 70 years old in housing stress. This figure has doubled since 2004.
Rental vacancies are below 2% in most capital cities and over the last decade, average weekly rents have risen by 82 per cent.
The evidence is clear – housing is fast becoming unaffordable for too many Australians – from Maitland in NSW to Mandurah in Western Australia.
Housing researchers tells me that we are starting to see the social implications of the housing affordability problem.
Home ownership has historically been an essential part of wealth creation and economic security for families.
People on low incomes have been able to expect that diligent saving would be rewarded with a home of their own – creating and important asset. The family home is one of the greater levellers in Australian society.
Today the housing market may actually contribute to inequality.
Once upon a time renting was a temporary tenure for families who were saving to buy their first home.
This may no longer the case.
Once upon a time – it was possible for Australians of limited means to buy a home.
Clearly for many disadvantaged Australians this is no longer the case: the median house price is now 27 times the annual income of the poorest renters.
Australians are no longer moving through various housing tenures – from rental to home purchase and from home purchase to outright home ownership.
Instead Australians are becoming entrenched in their housing tenures. Addressing this problem is important for the future of Australian society.
Australia’s housing affordability problems are fundamentally driven by a lack of housing supply.
This supply gap is the difference between the underlying demand for housing and the number of dwellings being completed.
Treasury data shows that the supply gap emerged in early 2004 and has grown steadily.
A lack of action to bridge this gap several years ago means that this year we have a shortfall of at least 30,000 dwellings. Some would say this is a conservative estimate.
Turning this around won’t be easy.
Turning this around will take time.
The Government is working to deliver a range of initiatives to help address the housing affordability crisis confronted by Australian working families.
The Government is focussed on initiatives that will reduce housing stress – from leveraging large scale investor interest in the private rental market to boosting the savings for people to buy their first home.
Yesterday, the Council of Australian Governments (COAG) agreed on five (5) implementation plans that will form the blueprint for a national response to housing affordability and homelessness.
These plans detail how we will implement our housing election commitments in partnership with the States and Territories. They herald both a new era of cooperative federalism and the beginnings of the first national housing agenda in over a decade.
Of the five plans agreed to yesterday by COAG there are three specific initiatives I would like to mention.
Housing Affordability Fund
Firstly the Government will establish a $500 million Housing Affordability Fund.
This fund will assist new home buyers across Australia by providing incentives to local councils to lower infrastructure and regulatory burdens currently priced into the cost of a new home.
We will be looking for projects that are able to demonstrate real savings to home buyers by reducing holding costs or other fees and charges.
Projects may focus on local issues or may take up broader reform agendas.
We are expecting the government and developers will be working together to get the best value of the funds available.
As part of the Housing Affordability Fund, the Government also recently announced an investment of up to $30 million for a national roll out of electronic development assessments (eDAs) and online tracking services.
Starting with high growth areas and then moving to all councils by the end of next year, the program will fund IT infrastructure, particularly software, so local governments can streamline their planning processes.
This will reduce the cost for new developments and individual building projects by reducing the holding costs which are ultimately passed on to homebuyers.
National Rental Affordability Scheme
Yesterday COAG also approved the implementation plan for the Government’s National Rental Affordability Scheme.
The Scheme will deliver 50,000 new affordable rental properties across Australia over the next five years. If successful, the scheme will be extended to 100,000 properties over the next ten years.
This initiative will use tax incentives and financial support to encourage institutional investors to provide rental housing to low and middle income families at 20 per cent below market rents.
The National Rental Affordability Scheme is an innovative program to create a new ‘asset class’ for institutional investors – residential property for the affordable rental market.
Under the Scheme, the Commonwealth will provide institutional investors with a tax incentive of $6,000 a year for ten years for new properties that are rented at 20 per cent below the prevailing market level.
I am pleased to announce that yesterday, through the COAG process States and Territories formally agreed to provide annual support of at least $2,000 per dwelling per year for 10 years. States and Territories will provide cash grants, cut price land or concessions on stamp duty to the value of $2,000.
Through COAG we have agreed to deliver the Scheme in two phases – each Phase lasting two years.
The first phase will be an establishment phase and run for the years 08/09 and 09/10. During this phase we plan to allocate incentives to stimulate the delivery of 11,000 new affordable rental dwellings under the Scheme by the end of June 2010.
The second phase of the Scheme will see the allocation of incentives to stimulate the delivery of a further 39,000 new affordable rental dwellings by the end of June 2012.
These incentives will be available to institutional investors, such as superannuation funds, to build new homes or units and rent them to low and moderate income households at 20 per cent below the market rate of equivalent properties in the area.
The National Rental Affordability Scheme will make a difference for families, older Australians, pensioners, apprentices and other low to moderate income earners struggling to pay the rent.
The Scheme will mean, for example, that rent on a new three bedroom unit would be $280 per week compared with $350 a week – a $70 saving each week.
We also expect that this Scheme will not only directly benefit those 50,000 households who will pay less than market rent, but also put downward pressure on rents more generally particularly in the broader regions where extra lower-rental properties are located.
Earlier this month the Prime Minister announced that if the previous target of 50,000 is reached by 2011-12, the program will be expanded.
If market demand from both renters and investors is strong the Government will double the number of incentives it provides allowing for the construction of a total of 100,000 affordable rental properties from 2012 onwards.
The Government will deliver a Technical Paper outlining the key design elements of the National Rental Affordability Scheme by the end of April.
It is the Government’s intention to be as flexible as is practicable in the design of this program.
Obviously we need to be clear about the outcomes we expect and the parameters of the Scheme.
But the intention of this Scheme – particularly during the Establishment Phase – is to provide a financial stimulus to allow for a market to emerge.
We will seek industry feedback on the detailed design elements of the scheme and expect to be calling for expressions of interest for the Establishment Phase of the Scheme in July 2008.
National Housing Supply Council
As part of our national leadership on housing affordability, the Australian government, together with the States and Territories, will soon appoint a National Housing Supply Council to facilitate better planning.
The Council will provide the information Australia desperately needs to plan for housing supply in the future. It will report annually on housing supply, including trends in land availability and construction rates.
The Council will use knowledge and expertise from governments, industry, social welfare services and universities to provide the information and policy advice Australia needs to tackle the housing affordability crisis. I expect to be announcing the membership of the National Housing Supply Council by the end of April.
First Home Saver Accounts
Our initiatives don’t stop there.
To support first home buyers save for their first home, the Government has already committed to establishing First Home Saver Accounts which will help potential first home buyers to save a bigger deposit through superannuation-style, low tax savings accounts.
We expect the first of these accounts will open soon into the new financial year.
The Treasurer and I launched a Discussion Paper outlining the features of the accounts and how they will operate. This Consultation process has now finished and we are drafting legislation to establish the accounts at the moment.
I am also announcing today that I have appointed Lend Lease Ventures Chief Executive Rod Fehring to be the new chair of the Australian Housing and Urban Research Institute (AHURI).
I am thrilled that Mr Fehring has accepted by invitation to lead the eminent research body during this critical time for the Australian housing industry.
Many of you will know of Rod’s work and have heard him speak at conferences such as this.
Rod has spent the past 25 years working in the Australian property sector, and has formerly been Chief Executive of Delfin Lend Lease and head of Lend Lease Communities in the Asia Pacific region.
Appointing Rod Fehring makes it clear that the Government want to utilise the expertise of the private sector to inform our ambitious housing agenda.
Forging closer partnerships between all levels of government and with the private sector is critical to delivering solutions to the housing affordability problem.
National Affordable Housing Agreement
Finally I wanted to talk a bit about the National Affordable Housing Agreement.
This Agreement is the key to delivering a coordinated set of solutions to the housing affordability problem.
This agreement will be the overarching framework for Australia’s affordable housing strategies.
It will bundle together the existing Government homelessness and housing subsidies and assistance.
It will replace the Commonwealth State Housing Agreement and will be the vehicle to deliver better housing outcomes for people, whether they are currently homeless or trying to find an affordable rental home or a home to buy.
It will represent the partnerships between this Government and all parts of the housing and homelessness sectors.
The National Affordable Housing Agreement will recognise there is no single housing solution, but a range of solutions.
It will recognise that we need a package of solutions to create a housing system that is flexible and responsive.
A housing system that meets the needs of aspiring home owners as well as the chronically homeless.
A housing system that is central to Australians raising healthy children, participating in the economy and participating in their communities.