‘Huge mistake’: how Howard spurred Boomer investors
Labor says a controversial tax reform package will correct a “major mistake” that has left a generation of people out of home ownership.
Federal Reserve research has found that the proportion of Baby Boomer real estate investors has increased since the introduction of the capital gains deduction.
As changes to negative gearing and capital gains tax are introduced to parliament on Thursday, Housing Minister Clare O’Neil told the National Press Club that the Howard government had created a “perfect storm” in the Australian housing market.
Investors who introduced the 50 percent capital gains deduction in 1999 flocked to the market at a time when the decline in building efficiency was already weakening supply.
“The conclusion? You can find this in any economics textbook in the world,” Ms. O’Neil said.
“House prices have decoupled sharply from incomes. Rents have increased. Homelessness has increased in a country where we should never accept it as inevitable.”
He accused the coalition of trying to defend the broken status quo, saying a generation had been deprived of home ownership.
Research by Central Bank senior analyst Alexandra Michielsen showed that 12 per cent of house investors were over 60 in 2000, the year after the Howard-era reform.
In 2023, this rate increased to 28 percent.
During the same period, the share of investors under 30 decreased from nine percent to four percent.
Opposition housing spokesman Andrew Bragg described the tax changes as “mad politics” and said Treasury analysis had found they would reduce housing supply by 35,000 homes.
But economists at Westpac found the tax changes could eventually lead to a 15,000 to 30,000 annual increase in house building as a result of an allocation towards new builds that draws investor activity away from established housing.
The government argues that other policies to stimulate supply, including $2 billion for so-called last-mile infrastructure and a $40 million package to encourage modular construction, will lead to a net increase in homes being built.
Ms O’Neil said the funding would support trialling modular, prefabricated building components that could reduce costs while speeding up construction times.
“It means building smarter and faster, using standardized components such as bathroom partitions, wall panels and facades,” he said.
The funding announced Thursday will go toward a “kit of parts,” a system of home components that can be built off-site and assembled similar to an oversized IKEA flatpack.
In Sweden, around 80 per cent of detached houses are built using prefabricated parts, while in Australia the figure is only five per cent.
The system is a product of the brain. Building 4.0 CRC It is an industry-led research group funded in part by the federal government and is open source; This means businesses across the country can participate without being tied to one specific company.
Ms. O’Neil said the federal funding would help provinces and territories with pilot projects, design studies, technical advice, training and supply chain development.
National Shelter, a housing advocacy nonprofit, said the funding would help overcome one of the most stubborn obstacles to introducing modern construction methods at scale.
“There is no way to meet our future housing needs without embracing new and innovative housing,” said Jackson Hills, the agency’s CEO.
The government also wants more social housing to be made from prefabricated parts as this would create a pipeline for the so far nascent industry in Australia.
Building 4.0 CRC managing director Mathew Aitchison said his organization would work with governments and industry to help roll out the parts kit.
While Senator Bragg supported the government’s promotion of prefabricated and modular construction, he said the overstuffed National Building Code made it very difficult to build cheap homes.
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