Home affordability and the neglect of public housing

In the March 27 edition of the Herald the Liberal Party candidate for Fremantle Matt Taylor attacked me for criticising the Barnett government's proposed stop-and-search powers and because I support public housing. This is my reply which was sent to the Herald but not published (you can also see Taylor's letter by clicking the link below):

Liberal candiate Matt Taylor tried to take me to task (Herald letters, March 27) on the issues of crime and housing, but in my opinion he completely missed the mark. Contrary to his denial, it has been suggested that we need to cut the Homeswest stock in order to reduce crime and anti-social behaviour. Like it or not, this argument (even if you say it should be done gradually) unfairly casts a shadow over all Homeswest residents. Matt claims I should be "representing a community crying out for a reduction in Homeswest housing". That's wrong, I should be representing the rights of all residents, including Homeswest residents.

Later Matt concedes, "Nor has anyone I've ever listened to suggested the Homeswest stock in Hilton (or Willagee) is related to issues around anti-social behaviour." So if that's true, why beat the anti-public housing drum in the first place? Matt agrees that combating crime and anti-social behaviour should be treated as a seperate issue to Homeswest, but doesn't offer any strategies on how to do so other than to defend the Barnett government's stop-and-search powers proposal. Matt didn't even comment on the the refusal of his colleagues in the State Liberal government to intervene to stop the closure of the Hilton police station.

Matt also puts words in my mouth claiming I called for an increase in Homewest houses in Hilton. I said there needs to a general expansion of social and public housing across all of Perth as home ownership slips out of reach for more and more working families. In the 1950s the average house price was equivalent to about three years' average earnings. Today it's around seven years. Yet at the same time capital funding for public housing has been in absolute decline. Public housing used to be about providing low-income earners with a genuine alternative to private rental and home ownership. It's been turned into welfare housing instead.

Put simply, I think talk about reducing public housing in Hilton and Willagee is the wrong debate, it needs to be increased everywhere else. After being run down for three decades it needs to be built back up again. If Matt doesn't agree that's fine, but he should have explained what he thinks should be done to address the home affordibilty crisis.

Sam Wainwright
O'Connor

As the article below from The Age reports, it's not just the underfunding of public housing that's been pushing up house prices but the negative gearing tax-break handed out to landlords:

Negative gearing top tax break
TIM COLEBATCH
March 27, 2010

NEGATIVE gearing by rental investors has become Australia's biggest tax break, with landlords claiming $12.75 billion of net losses in 2007-08 to reduce their tax.

Tax Office figures show a record 1.2 million investors claimed they spent more money on their rental properties than they earned in 2007-08. One in every 10 taxpayers is now a negatively geared property investor.

On average, they claimed losses of $10,640 each - or $26,500 for those earning more than $250,000 a year. These reduce their taxable income, and hence tax paid.

By the time final figures are in, the cost to revenue is likely to be about $5 billion. That means, in effect, this tax break paid landlords 4 per cent of all income tax collected.

Since tax breaks on negative gearing were restored in 1987 by the Hawke-Keating government, investors' share of finance to buy existing homes has soared from 8 per cent to 40 per cent. The number of landlords has more than trebled from 538,000 to 1.73 million, with many owning two or more homes.

The huge growth in demand from investors has been one of the main factors driving up Australia's house prices. Since 1987, house prices have soared by 433 per cent while household incomes rose 195 per cent - putting home ownership out of reach for many younger or lower income people.

Unlike those buying their own home, investors can use their mortgage bills to reduce the tax they pay on other income. In 2007-08, they told the Tax Office they spent almost as much paying the interest on their investment loans as they earned in rent. Rental income was $24.1 billion, mortgage bills $20.2 billion.

Treasurer Wayne Swan yesterday rebuffed calls for the government to limit negative gearing so more people can buy their own homes. "If you go back and look at my comments over the years, I have not been a critic of negative gearing."

He said he could not comment on issues relating to the Henry report on tax reform, now before cabinet. Its main author, Treasury secretary Ken Henry, said last year the negative gearing tax break meant the tax system was subsidising landlords, and the report would "have something to say" about it.

Labor restored the tax breaks in 1987, saying their removal had hurt rental investment and driven up rents. But Bureau of Statistics figures showed no impact on rents, and investment in new dwellings for rental is far lower now than in 1987.

Rising deductions for mortgage bills in 2007-08 saw negative gearing overtake dividend imputation as the biggest tax break for individual taxpayers.

The most widespread tax break of the top five is using your car for work. In 2007-08 2.77 million taxpayers claimed total deductions of $6.48 billion for using their car on the job.

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