Labor’s ‘Rent to Buy’ Plan Will Increase Housing Prices

The Help to Buy Bill 2023, introduced by the Albanese Labor government, will make Australia’s housing crisis worse. The bill proposes to allow the government to own a significant portion of the house – 30% for existing homes and 40% for new ones. Providing buyers with an additional 40% purchasing power will only drive up house prices further, as highlighted by the Productivity Commission’s warnings about increasing demand leading to higher prices.

The bill is also criticised for being poorly targeted and not addressing the fundamental issue of housing supply and demand. The limited number of spots available under this scheme suggests the government know it will introduce inflation. Key questions about how profits, losses, and renovations will be treated are unclear. Participants in this scheme could be far worse off.

One Nation proposes a way for all Australians to be able to afford a house. We focus on addressing both supply and demand issues. These include throttling the amount of immigrants in the country from their record highs to pre-COVID numbers (for a start), banning foreign ownership of Australian residential properties, allowing Australians to leverage their superannuation funds towards owning homes, establishing fixed 5% mortgages, cutting GST on building materials and gutting the bloated building codes.

Under the government’s “Help to Buy” bill, you’ll become a slave in your own home. Under One Nation’s plan, the Australian dream of owning your own home will become a reality.

Transcript

The Help to Buy Bill 2023 is a bill that won’t help anyone. Right now, Queenslanders are sleeping under bridges and on riverbanks. In one of the world’s richest states, working families with children are living in cars. Where do they toilet or shower? It’s inhuman. Rents are skyrocketing—if a rental can be found. House prices are reaching record highs. This is a housing crisis, one of the worst we’ve faced. It’s an inhuman catastrophe.  

The Albanese Labor government wants to look like it’s doing something. Enter the Help to Buy Bill. Under this plan the government wants to own a significant part of your house. If it’s an existing place, the government wants to own 30 per cent; if it’s a new place, 40 per cent—with the government paying for part of it with low-income earners. While a 40 per cent subsidy might sound attractive, it’s fatally flawed. If the government just borrows more money for this plan then one thing is going to happen. When you give people 40 per cent more money to buy a house, house prices are going to go up. The Bills Digest notes: 

In 2022, the Productivity Commission concluded that—unless it is well-targeted … assistance to prospective home buyers presents too great a risk of increasing housing demand and, consequently, house prices. 

The government’s own Productivity Commission warned them this plan would increase house prices. Even the Labor government recognises this. That’s why they’ve severely limited the amount of places available under the scheme—so that house prices aren’t drastically increased. There’s a contradiction right there. If the government is only opening limited spaces so there’s no impact on house prices, then it’s an admission the scheme will not help many people. 

The problem of increasing house prices is one of too much demand for the amount of supply. This bill will only increase the amount of demand and increase house prices. In the absence of more supply, we need to decrease demand, not increase it. As Dr Cameron Murray from Fresh Economic Thinking accurately said: 

If you want people to have cheap housing, give them cheap housing. You can go and do all the financial tricks in the world but at the end of the day if they’ve paid that price, someone’s paying the price. 

This bill’s core concept and premise is flawed and possibly a lie. We can’t subsidise our way out of a house price problem. 

Looking at the bill’s details or lack of details, the problem is worse. Firstly, let’s look at profit and loss and renovations. One of the most concerning questions is how the government will treat profits and losses and renovations. To these questions, this bill has no answers. How much of the profits will the government take if you sell your house? We don’t know. How much of the loss will taxpayers pay if house prices go down or the homebuyer defaults on their mortgage? Australian house prices have aggressively and consistently risen for 30 years. What if they fall? The bill is silent on how this would be handled. Would taxpayers be forced to pay for the entire loss on someone’s mortgage? The government basically acts as a mortgagor second to the bank. Does this mean the bank gets first call to recoup all their losses and the taxpayer simply has to cop the loss on whatever is left over? We don’t know. 

If someone improves the value of the house with renovations, does the government take 40 per cent of the improved value while doing nothing? We don’t know. Imagine tearing up carpets, swinging hammers and sanding with bare hands for six months or a year, and the government takes 40 per cent of the profits from that hard work of yours. That’s entirely possible under the bill as currently drafted. Under the government’s Help to Buy Bill, Australians could become slaves in their own homes. We cannot wait for this bill to be passed and a minister to make a decision later down the track. These matters must be clarified and explained in the bill. Homebuyers and taxpayers deserve to know what the risk is here. 

Secondly, let’s look at some criteria. The eligibility criteria are clunky and don’t cater for differences between states. The maximum income is set at $90,000 for singles and $120,000 for couples. This is despite the average house price and the required mortgage varying hugely between states and between towns. In Darwin, the average house price is $504,000. In Sydney, it’s $1.2 million, more than double, yet the same income thresholds apply. The price thresholds are not available in the bill, and it appears the government has not yet published thresholds. When it comes to the housing crisis, one size doesn’t fit all, yet that’s exactly what this bill tries to do. We’re just meant to pass the bill as a blank cheque and trust that the bureaucrats and the minister will get it right down the road—maybe. 

Thirdly, let’s look at the constitutional basis. This bill is completely outside the federal government’s power. Some reviewers have said that Help to Buy is built on a ‘complex constitutional foundation’. That may be the understatement of the year. Put very simply, under the Constitution, this is not the federal government’s job. To make this bill legal, there are a huge number of constitutional headaches, state government agreements and transfers of powers. Federal parliament simply shouldn’t be dealing with this. It’s outside of the powers granted to us under the Constitution.