Leaders in the housing industry have called for urgent action to stimulate residential construction in Australia.
In an industry roundtable convened by the Housing Industry Association (HIA) on Tuesday, leaders agreed the industry is facing the worst conditions in decades, and that a lack of action by all levels of government is constraining the ability of Australians to access affordable housing.
The meeting, which was addressed by Minister for Housing and Homelessness Brendan O’Connor, called for a number of measures to address ‘dire’ levels of housing supply in the country.
These include immediate investment to promote building activity and reform measures to improve productivity and reduce taxation in the medium to longer term.
The calls come amid the release of a new report which highlights the importance of the housing sector to the national economy.
According to the report, which was prepared by the Centre for International Economics on behalf of the HIA, the residential building industry is directly worth $70 billion to the Australian economy and is responsible for putting over 350,000 people into a new home each year.
HIA managing director Shane Goodwin says the report shows that every one per cent increase in housing sector productivity can boost the broader economy by a factor of 4.81, and that for every dollar in taxation removed, there is a return of $2.46 to the economy.
“This is a significant finding, as previous studies have shown that over 40 per cent of the cost of a new house and land package can be government taxes, levies and charges – which makes no sense in terms of providing affordable housing for the community or fostering a mobile workforce that can respond to the structural changes in the economy,” Goodwin says.
“Whether government is directly intervening through investing in affordable housing or providing incentives for new home buyers, or indirectly through tax reform and red tape reduction, investment in residential building will provide a significant return to the overall economy.”
Goodwin says that, given the burden of red tape and ‘green tape’ on the sector – itself a substantial weight on improvements to productivity – even modest action by governments can produce a significant amount of economic gain.
Stamp Duty, Infrastructure Charges Main Problem
HIA national director of communications Greg Weller says conference participants raised concerns in a number of areas.
The first and most obvious concern raised surrounds stamp duty which, according to the Taxation of the Housing Sector report released earlier this year, represents the largest area of tax burden outside the GST and accounts for $24,228 of the cost of a Sydney-based dwelling which costs $639,533 to build.
This is far from the only area of concern. Weller says Tuesday’s attendees also raised concerns about the overall level of taxation on the sector and the fact that the tax burden on the sector had risen over recent decades.
Along with the GST, which has impacted the majority of industries throughout Australia including housing, Weller told DesignBuild Source that rising infrastructure charges were a particular area of concern.
He says many in the industry question why housing is taxed more heavily than most other sectors and whether some of the indirect taxes on the industry are necessary.
Weller says the industry welcomes the short-term boost associated with home owner incentive schemes which some states have embarked on in recent times.
He notes, however, that there is a feeling in the industry that these are simply being ‘gobbled up by taxes’ and that addressing tax reform is the best way to unleash industry growth over the longer term.
Weller says the industry acknowledges some reform efforts on the part of state and territory governments. He says the ACT, which is phasing out stamp duty, is considered a standout example, and that some industry participants in New South Wales are reasonably happy about some of the fiscal and planning reform efforts the new government is making there.
Still, Weller says, the industry feels there needs to be ‘an awful lot more’ from governments around the country in this regard.