Victoria University’s Centre of Policy Studies has conducted an analysis of four government programs aimed at improving housing affordability in Australia. The study sought to compare the economic impact of these programs and determine their effectiveness in addressing the challenges faced by renters and homeowners.
The findings of the study indicate that while none of the four programs can single-handedly address all aspects of housing affordability, a combination of measures could yield positive results.
The study utilized Victoria University’s regional economic model to evaluate the impact of allocating an additional $500 million to each of the four programs available in Victoria. To gauge the economic implications, it was assumed that the extra funding would be obtained through increased taxation.
1. Grants & Shared Equity
First homeowner grants were found to improve affordability for homeowners and renters to some extent, while also contributing to a slight increase in home ownership rates. However, the economic cost of these grants is significant, amounting to approximately 20 cents for every dollar spent. Shared equity schemes, where the government co-owns a home with the buyer, yield similar economic costs but are more effective in facilitating home ownership.
2. Stamp Duty Discounts
The study revealed that stamp duty discounts for first home buyers have a positive economic impact by addressing the inefficiencies of stamp duty as a tax, which often hinders mobility. However, these discounts may lead to higher property prices, making home ownership even less attainable for some.
3. Rent Assistance
Rent assistance, administered by the Commonwealth, was found to have low economic costs, with only 5 cents for every dollar spent. While it significantly improves rent affordability, it also contributes to a decline in home ownership rates, as financially strained households are more inclined to rent rather than buy.
4. What Works Best
For low-income earners, boosting rent assistance emerges as the most effective strategy in improving shelter affordability, despite its impact on home ownership rates. However, since rent assistance is federally administered, state governments can focus on a blend of first home buyer grants and stamp duty discounts. This combination minimizes economic costs while simultaneously benefiting both homeowners and renters.
In conclusion, while there is no one-size-fits-all solution to housing affordability, a balanced approach combining various government programs can help address the diverse needs of renters and homeowners alike, ensuring a more equitable housing market for all Australians.
