Scott Morrison may not believe federal governments have much of a role in housing policy other than removing planning restrictions. But Ronald Reagan did.
Well – perhaps that is not entirely accurate. But in 1986, Reagan signed into law a bill that has since been described as one of the most effective housing policies ever enacted by a federal government, and which stands as a marked contrast to the Australian lethargy on affordable housing.
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Land use rules hamper housing
Housing affordability is being hindered by the states' land use regulations, asserts Treasurer Scott Morrison. Courtesy ABC News 24.
The policy, known as the Low Income Housing Tax Credit, offers tax benefits to developers who build apartments rented below market rates. In its thirty years of operation, the credit is estimated to have created about three million affordable dwellings. That's the equivalent of a city the size of Sydney.
Remarkably, the credit remains in place today. It has survived five presidents, a political culture that may be descending from dysfunctional to apocalyptic, and continues to cost the US government about $10 billion a year.
"Oh yeah it's a success," says Buzz Roberts, the president and chief executive of the National Association of Affordable Housing Lenders in Washington, who worked on the development of the tax credit in the mid '80s.
"There are just under 10 million units that are comparably affordable [in the US]," says Roberts, "and the credit is responsible for about 30 per cent of them."
Morrison's intervention this week into the great Australian debate about housing affordability had the enervating effect of confirming the major parties in roles they had already cast for themselves.
Labor wants to curb property investment through restrictions on negative gearing and capital gains tax changes. Morrison and the Turnbull government say that would be a risk, and want only to increase supply.
But there is more to housing policy than negative gearing. And there is more to housing policy than handing the keys to the city to developers.
It should be embarrassing that the US has such a better federal scheme for providing affordable housing than we do in Australia – a scheme embraced not just by community housing providers, but by a bipartisan politic.
And it should be doubly embarrassing because Morrison himself helped to close a recent Australian attempt to create a similar system.
Following Morrison's speech on Monday, in which he acknowledged the growing problem of affordability in cities like Sydney and Melbourne but appeared to absolve his government of doing much to fix the issue, the Treasurer drew criticism for being a late arrival on housing issues.
But that would be an inaccurate characterisation. Morrison spent six years working for the Property Council in the late '80s and early '90s. When he made it to Federal Parliament, Morrison's first portfolio position was as the Coalition's spokesman on housing in 2008.
Morrison proved effective in that role in undermining the Rudd government's nascent attempts at developing affordable housing programs. In fact, he proved so effective he soon won himself a promotion to immigration spokesman, whereupon he fearmongered for his country and has not looked back.
One of those Rudd programs Morrison was adept at picking holes in was known as the National Rental Affordability Scheme.
The NRAS had the same goals as the US tax breaks – encouraging investment in housing rented to middle and lower-income residents. But the scheme had its problems. It was slow to start, overly bureaucratic, and vulnerable to misuse. So too was the US tax credit.
"We did have a few years early on where it had to prove itself," says Roberts. "It started out really slow. The initial program design was not the best, so we had to go back, and Congress was able to put in an amendment or two to make the system more workable."
It was not until the early '90s, Roberts says, that the US tax credit was "off to the races."
Tens of millions of families have benefited in response. "The housing doesn't stick out as a public housing project, it just looks like high quality housing," says Roberts. "There's research to show that in low-income neighbourhoods, housing credit properties increase surrounding property values, decrease racial and economic isolation, and even reduce crime."
Back in Australia, and after less than six years of operation, the NRAS scheme was closed by the Abbott government. It had started to attract investors, and had created about 30,000 properties for affordable rent. Since its closure, investors who participated in NRAS have called for it to be replaced by a more simple tax credit, as in the US.
Ironically, this is just the sort of thing Morrison may have to consider.
The NSW government is expected to pursue a policy requiring new developments to include housing that might be rented below the market rate.
The success of such a policy would almost be assured if the Turnbull government supported such projects through the tax system. There was a lot Morrison could have talked about on Monday, if he did not want to go over the same old stuff.
Jacob Saulwick is city editor.
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