Page 2892 - Week 08 - Wednesday, 24 June 2009
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When the Labor government determined back in 2007 to tackle the increasing issues around housing affordability, it looked at all aspects of housing—at public housing, at community housing, at the experience of homebuyers, first-homebuyers, second-homebuyers, and those wanting to downsize later in life. The result was a comprehensive and integrated package of 62 measures, which the government has been progressively implementing.
In many senses the package is indivisible. Getting more Canberrans into homeownership frees up rental properties for others. Increasing stocks of student accommodation also has an effect on the rental market and on the level of rent. Helping older Canberrans downsize frees up the larger, family-sized properties for new owners, and accelerating the release of land helps stabilise land prices. Mandating that 15 per cent of all new developments be devoted to affordable house and land packages encourages the construction of more homes at the affordable end of the market, and refurbishing and retrofitting public housing improves the quality of life for the government’s own tenants.
Everything touches upon and affects everything else. And this week, of course, Community CPS Australia has announced that it will become the first major financial institution to offer loans under the ACT government’s land rent scheme. Land rent is not, as the Liberals have serially and deliberately misrepresented, the centrepiece of the government’s action plan. It is one of 62 integrated measures. It is geared philosophically and practically at those households on modest incomes that perhaps have dealt themselves out of the dream of homeownership or have been dealt out by the sheer impracticality of servicing a very large mortgage.
That is the beauty of the land rent scheme: it structurally changes the game. It means that people of modest means can take out a more modest mortgage without overextending themselves. Let us take a look at the practical difference land rent would make for a household buying a $150,000 house on a $150,000 block of land. Let us assume that it is one of our target households earning a combined income of $75,000 a year or less. The mortgage payment on the house and the rent payment on the land combine to $1,193 per month. The monthly repayment for someone who has bought both house and land as part of a 25-year mortgage at a 5.74 per cent interest rate would be $1,886 a month. That is a saving per month to that household of $693—month after month after month, year after year after year—a significant saving. What a significant contribution to assisting with the price of housing.
The average monthly cost of renting a three-bedroom house in the ACT in the March quarter was $1,680. In other words, the land renter in the above example would be almost $500 a month better off than a renter. It is extraordinary that, in a circumstance where you have a scheme that will save households nearly $700 a month in mortgage payments, or comparably make them $500 a month better off than if they had been renting, the Liberal Party think that this scheme is a bad idea. That is the real and meaningful contribution that this scheme makes to tackling the issue of housing affordability.
Evidently, Mr Seselja believes that people with a dream of homeownership should squash it down inside where it belongs and continue to rent, rather than availing
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