How can we fix the housing affordability crisis?



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It seems as though there is no hotter topic than the housing affordability crisis and what needs to be done to solve it. From the endless news articles to the discussions had in homes around Australia, it’s a problem that strikes right at the heart of the Australian dream of property ownership.

But with the issue not going away anytime soon all that hopeful first time buyers can do is keep an eye on the solutions proposed and add their voice to the discussion where they think a difference can be made.

Find out about the solutions that have been proposed to the housing affordability crisis below.

Limit negative gearing

The Australian Labour Party has been very vocal in pushing for changes to the current negative gearing system that allows investors to claim loses on their investment property as a reduction on their taxable income. This ultimately reduces the amount of tax paid by these investors and acts as an incentive to stay in the property investment game.

The issue for first home buyers with all of this is that the more investors are encouraged to continue investing in property, the higher property prices will be pushed up and the harder it will be for those without property to get a look in.

The ALP is proposing to limit negative gearing to new housing only from July 2017. This will not affect people who currently negatively gear a property. Read more about the pros and cons of negative gearing here.

Medium density housing

Terrace Houses, coastal New South Wales

Named “the missing middle” this type of housing includes townhouses, terraces, dual occupancies and manor homes. The NSW state government in particular has recognised the role that medium density housing can have in opening up property in Sydney to first time buyers and is currently accepting submissions on their proposal to make this a reality.

The government aims to make it easier to get approval for these types of dwellings in order to contribute more options to buyers who want to live close to the city at an affordable price and increase overall supply. It will also help to provide suitable housing alternatives for empty nesters living in established suburbs who are looking to downsize and yet still stay in the area they are used to.

It is hoped this will open up some great family sized homes to younger Aussies and allow for generations of families to live side-by-side in the suburbs they love.

Open up super accounts

Another proposal that has been floated is that first home buyers should be able to access their super fund savings to put down a deposit on a home. This solution, however, raises immediate red flags as it goes against the very purpose of super which is of course to assist in funding retirement. Using this money to buy a property may seem like a good short term solution but can have serious negative repercussions in the long term.

What has been approved by the ATO, however, is that a self-managed super fund holder can use their funds to purchase a property that is then rented to a family member as long as the fund owns less than 50 per cent of the property. This was only made possible this year and provides an opportunity for family members to invest in property together.  

Rentvesting

Rentvesting is the only solution proposed that doesn’t require any government intervention and is currently being used by first home buyers. This is the term coined for when a home buyer purchases a property in an affordable area and rents it out while renting another property in the area that they wish to live.

Renting vs buying: The costs and fees

While this isn’t a viable solution for all home buyers, it has helped some Australians get a foot in the door of an otherwise impossibly expensive property market. Whether or not this will turn out to be a long term trend, with home owners never buying into the area in which they live, will remain to be seen. Although for now, it is one of the last options available to those who still want to claw their way onto the property ladder.

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