All eyes were on Treasurer Josh Frydenberg during Tuesday's announcement of the Federal Budget 2020-21. As concerns over the economy continue to grow amid the COVID-19 pandemic, many were looking to the Federal Budget for relief. The housing market, in particular, has had a rough few years, barely recovering from a severe downturn before being forced back again by lockdowns and a global crisis.
To break down how the Budget will affect housing going forward, we'll first look at its direct impacts, then the indirect support it offers.
First Home Loan Deposit Scheme Extension
Financing for Affordable Housing
Assistance for Indigenous Home Buyers
Direct: First Home Loan Deposit Scheme
The First Home Loan Deposit Scheme was introduced in 2019, reducing the initial deposit for purchasing a home from 20 per cent to as little as 5 per cent for low to middle-income first home buyers. Initially extended to 10,000 first home buyers across the nation, the Budget has freed up another 10,000 spots for eligible applicants.
The Scheme, however, continues to draw criticism for its narrow eligibility criteria. The Real Estate Institute of Australia (REIA) regards it as a step in the right direction, but missing its target market segment entirely.
One of the Scheme's key eligibility criteria is that the buyer must purchase a new or newly-built home. REIA President, Adrian Kelly noted that over 80 per cent of first home buyers purchase established dwellings, whereas the market for new homes is more popular with vendors of older homes, who then look into purchasing new homes.
Kelly argues that there is room for additional opportunity here, as upgraders are more likely to purchase larger homes, and thus more expensive dwellings, creating more financial value for the construction sector, as well as jobs.
In short, REIA is calling for an expansion of the Scheme's eligibility criteria, and not an extension, an assertion backed by the Housing Industry Association (HIA) and Master Builders Australia (MBA).
Direct: Financing for Affordable Housing
The Federal Budget commits an additional $1 billion to affordable housing via the National Housing Finance and Investment Corporation (NHFIC).
While the funding promises to deliver increased institutional investment into Australia's affordable housing sector, to some, this investment into affordable housing only succeeds in highlighting the notable lack of support for social housing and tackling long-running issues (which have only further deepened during the pandemic and its subsequent economic crisis) such as homelessness.
Advocates of social housing have argued that investment into the sector would have both enormous economic and social benefit, creating 60,000 jobs over four years, building 30,000 properties and renovating 100,000 to decent standards.
To them, the utter lack of reference to social housing in the Federal Budget 2020/21 is a devastating hit to homelessness funding, which has already seen a 10 per cent shrink over the past three years.
Direct: Assistance for Indigenous Home Buyers
The Indigenous Home Ownership Program receives an investment of $150 million, delivering '360 construction loans in regional Australia'.
Nevertheless, the Indigenous community remains concerned over the lack of government investment into social housing; the investment into the Program only fills one of many gaps in the measures for improving Indigenous welfare, and investment into Indigenous funding remains sorely lacking as a whole.
National Aboriginal Community Controlled Health Organisation (NACCHO) chair Donnella Mills calls the neglect of social housing 'indefensible', citing that in the Northern Territory, Indigenous homes house an average of 17 people within a small dwelling. Amid the COVID-19 pandemic, this is only even more of a critical health hazard that has been overlooked by the government.
Indirect: Tax Cuts
The Budget brings with it tax cuts for approximately 11.6 million Australians, focusing primarily on low to middle-income earners.
In addition to relieving stress on Australian taxpayers, these tax cuts will also boost consumer spending across all sectors, including the housing sector. Homebuyers will be able to purchase homes sooner than expected, while homeowners can funnel money into paying off their mortgages.
Investment into JobMaker Hiring Credit allows eligible employers to claim '$200 a week for each additional eligible employee they hire aged 16 to 29 years old; and $100 a week for each additional eligible employee aged 30 to 35 years old'. The government estimates that this will support 450,000 young Australians into jobs.
There are concerns, however, that JobMaker only creates an incentive for large corporations to hire minimum-wage workers on a part-time basis. In the short run, this will provide support for young Australians. Many of them rent homes, thus financial support will boost rental affordability among that demographic. But in the long run, critics worry that the JobMaker may offer very little in job security and fall painfully short for individuals who are trying to rebuild their lives.
Indirect: Infrastructure Spending
The Budget promises a significant $7.5 billion to infrastructure spending, including $1.1 billion allocated to Victoria.
For Victoria, this funding will go toward the Shepparton Rail Line Upgrade, Stage 2 of the Warnambool Rail Line Upgrade, the Barwon Heads Road Upgrade and the Hall Road Upgrade in Cranbourne. It is expected to create 3,850 direct and indirect jobs across the state.
Overall, the Federal Budget 2020-21 provides an injection of much-needed financial support to the economy across many sectors and industries. Though light on direct investment into the property industry, support will flow on from the indirect effects of tax cuts, employment boosts and infrastructure spending.
Its critics, however, have expressed severe disappointment over the lack of funding for social housing. Many were hoping that the government would opt for a social-housing led recovery, but the Budget indicates that the government is aiming for a recovery led by the private sector.
Fundamentally, criticism over the budget seems to boil down to a widely-held opinion that the Budget only offers band-aid solutions with faster yield, but neglect to adequately include long-term investment to key issues. (ET)