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Keep home ownership away from corporates

Authors
Senator Andrew Bragg
Liberal Senator for New South Wales
Publication Date,
September 2, 2024
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September 2, 2024


First published in The Australia: https://www.theaustralian.com.au/business/property/keep-home-ownership-away-from-corporates/news-story/51b0e68abe1dfb2c76219793523f9c5c
September 02, 2024

Labor’s new Housing Minister, Clare O’Neil, has conceded that more needs to be done to fix the housing crisis. But at the same time, she has recommitted the government to corporate housing.

Corporate home ownership will be the final nail in the coffin of the Australian Dream. Labor has put Australia on a path to emulate the US’s corporate housing model through its “build-to-rent” obsession and subsidies for super funds.

We do not want to emulate the American corporate housing model. We want people to own our homes – not BlackRock, Vanguard or Cbus.

From the 1960s, the US established a path for fund managers to buy up residential housing. A housing market downturn in 1989 started the drive towards the corporatisation of America’s housing market.

Labor’s new Housing Minister, Clare O’Neil, has conceded that more needs to be done to fix the housing crisis. But at the same time, she has recommitted the government to corporate housing.

Today, according to the US Government Accountability ­Office: “Large institutional investors emerged in the wake of the 2007-2009 financial crisis, bulk-purchasing foreclosed homes at auction and converting them into rental housing.”

Corporate housing funds held $US1 trillion in assets in 2023. They provide returns to their investors by developing residential properties to perpetually rent out.

The GAO says institutional investors own 25 per cent of the rental stock in Atlanta, 18 per cent in Charlotte and 21 per cent in Jacksonville.

This situation has prompted two very different responses to institutional investors.

First, the US is pushing back against the corporatisation of housing. Across the US, legislation is being proposed to limit the role of institutional investors in the housing market.

Last year, Democrat senator Sherrod Brown introduced the Stop Predatory Investing Act. This bill would penalise institutions owning more than 50 freestanding dwellings and incentivise them to sell existing houses to ­individuals.

Although the bill has stalled in the Senate, Democrat presidential candidate Kamala Harris has committed to the bill as part of her election platform.

It’s not just Democrats calling for an end to institutional home ownership.

In March, Republican Governor Greg Abbott urged the Texas legislature to limit corporate housing, saying: “This corporate large-scale buying of resi­dential homes seems to be distorting the market and making it harder for the average Texan to purchase a home. This must be added to the legislative agenda to protect Texas families.”

Across the US, there is a growing bipartisan push away from corporate housing and back towards individual home ownership. Republicans and Democrats rarely agree.

Second, while the US is moving away from corporate housing, the Labor government is prioritising corporate home ownership over individual ownership.

In the wake of the GFC, large institutional investors in the US bulk-bought foreclosed homes at auction and converted them into rental housing.

In the wake of the GFC, large institutional investors in the US bulk-bought foreclosed homes at auction and converted them into rental housing.

The Housing Australia Future Fund is one of Labor’s main policies to entrench institutional advantage. Under the HAFF, Labor will provide institutional investors with $350m over the next five years to expand their footprint in the residential property market.

More concerning is Labor’s commitment to build-to-rent for foreign fund managers.

In the 2023-24 budget, the government committed to halving the managed investment trust withholding tax rate for build-to-rent developments from 30 per cent to 15 per cent.

This reduction will apply to institutional investors with more than 50 properties. This is no accident; Labor aims to cement institutional advantage.

Alan Kohler made the case for corporatising housing in a recent Quarterly Essay. He doesn’t like mums and dads providing rental stock: “All that would do is offset the tax advantage that individual owners get from negative gearing and capital gains tax, which is unavailable to institutions and is the reason Australia doesn’t do build-to-rent – since tax-advantaged individuals outbid institutions.”

Kohler would presumably prefer BlackRock and Cbus as the nation’s landlords.

Recently, the Association of Superannuation Funds of Australia derogatively described individual mum and dad investment in the property market as a “hobby activity”, and said Australians “would be very happy with institutionally owned residential property”.

Labor seems to want Australians locked into permanently renting from super funds that make at least $40m in payments to Labor-affiliated organisations.

Corporate housing is a virtuous circle for Labor – but not for Australians.

Labor’s new Housing Minister, Clare O’Neil, has conceded that more needs to be done to fix the housing crisis.

But at the same time, she has recommitted the government to corporate housing.

We have new marketing but the same failed, misdirected ­policies.

We know from the US that Labor’s corporate housing approach will end in disaster. We cannot have a situation where Australians are denied their chance at the Australian Dream.

Robert Menzies understood the importance of individual home ownership to Australians. It was derided by Labor’s post-war minister for reconstruction, John Dedman, who said in 1945 that Labor was “not concerned with making the workers into little ­capitalists”.

Paternalism still rules the roost in Labor.

The Albanese government is happy for foreign asset managers and local super funds to own our houses and rent them to Australians.

Like the Chifley government, they see individual ownership as an obstacle for their vested ­interests. That is not the Australian dream and will never be our policy.

Senator Andrew Bragg is the federal opposition’s spokesman on home ownership.

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