Strong NSW Budget should go further to tackle housing affordability crisis

GUEST OBSERVER 

The Premier and Treasurer should be applauded for the record infrastructure spend and strong fiscal outcome in the NSW State budget, but needed to do more to ensure the dollars matched the rhetoric on the Government’s housing affordability plan.

The NSW built environment is being transformed by the Berejiklian Government’s $73 billion infrastructure spend and future generations will benefit enormously from this investment.

But, in a budget that trumpets an upgraded surplus of $4.5 billion this year, $2.7 billion next – and solid surpluses in the out years – it is disappointing to find that half a billion dollars of new taxes could be imposed on the property industry to fund the extra infrastructure investment foreseen in the government’s housing affordability plan.

For the first time, today’s budget papers revealed the Government expects to collect more than half a billion dollars from the property industry over the next four years to fund state infrastructure needed to support increasing housing supply. 

At the end of the day extra taxes on housing supply means extra cost for buyers and more expensive home.

Surely with the state budget so far in the black this impost could be avoided.

Budget papers stated that the expansion of State Infrastructure Contribution Scheme (SICs) to 10 new areas announced in the recently released NSW Government housing affordability plan would raise an additional $545 million in revenue.  

These additional costs were on top of the announcement as part of the Government’s housing affordability plan that the Local Infrastructure Growth Scheme would be closed in 2020 with a potentially significant cost shift to the property industry of almost $400 million.

The budget confirms that with an increase of 9.6 per cent in residential property stamp duty revenue in 2016/17, the rivers of gold flowing from property taxes will fund essential services and programs next year and beyond.  It also now suggests that significant additional costs could be imposed on the supply of the average home. 

By 2020 that could add a billion dollars to the cost of delivering new homes in NSW. 

Sydney’s housing supply pipeline ground to a halt less than a decade ago under the burden of excessive infrastructure taxes, so widening the net risks a repeat of recent history. 

The Property Council is very keen to work with the NSW Government to ensure this scenario does not play out. 

The strong surplus delivered in Treasurer Perrottet’s first budget was a terrific result that should be applauded along with the $72.7 billion infrastructure spend.

On infrastructure investment, overall economic management and managing the bottom-line the Premier and the Treasurer score 10 out of 10 but on improving housing affordability there are still questions to be answered. 

The Government needs to take serious care to ensure that secondary policy decisions, such as the cost shifting the new SICs envisage, do not torpedo the primary policy objective of improving housing affordability in this state. 

It was pleasing to see that the budget papers confirm that wholly or majority owned companies who were positively contributing to housing supply in NSW would be exempt from the foreign investment taxes imposed in last year’s budget and that the exemption would be backdated to June last year.

These were a direct tax on housing supply and the Premier and the Treasurer are to be congratulated for acknowledging and fixing this so quickly.

Jane Fitzgerald is NSW Executive Director of the Property Council,and can be contacted here.