The opposition promised to ban direct borrowing by self-managed superannuation funds as part of a housing affordability policy released last Friday to pre-empt the government’s package in the May budget.
This “limited recourse borrowing”—wherein creditors have limited claims on loans if there are defaults—has increased from approximately $2.5bn in 2012 to more than $24bn. Almost all of these loans are in residential and commercial property.
The Murray Financial System Inquiry in 2014 recommended restoring the prohibition, which was lifted in 2007. The Inquiry warned that “further growth in superannuation funds’ direct borrowing would, over time, increase risk in the financial system.”
Among other measures, the Shorten government would double the screening fees on foreign investment as well as financial penalties that apply to foreigners investing in residential real estate.
Foreign investment purchases nearly tripled over the three years to 2014-2015. According to the ALP, higher fees and penalties would “help level the playing field between first-home buyers and property speculators.”
The core of the ALP’s housing policy remains the reforms to negative gearing and the capital gains tax discount that Labor took to the election. However, the latest package bolsters these with several other initiatives.
The opposition announcement comes as the federal government’s expenditure review committee struggles to stitch together a credible package—and after a highly-publicised split among ministers over whether first-home buyers should be able to use their super to fund the purchase of homes. (The Turnbull government appears to have ruled this option out.)
The ALP said its package would see the construction of more than 55,000 new homes over the course of three years, as well as increase employment by 25,000 new jobs a year.
Labor would establish a Council of Australian Governments process to achieve a more efficient and uniform vacant property tax across the major cities. Labor would also work with state governments to get better outcomes in the National Affordable Housing Agreement, and would establish a bond aggregator to increase investment in affordable housing, something the government is moving progressively towards.
Federal Opposition Criticised Over Negative Gearing Resurrection
Government Rolls Out New Housing Affordability Package
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