Global factors are driving up living costs but governments should be ambitious in targeting the country's housing affordability crisis, a new paper says.
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The Committee for Sydney paper titled 'Real talk on cost of living' says with inflation in Australia on track to reach its highest level since the global financial crisis, and a long-term strategy is the only way to control Sydney's skyrocketing house prices.
House prices in the NSW capital have risen 23.7 per cent in just over a year, with young people and low to middle-income families on track to be locked out of ever owning a home, it says.
If no government can lead major change on the current housing price dynamics, Australia will sleepwalk into a permanent class divide where only those with inherited wealth will own homes, the paper found.
Policy settings to blame for the inequities include negative gearing and the capital gains tax discount, which give investors a leg-up on the rest of the population.
The paper says the only way to increase levels of home ownership is to decrease the rate of investment property ownership.
Property investors generally receive a discount on the capital gains tax owing on the proceeds of the sale of their property, if they have owned the asset for more than 12 months.
A number of issues have led to inflation, it said, including supply chain disruptions related to COVID-19 and the war in Ukraine.
The COVID-19 pandemic also saw developed countries borrowing funds to stimulate their economies, creating a "synchronised boom".
These stimulus measures were largely beneficial, but the downside of excess cash in world economies is the likely occurrence of inflation.
Committee for Sydney deputy CEO Ehssan Veiszadeh says housing policy is the most powerful lever governments hold for delivering real affordability.
"Quick fixes won't solve what's set to be the highest inflation since the GFC," he said.
"What we need is a real long-term strategy to make Sydney more affordable."
The think tank said the way to boost home ownership levels is to reform federal and state tax laws, increase new housing around rail and metro stations, and a well-funded program for social and affordable housing.
Australian Associated Press
