Coalition super for housing proposal to “hinder home ownership aspirations”

A Coalition election proposal from 2022 that would allow superannuation withdrawals to be contributed to housing deposits has been labelled the “worst public policy decision” if introduced in a new report commissioned by the Super Members Council (SMC).

The Corinna Economic Advisory independent report, penned by Saul Eslake, found that the Coalition’s ‘Super Home Buyer Scheme’ would likely “hinder home ownership aspirations for younger Australians” by allowing individuals to withdraw up to 40 per cent or $50,000 (whichever is less) to put towards purchasing a property as owner-occupier.

Eslake said the proposal would also increase house prices, lower retirement incomes and lead to ballooning Budget costs. According to the report, 78 per cent of single Australians aged from 25 to 34 years old would be unable to withdraw more than $20,000 as part of the scheme.

“We have 60 years of history, which unambiguously tells us, anything that allows Australians to pay more for housing than they otherwise could leads to more expensive housing and not more homeowners,” he said.

“Of all the demand-fuelling housing policies, the Coalition’s super for housing policy would be the biggest – it can only lead to higher prices. If super for house was introduced, it would be one of the worst public policy decisions in the last six decades.

“It would do little for the people who are most in need of assistance in order to become homeowners and would do most for those who need it least. And depending on the number of homeowners who accessed the scheme, the impact on prices could be far greater than first homeowner grants.

“Super for housing would just make the affordability crisis worse.”

The report also indicated that the scheme would work better in favour of older and wealthier people who currently do not own a home. The median non-homeowner couple aged between 35 and 44 years would be able to lift their deposit by close to $38,500 through the scheme and allow them to spend $192,500 more with borrowing, and the median couple between the ages of 45 and 65 who do not own a home could spend up to $400,000 more on a property purchase. The median couple aged between 25 and 34 years, the ‘typical’ home buying age, would only be able to withdraw $18,000 from their super and would face a purchase price worth $90,000 more than older couples.

Eslake said scheme participants would be left with less super at retirement and would then rely more on the taxpayer-funded age pension.

The report also considered the experiences of superannuation members from across the pond, with New Zealand’s KiwiSaver product allowing withdrawals from super savings for home deposits. Since its introduction, home ownership rates have fallen by 2.1 per cent across all generations and by 5.7 per cent for people in their early 30s.

“Advice given by New Zealand’s Treasury said the benefit of KiwiSaver would go to sellers in a supply-constrained market, and that’s exactly what has occurred. There are fewer homeowners since the scheme’s introduction,” Eslake said.

“In New Zealand, house price spikes coincide with periods in which the volumes of withdrawals from KiwiSaver accounts have rapidly risen.”