The Greens want the federal government to enter the property development game as part of a new housing policy to be unveiled on Wednesday afternoon.
The party’s housing spokesperson, Max Chandler-Mather, will use a National Press Club address to call for the government to develop 360,000 homes in the next five years.
Distinct from social housing, these homes would be available for the wider public to buy and rent at discounted prices.
Mr Chandler-Mather will tell the National Press Club the proposal would save participating renters an average of $5,200 a year, and participating homebuyers $260,000 on the price of their home.
Speaking to the ABC ahead of his address, Mr Chandler-Mather blamed private property developers for the housing crisis.
“We don’t need the more high-end apartments that property developers sell but no one can afford except for an investor,” he said.
“What we need are homes that people can actually afford, and the way to do that is for the government to build homes where you cut out the profit margin.”
But the Greens’ own policy costs, prepared by the independent Parliamentary Budget Office (PBO), cast doubt over the policy, warning it was “highly uncertain” whether it could be implemented as the Greens intended.
And key elements of the policy remain unclear, including how participating homebuyers would be chosen, and how rents would be set.
The announcement comes while the government’s own housing policy remains stuck in the Senate, unable to win the support of the Greens or the Coalition.
The government as city planner
Under the Greens’ plan, the federal government would choose sites, procure land and design buildings itself. It would likely contract out construction to the private sector.
It would also decide what types of houses would be built and where. Half would be “medium-rise” developments, and the other half a combination of high-rises, detached houses and townhouses.
It is not clear how the federal government’s planning decisions would interact with state, territory and local governments, which currently have planning responsibilities.
Mr Chandler-Mather said he envisaged the levels of government would work together and disagreements would be minimized by building “really good quality homes that communities are happy to have”.
He downplayed the suggestion that councils would be an obstruction.
“I [reject] this idea that the issue is that there’s not enough [council] planning approvals,” he said. “Private developers hold back supply. They sit on vacant land and vacant apartments and only release them when it is profitable to do so.”
But Brendan Coates, housing policy director at the Grattan Institute, said council planning rules were “clearly an obstacle to getting more housing built, and that would apply to a federal government developer just as it applies to any other developer”.
If there were any obstacles, they would need to be overcome quickly. To achieve the target of 360,000 homes in five years, construction would need to start this year, so that the first homes could be ready by 2026.
The homes would be designed according to “sustainable” principles, such as prioritizing rooftop gardens and scrapping car parks for developments near public transport.
The PBO’s analysis suggests the policy would cost $5.8 billion in the next four years and $27.9 billion in the next decade, on an underlying cash basis.
That reflects the interest costs associated with large-scale property investment. The cost of land and building materials would not impact the standard measure of the budget bottom line, but it would inflate the government’s balance sheet by $104 billion over four years and $285 billion over 10 years.
These figures assume the government could build at the same price as private developers can build, which the PBO warned may not be the case.
The government as realtor
Homes sold under the plan would be sold at 5 per cent above their development cost, which Mr Chandler-Mather described as “cutting out the profit margin”.
The homebuyers themselves would also be unable to profit. Under the terms of purchase, the homes could only be sold back to the government at the purchase price, adjusted for inflation.
The homes would be sold via application, rather than by auction. Only those who do not own any other real estate could apply, which would effectively limit the scheme to first homebuyers.
Mr Chandler-Mather said current home owners could also be eligible, but they would have to sell their homes before applying and could miss out.
“There could be situations where people want to get off the peri-urban fringe and sell up and avoid being in a huge amount of debt to move closer to the city into a good medium-density apartment … That would be a good social outcome, ” he said.
Priority would be given to those with a “connection” to the local area, such as those who have children enrolled in local schools, work in the area, or are First Nations people.
Mr Chandler-Mather suggested renting in a local area would not be considered a connection. “It’s not just [about whether] you rent in Brunswick or Fitzroy,” he said.
Mr Coates called the proposal “a very expensive and arbitrary lottery”.
“There is a sound case to be made for more direct government involvement in housing development, including housing that is for the private market,” he said.
“But this would see a few lucky first homebuyers get the largest first homebuyer grant the country has ever seen. It’s unclear how bureaucrats decide who gets it and who misses out.
“A big concern is that it substantially reduces mobility: you’ll never leave once you get access to such a cheap residence.”
PBO analysis suggested the policy would wipe $260,000 off the house price for the average participant.
But this was based on the Greens’ assumption that state and territory governments would agree to waive stamp duty. The PBO warned there was a “significant risk” they would not agree, and the Greens did not propose a mechanism for securing their agreement.
The government as landlord
Homes rented under the plan would be offered at rents “capped at 25 per cent of household income”.
The Greens offered contradictory indications of what this means.
In the version of the policy submitted to the PBO, the cap was a single, nationwide cap based on average household income. The PBO calculated this would save the average renter $5,200 a year on rent.
But Mr Chandler-Mather told the ABC each household would have its own cap based on its own income. This would give a different number since it could see high-income households pay much higher rent than what the PBO assumes.
In total, 30 per cent of the homes built would be for sale and 70 per cent would be for rent. Of the houses for rent, 20 per cent would be quarantined for low-income renters.
Digging housing trenches
Mr Chandler-Mather will use his Press Club address to draw a point of difference between his party and the Labor government.
“Labor’s plan to tackle the housing crisis is to rely on profit-hungry developers to build expensive homes no one can afford,” he is expected to say.
“The Greens are the party for beautifully designed and well-built homes at prices people can actually afford.”
But the government has accused the Greens of obstructing its own housing plans.
Prime Minister Anthony Albanese has repeatedly accused Mr Chandler-Mather of playing “student politics” on the issue of housing and has lashed the Greens for objecting to social housing developments in their own electorates.
The Coalition has also promised a major housing policy before the federal budget in May. On Tuesday, Opposition Leader Peter Dutton appointed Senator Andrew Bragg to the newly created role of shadow assistant minister for home ownership.
While the Coalition’s policy plans are not yet known, Senator Bragg is a strong advocate for allowing first home buyers to use their super to purchase a home, a policy that former prime minister Scott Morrison took to the 2022 election and which Mr Dutton has also supported.
Senator Bragg alluded to this policy in a statement on Tuesday.
“The key determinant of success in retirement is your home ownership status, not your super balance,” he said.
“I look forward to working with my colleagues to develop solutions to this wicked problem.”