tag:theconversation.com,2011:/us/topics/homebuilder-87970/articlesHomeBuilder – The Conversation2022-09-06T20:06:43Ztag:theconversation.com,2011:article/1882982022-09-06T20:06:43Z2022-09-06T20:06:43ZBuilding costs have soared. Is it time to abandon my home renovation plans?<figure><img src="https://images.theconversation.com/files/480706/original/file-20220824-12-ixrqp6.jpg?ixlib=rb-1.1.0&rect=0%2C5%2C1920%2C1267&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Image by Michal Jarmoluk from Pixabay</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Australia’s appetite for home renovations remains strong, with around <a href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/latest-release">A$1 billion</a> worth of alterations and additions to homes approved in July. </p>
<p>But rising interest rates and shortages in labour and material may have some would-be renovators wondering: is this still a good idea?</p>
<p>Here are five questions worth considering.</p>
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Read more:
<a href="https://theconversation.com/what-adds-value-to-your-house-how-to-decide-between-renovating-and-selling-140627">What adds value to your house? How to decide between renovating and selling</a>
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<h2>1. What would a successful renovation look like – before, during and after?</h2>
<p>As with any major financial decision, you need to understand how the renovation fits with your broader life goals. Why do you want to do it?</p>
<p>There’s a big difference between a “nice-to-have” new kitchen and a “must-have” modified bathroom for mobility needs.</p>
<p>Let’s say you’re choosing, rather than needing, to renovate.</p>
<p>Consider whether the choice is for capital gain at sale in the short term (up to five years). Flipping a property will incur transaction costs such as stamp duty and legal fees, so factor those into the overall cost. Can you still afford it?</p>
<p>Or are you looking to live in the house over the longer term? Will the renovation deliver lifestyle enjoyment over many years? For some, that may make a period of financial belt-tightening worth it.</p>
<p>It’s never just about the capital gain, increased floor space, amenity or privacy. </p>
<p>A renovation affects areas of <a href="https://theconversation.com/australia-are-you-ok-here-are-the-groups-with-the-highest-and-lowest-life-satisfaction-150363">life satisfaction</a> beyond finances – including family life, relationships, work, health, and lifestyle opportunities such as being able to afford to travel.</p>
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<a href="https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480703/original/file-20220824-20-jm7qiq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">There’s a big difference between a ‘nice-to-have’ new kitchen and a ‘must-have’ modified bathroom.</span>
<span class="attribution"><span class="source">Photo by immo RENOVATION on Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<h2>2. Have you done the sums?</h2>
<p>You may have quotes from designers or builders. Check the detail including allowances for budget variations. Consider whether some changes – such as solar, good insulation and energy-smart design – may reduce bills over time.</p>
<p>You can use the government’s online Moneysmart <a href="https://moneysmart.gov.au/home-loans/mortgage-calculator">calculator</a> to work out what your increased payments would be on a larger mortgage after you’ve paid for a renovation.</p>
<p>Say you have a 25-year mortgage and are considering a $150,000 renovation. That may cost you around $10,000 extra annually in mortgage payments, particularly if interest rates were to increase from a variable rate of 3.5% now to 5.5% over the next few years. </p>
<p>That $10,000 would be <em>in addition to</em> the increase in repayments on your existing mortgage, which (on the average new owner-occupier Australian mortgage of about <a href="https://www.ratecity.com.au/home-loans/mortgage-news/average-mortgage-around-australia">$610,000</a>) could be around $8,500 extra if rates went up by two percentage points.</p>
<h2>3. How much risk can you stomach?</h2>
<p>If you had a sudden shock to your income, expenses or health, how long could you cover all your expenses without having to sell major assets or go without lifestyle staples?</p>
<p>This may depend on a range of factors, including whether you have income protection or other insurances, and if you have a savings buffer. </p>
<p>One indicator of your risk is your <a href="https://www.canstar.com.au/home-loans/debt-income-ratio/">debt-to-income ratio</a> (total debt divided by before-tax annual income, excluding compulsory superannuation contributions). </p>
<p>Lenders and regulators consider a ratio above six to be high. However, <a href="https://www.apra.gov.au/news-and-publications/apra-releases-quarterly-authorised-deposit-taking-institution-statistics-11">23.1%</a> of borrowers in the March quarter 2022 had a ratio of six or more.</p>
<p>Your personal debt comfort zone might be much more conservative. Only you will know how much debt you can live with before it stresses you out so much it’s not worth it.</p>
<p>If you have determined your full project is too risky for now, you might consider doing the renovation in stages. But while this might get you a smaller mortgage in the short term, it can cost more in the long run and draw out the time frame.</p>
<p>What if you’ve already had an architect or designer draw up plans and get approvals, but no longer want to renovate? You might consider selling the house with the approved plans; this is still a good value-adding option.</p>
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<a href="https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5184%2C3445&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5184%2C3445&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480702/original/file-20220824-13-209cxa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A renovation can affect relationships.</span>
<span class="attribution"><span class="source">Photo by Roselyn Tirado on Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<h2>4. What expert advice can you get?</h2>
<p><a href="https://thinkinsights.net/strategy/choiceology-overconfidence-hindsight">Seeking expert advice</a> from architects, designers, landscapers, builders or project managers before and during the renovation can get you better value, less stress and fewer mistakes overall. </p>
<p>Word-of-mouth recommendations can help, but check the <a href="https://www.mbqld.com.au/home-owners/find-a-master-builder?gclid=EAIaIQobChMIkr-0sMDg-QIV6PvICh1G9Ab4EAAYASAAEgIdqvD_BwE">Master Builder Association listings and ratings</a> for builders, too.</p>
<p>It’s vital you do your due diligence on the quality, reliability, solvency, style, insurance and cost of experts you enlist. </p>
<p>That can include seeking advice from a building and construction expert lawyer to check the contract before you sign. </p>
<p>Choose someone who is easy to talk to, listens and understands your goals. The relationship with your build and design team will be crucial.</p>
<h2>5. What role do my emotions play?</h2>
<p>Almost every episode of renovation reality shows seems to feature an emotional breakdown and a massive budget blowout.</p>
<p>Emotions are an important consideration throughout your renovation. Financial decisions are never just about money.</p>
<p>If maintaining relationships and a healthy stress level is part of what a successful renovation looks like for you, plan ahead for that.</p>
<p>If that means moving into a rental for the renovation period, add it to the budget considerations.</p>
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<span class="caption">Renovating can be exciting but also exhausting.</span>
<span class="attribution"><span class="source">Photo by Christian Erfurt on Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Renovating can be exciting and exhausting, but beware of some of the common renovation decision-making <a href="https://reader.elsevier.com/reader/sd/pii/S0378778822001293?token=4C9598870045D57C1C8CC6D233C5D3F8C4A829BCD87B03C993D43E0C8FAA0DFE4EFCF44DF337E882B3E7AD21C1BA6FF5&originRegion=us-east-1&originCreation=20220821045014">biases</a>. </p>
<p>One is the <a href="https://media.proquest.com/media/pq/classic/doc/2652784771/fmt/pi/rep/NONE?_s=ew%2Bn%2Fm85xXTvT0NWBCxBx6cJzQQ%3D">sunk cost fallacy</a>, where the time and money you’ve sunk into the project so far can make it hard to change or abandon plans. </p>
<p>Even paying a small deposit can lead to an irrational reluctance to change course.</p>
<p>Then there’s decision fatigue, where mental energy gets depleted with each decision (and there are a <em>lot</em>). It gets tempting to give in to whatever seems easiest at the time. </p>
<p>Be prepared to take more time to contemplate high-stakes decisions, and get advice, particularly in areas where you have no experience. Getting the right advice at the right time over a renovation could be among the most important financial decisions you ever make.</p>
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Read more:
<a href="https://theconversation.com/how-much-can-i-spend-on-my-home-renovation-a-personal-finance-expert-explains-160696">How much can I spend on my home renovation? A personal finance expert explains</a>
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<p class="fine-print"><em><span>Di Johnson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As with any major financial decision, you need to understand how the renovation fits with your broader life goals. Why do you want to do it?Di Johnson, Lecturer in Finance, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1607732021-06-04T05:06:28Z2021-06-04T05:06:28ZHere’s what the budget did to get Australians into homes (hint: not much)<p>Among the <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2021-22">bolder claims</a> in last month’s budget was that “under the Coalition, home ownership will always be supported”.</p>
<p>Since the Howard government took office in 1996, the proportion of Australian households owning the home they live in has fallen from 70% to <a href="https://www.abs.gov.au/statistics/people/housing/housing-occupancy-and-costs/latest-release">66%</a>.</p>
<p>The proportion having paid off their mortgage has fallen from 40% to 30%.</p>
<p>The proportion renting privately has climbed from 20% to 27%.</p>
<p>In the lead up to the budget, home prices began climbing again, soaring 8.5% so far this year in Melbourne and <a href="https://theconversation.com/paying-off-a-home-loan-used-to-be-easier-than-it-looked-its-now-harder-heres-why-161873">11%</a> in Sydney.</p>
<p>The response was a series of measures designed to look as if they would help people buy their own homes. </p>
<h2>Shuffling the queue</h2>
<p>On examination, each measure is less than it could be, although each helps some people more than others.</p>
<p>Usually first home buyers with less than a 20% deposit need to pay lenders’ mortgage insurance. </p>
<p>Under two of the schemes they can effectively get this cost met by the government. </p>
<p>Extending the <a href="https://www.nhfic.gov.au/what-we-do/fhlds/new-homes/">First Home Loan Deposit Scheme</a> will allow 10,000 more first home buyers to buy newly-constructed dwellings with a 5% deposit.</p>
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Read more:
<a href="https://theconversation.com/paying-off-a-home-loan-used-to-be-easier-than-it-looked-its-now-harder-161873">Paying off a home loan used to be easier than it looked. It's now harder</a>
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<p>A separate new <a href="https://www.nhfic.gov.au/what-we-do/fhlds/">Family Home Guarantee</a> will allow 10,000 single parents to buy a new or existing home with just a 2% deposit. </p>
<p>Both are only open to single applicants with annual taxable incomes of $125,000 or less. Couples have to earn $200,000 or less.</p>
<p>The measures have similar problems to the <a href="https://www.smh.com.au/business/billions-in-handouts-but-nothing-gained-20110315-1bvvs.html">First Home Owners Grant schemes</a> in place intermittently since 1964. </p>
<p>They add to demand for housing but not its supply.</p>
<h2>Not quite helping those most in need</h2>
<p>This means that while the schemes assist (doubtless worthy) people buy homes, they do it at the expense of others who miss out. </p>
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<img alt="" src="https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/404185/original/file-20210603-15-me1f78.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Homebuilder, used for knockdowns and rebuilds.</span>
<span class="attribution"><span class="source">Twin Sails/Shutterstock</span></span>
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<p>They shuffle rather than shrink the queue.</p>
<p>A separate measure since closed, <a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder</a>, awarded grants for the construction of homes, but it was also available for <a href="https://treasury.gov.au/sites/default/files/2021-04/homebuilderfactsheet2704.pdf">knockdowns, rebuilds</a> and extensions rather than being directly targeted at increasing supply.</p>
<p>Only three economists responding to the Economic Society of Australia’s post-budget <a href="https://theconversation.com/great-approach-weak-execution-economists-decline-to-give-budget-top-marks-161347">survey</a> referred to the housing measures and none were supportive.</p>
<p>Our <a href="https://stinmod.canberra.edu.au/research/budget/brochure/brochure2021">calculations</a> using <a href="https://www.governanceinstitute.edu.au/centres/national-centre-for-social-and-economic-modelling-natsem">NATSEM</a>’s STINMOD+ model suggest that even if these schemes were not limited to 10,000 applicants, there may not have been many households able to take them up. </p>
<p>Only 5% of private renters, and 7% of single parents, have enough savings to enter the housing market, even with the promised mortgage insurance guarantee. </p>
<h2>Young urban professionals</h2>
<p>Of these, more than 85% would then be paying more in servicing costs than they currently pay in rent, even at today’s historically low interest rates. </p>
<p>They might not regard this as an improvement in affordability. </p>
<p>In any case, it wouldn’t be the poorest households being helped. </p>
<p>Our calculations suggest the poorest fifth of households would be unlikely to have enough savings to use the deposit insurance schemes. </p>
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Read more:
<a href="https://theconversation.com/homebuilder-only-makes-sense-as-a-nod-to-morrisons-home-owning-base-142169">HomeBuilder only makes sense as a nod to Morrison's home-owning base</a>
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<p>Those most likely to use them are on higher incomes but still renting. They include young urban professionals in the eastern and northern suburbs of Sydney. </p>
<p>The blue areas on this map show the regions with the most households who might benefit.</p>
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<span class="attribution"><a class="source" href="https://stinmod.canberra.edu.au/research/budget/brochure/brochure2021">NATSEM</a></span>
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<p>The schemes would be more helpful for potential homebuyers in regional areas than in cities, but they are less likely to have the income and savings needed to take advantage of them. </p>
<p>The schemes also have <a href="https://www.nhfic.gov.au/what-we-do/fhlds/property-price-caps/">price caps</a> below the median house price in most capital cities, making it hard for people such as parents who need extra bedrooms to take advantage of them.</p>
<h2>The downsizer initiative will help</h2>
<p>A more promising initiative in the budget is lowering the minimum age at which downsizers can access the <a href="https://www.abc.net.au/news/2021-05-16/budget-items-that-dont-cost-much-might-serve-a-different-purpose/100134670">downsizer contributions scheme</a> from 65 to 60.</p>
<p>This scheme allows older Australians to downsize and put the proceeds into lightly-taxed superannuation. </p>
<p>This will free up family homes for the younger generations, although it will not help those on low incomes buy them.</p><img src="https://counter.theconversation.com/content/160773/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yogi Vidyattama previously received funding from ACT Government for economic research related to housing.</span></em></p><p class="fine-print"><em><span>John Hawkins was the secretary to the Senate Select Committee on Housing Affordability in Australia.</span></em></p>Most of the budget’s housing measures shuffle the queue, rather than increase the number of homes.Yogi Vidyattama, Associate Professor, National Centre for Social and Economic Modelling, University of CanberraJohn Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1421692020-07-26T19:53:13Z2020-07-26T19:53:13ZHomeBuilder only makes sense as a nod to Morrison’s home-owning base<p><a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder</a> grants of A$25,000 are being offered to build or renovate a home as part of the Australian government’s <a href="https://treasury.gov.au/sites/default/files/2020-05/Overview-Economic_Response_to_the_Coronavirus_3.pdf">emergency economic response</a> to the coronavirus pandemic. <a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">Critics</a> note that the program, framed as stimulus for residential construction, benefits already well-off households. It ignores the realities of the housing market, especially the affordability crisis, with housing stress affecting precarious renters, the homeless and those struggling with bloated mortgage payments. </p>
<p>Homebuilder appears to be a <a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">bewildering policy</a>. It’s likely to support construction work that <a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">would have occurred anyway</a> while failing to meet <a href="https://theconversation.com/homebuilder-misses-a-chance-to-make-our-homes-perform-better-for-us-and-the-planet-140067">real housing needs</a>.</p>
<p>However, to criticise HomeBuilder simply as bad policy made on the run is to miss a broader picture. HomeBuilder begins to make a lot more sense when understood as a response to the role of housing assets in shaping both economic inequality and electoral politics. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics</a>
</strong>
</em>
</p>
<hr>
<h2>The rise of the ‘asset economy’</h2>
<p>We describe this dynamic as the “<a href="https://politybooks.com/bookdetail/?isbn=9781509543458">asset economy</a>”: our socio-economic positions are defined less and less by employment income and more and more by our holdings of wealth-generating assets, especially housing.</p>
<p>The government has touted HomeBuilder as boosting construction jobs through a “tradie-led” recovery. House-price inflation has made the economy particularly dependent on construction jobs. <a href="https://australianjobs.employment.gov.au/jobs-industry/industry-overview">Construction</a> is the third-biggest employer in Australia and the only industry outside the services sector to have had significant job growth in recent years. </p>
<p>However, the government could have boosted construction jobs at least as much, if not more, by investing in <a href="https://theconversation.com/why-the-focus-of-stimulus-plans-has-to-be-construction-that-puts-social-housing-first-136519">social housing</a> or <a href="https://theconversation.com/homebuilder-misses-a-chance-to-make-our-homes-perform-better-for-us-and-the-planet-140067">energy-efficient housing</a>. Why then did it choose to make the already well-off even better off by paying owners to add value to their homes?</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-the-focus-of-stimulus-plans-has-to-be-construction-that-puts-social-housing-first-136519">Why the focus of stimulus plans has to be construction that puts social housing first</a>
</strong>
</em>
</p>
<hr>
<h2>A long history of looking after home owners</h2>
<p>It’s no coincidence that, beyond the initial emergency responses to support household and business incomes, the first substantive stimulus the Coalition government announced went to residential property owners. </p>
<p>The rise of the asset economy has occurred in <a href="https://www.thesaturdaypaper.com.au/news/politics/2020/06/13/who-morrison-looking-after/15919704009961">parallel with a shift in voting patterns</a>. The 2019 <a href="https://australianelectionstudy.org/wp-content/uploads/The-2019-Australian-Federal-Election-Results-from-the-Australian-Election-Study.pdf">Australian Election Study</a> observed a move “away from occupation-based voting and towards asset-based voting”. Voters who own housing – owner-occupiers and investors – strongly favour the Liberal and National parties. </p>
<p><a href="https://www.sydney.edu.au/arts/our-research/futurefix/asset-ownership-and-the-new-inequality.html">Our research</a> on the asset economy reveals the long-term drivers of Australia’s asset-based politics. HomeBuilder is the latest in a long line of Australian government policies over the past four decades to encourage, prop up and reward residential property ownership. These policies have included selling off public housing, tax incentives (especially <a href="https://grattan.edu.au/wp-content/uploads/2016/04/872-Hot-Property.pdf">negative gearing and capital gains tax exemption</a> for the family home) and promoting home ownership as an alternative to welfare programs such as public pensions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/fall-in-ageing-australians-home-ownership-rates-looms-as-seismic-shock-for-housing-policy-120651">Fall in ageing Australians' home-ownership rates looms as seismic shock for housing policy</a>
</strong>
</em>
</p>
<hr>
<p>These policies have not simply encouraged home ownership – they have transformed it. Nowadays the <a href="https://theconversation.com/explainer-the-financialisation-of-housing-and-what-can-be-done-about-it-73767">home is a financial asset</a>, an investment financed by growing debt that is supposed to generate capital gains. </p>
<p>Property price increases, driven by the liberalisation of credit and low interest rates, came to be seen as a key route to economic security for households in an economy with <a href="https://theconversation.com/theres-an-obvious-reason-wages-arent-growing-but-you-wont-hear-it-from-treasury-or-the-reserve-bank-122041">stagnant wages</a> and <a href="https://theconversation.com/self-employment-and-casual-work-arent-increasing-but-so-many-jobs-are-insecure-whats-going-on-100668">precarious employment</a>. Credit-driven home ownership expanded and property prices grew. Many property-owning households saw major gains in their wealth portfolios. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">HomeBuilder might be the most-complex least-equitable construction jobs program ever devised</a>
</strong>
</em>
</p>
<hr>
<h2>Housing is now a driver of inequality</h2>
<p>Credit-driven home purchases pushed prices to heights where it became increasingly difficult for people to enter the market. In Australia as well as in other Anglo-capitalist countries ― including the United Kingdom, the United States and Canada ― rates of home ownership show the <a href="https://www.tandfonline.com/doi/full/10.1080/13563467.2017.1401055">same pattern from 1980 to 2020</a>: increases followed by decreases. </p>
<p>In large cities such as Sydney and Melbourne price inflation over time has made it virtually impossible to buy a house on the basis of an average wage alone. As a result, <a href="https://www.abc.net.au/news/2019-07-17/home-ownership-falling-while-more-people-are-renting-abs-study/11318070?nw=0">private rental markets have expanded</a>, rents have soared and <a href="https://www.tandfonline.com/doi/full/10.1080/14649365.2018.1466355">new modes of occupancy</a> have emerged, including <a href="https://theconversation.com/why-adult-children-stay-at-home-looking-beyond-the-myths-of-kidults-kippers-and-gestaters-68931">multigenerational</a> and <a href="https://theconversation.com/generation-share-why-more-older-australians-are-living-in-share-houses-107183">shared living</a>. These renters are not simply locked out of home ownership but also out of the wealth it generates. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing changes in rates of home ownership and rental by households from 1994-95 to 2017-18" src="https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=582&fit=crop&dpr=1 600w, https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=582&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=582&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=731&fit=crop&dpr=1 754w, https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=731&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/349281/original/file-20200724-15-1ok5wa8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=731&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure">Source: AIHW. Data: ABS 2019</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>These trends have opened up a rift between those with and without housing assets. This entails not just major differences in levels and patterns of wealth accumulation, but also in <a href="https://theconversation.com/life-chances-policy-must-respond-to-the-real-lives-of-young-people-27425">life chances</a>. The asset economy has fundamentally <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19873673">reworked the social structure</a>, or what sociologists study as patterns of “class” or “stratification”. </p>
<p>This means even when people have similar jobs or earn the same wages, deep inequalities can exist between those who own assets and those who do not. </p>
<p>These trends are particularly notable among younger generations, giving rise to stark new forms of inequality. Those who are set to inherit housing assets or whose access to parental wealth offers a route into home ownership have a distinct advantage. They can benefit from property-based asset inflation and capital gains.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-housing-boom-propelled-inequality-but-a-coronavirus-housing-bust-will-skyrocket-it-139039">The housing boom propelled inequality, but a coronavirus housing bust will skyrocket it</a>
</strong>
</em>
</p>
<hr>
<h2>Shoring up the base in a crisis</h2>
<p>HomeBuilder is a product of the electoral politics that emerged out of this asset economy. Asset owners vote with their feet and resist any changes that would jeopardise the long-lived advantages that asset ownership gives them. The result of the 2019 <a href="https://www.abc.net.au/news/2019-05-15/federal-election-2019-alp-capital-gains-tax-negative-gearing/11108734?nw=0">federal election</a>, when Labor’s policy was to reduce the benefits available from negative gearing and the capital gains tax discount, showed this. </p>
<p>The government knows as long as it keeps in place the advantages that flow to home owners, residential property investors and the “bank of mum and dad”, they form a powerful core of the Coalition’s electoral base. It’s offering a stimulus measure directed specifically at this constituency, adding yet more value to their assets at a time of economic uncertainty. HomeBuilder is an asset owner’s policy aimed at appeasing and shoring up the Liberal-National party’s <a href="https://7ampodcast.com.au/episodes/the-power-of-tradesmen">electoral base</a>. </p>
<p>As home ownership rates decline and asset-based inequalities increase, just how long such tactics can produce electoral success remains a critical question.</p><img src="https://counter.theconversation.com/content/142169/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Voters who own housing are strongly invested in increasing the value of their wealth-generating assets. And they strongly favour the Coalition, which knows to protect their interests.Lisa Adkins, Professor of Sociology and Head of School of Social and Political Sciences, University of SydneyGareth Bryant, Senior Lecturer in Political Economy, University of SydneyMartijn Konings, Professor of Political Economy and Social Theory, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1409392020-06-26T02:20:11Z2020-06-26T02:20:11ZRenovation rescue: 6 ways to ensure HomeBuilder helps consumers, the climate and the economy<figure><img src="https://images.theconversation.com/files/343884/original/file-20200625-132982-14z0g6e.jpeg?ixlib=rb-1.1.0&rect=0%2C0%2C5427%2C3564&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Dan Peled/AAP</span></span></figcaption></figure><p>The federal government’s new HomeBuilder scheme offers eligible Australians money to renovate or build a home. While it’s attracted <a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">controversy</a>, HomeBuilder does offer a much-needed opportunity to make old homes more energy-efficient.</p>
<p><a href="https://www.climateworksaustralia.org/resource/decarbonisation-futures-solutions-actions-and-benchmarks-for-a-net-zero-emissions-australia/">Research</a> released in March showed the energy performance of housing must improve by an average 44-48% in the next decade for Australia to reach net zero emissions by 2050. This means building new homes above today’s energy standards and upgrading existing homes.</p>
<p>Australian houses built before 2004 weren’t required to meet national energy efficiency standards. In fact, many older homes average just <a href="https://www.sustainability.vic.gov.au/-/media/SV/Publications/About-us/Research/Household-retrofit-technical-reports">1.8 stars in energy efficiency</a>, which means they need more than three times as much energy to heat and cool compared to today’s six-star standard. </p>
<p>Bringing forward their upgrade to incorporate better energy performance would help Australia’s COVID-19 economic stimulus, and save occupants money on energy bills. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343887/original/file-20200625-132951-s066i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A tradesman working on a renovation in Brisbane. Homebuilder encourages Australians to build or renovate homes.</span>
<span class="attribution"><span class="source">Dan Peled/AAP</span></span>
</figcaption>
</figure>
<h2>Potential win-win</h2>
<p>The HomeBuilder initiative will <a href="https://treasury.gov.au/sites/default/files/2020-06/Fact_sheet_HomeBuilder_0.pdf">provide a grant</a> of A$25,000 to eligible property owners, with an income of no more than A$125,000 per year (or A$200,000 for a couple). And they’re required to spend at least A$150,000 on renovations. It’s touted as a way to protect construction jobs and help stimulate the post-coronavirus economy, but should be expanded to reach a greater proportion of home-owners and renters. </p>
<p>Energy-efficient home improvements include:</p>
<ul>
<li>draught-proofing doors and windows</li>
<li>switching to LED lighting</li>
<li>upgrading to solar hot water heaters</li>
<li>insulating ceilings, floors and walls</li>
<li>replacing windows with double glazing</li>
<li>creating temperature zones so you don’t have to heat or cool the whole house</li>
<li>adding shading to windows and orienting living areas to the north, to take advantage of winter sun.</li>
</ul>
<p>A new report from <a href="https://www.gbpn.org/reports/decarbonization-policies-buildings-and-construction-sector-0">the Global Building Performance Network</a> shows how large-scale building renovation programs can boost energy efficiency, and create jobs and long-term cost savings. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-has-failed-miserably-on-energy-efficiency-and-government-figures-hide-the-truth-123176">Australia has failed miserably on energy efficiency – and government figures hide the truth</a>
</strong>
</em>
</p>
<hr>
<p>It found that globally, each US$1 million invested in energy-efficient buildings globally creates an average 14 years of net employment. And improving thermal comfort in homes can benefit heart and lung health, and productivity. </p>
<p>Drawing from international examples, here are six policies Australian governments should adopt to deliver both economic impact and emissions savings over the long term. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343641/original/file-20200624-56968-8ncq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Low-carbon homes help meet climate targets and boost the economy.</span>
</figcaption>
</figure>
<h2>1. Set renovation targets</h2>
<p>Australian governments should commit to annual renovation targets to meet energy efficiency goals at a local, state and national level.</p>
<p>Australia can learn from the European Union’s <a href="https://ec.europa.eu/energy/topics/energy-efficiency/targets-directive-and-rules/energy-efficiency-directive_en">energy efficient directive</a>, introduced in 2012.</p>
<p>The directive includes increasing the rate of public building renovations to 3% a year to improve energy efficiency. It’s coupled with a long-term strategy to mobilise investment to renovate existing residential and commercial buildings. This has helped the EU <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php/Europe_2020_indicators_-_climate_change_and_energy">stay on track</a> to reach its 20% energy efficiency target this year.</p>
<p><a href="https://ec.europa.eu/energy/home_en">Analysts estimate</a> EU initiatives to renovate buildings provided the opportunity to lift the EU’s gross domestic product by <a href="https://ec.europa.eu/energy/sites/ener/files/documents/final_report_v4_final.pdf">up to 2.3% </a>between 2012-2020.</p>
<h2>2. Upgrade local precincts</h2>
<p>Australia can deliver “net zero makeovers” to multiple buildings in particular precincts, cutting emissions at scale. It could follow the lead of the Netherlands’s <a href="https://energiesprong.org/about/">Energiesprong</a> (or “Energy Leap” in English) program. </p>
<p>Energiesprong homes are designed to pay for themselves over 30 years. Innovative construction techniques, such as prefabricated facades, mean the work takes as little as a week and residents don’t have to move out during the process.</p>
<p>The program is now being implemented in the UK, Italy, France, Germany, California and New York State.</p>
<figure>
<iframe src="https://player.vimeo.com/video/235335180" width="500" height="281" frameborder="0" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen=""></iframe>
</figure>
<h2>3. Make home energy ratings and labelling clear</h2>
<p>In Australia, <a href="http://www.coagenergycouncil.gov.au/publications/trajectory-low-energy-buildings">home energy ratings</a> are not mandatory. Without them, many Australians probably know more about the energy efficiency ratings of their refrigerators than their homes.</p>
<p>The recently released <a href="https://www.industry.gov.au/data-and-publications/examining-additional-sources-of-low-cost-abatement-expert-panel-report">King Review</a> recommended Australia develop an energy performance rating scheme for new and existing residential buildings. </p>
<p>This is what’s happening in places such as the EU, China and some US states. Buildings certified under the US “Energy Star” label use <a href="https://www.energystar.gov/index.cfm?fuseaction=home.downloadfile&file=7A2324975BD5DE9E9B7655CAEFE7484C4828B35AD3AA3BFDEA33E2BD291D44E38608227E3205815277587A1AA20439EAC3FAF0B97434FFBDBADEE37670B8FC30E1A04506F11C8963E766DCE86467C11021AA276C3173888E5D5541340DF8284C728AD8CFA4351F74B60366A56F7995BECD804F9AB3CD79AB7679BC7496DB4F9D&app_code=publications&env_name=other">50% less energy</a> than typical buildings. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Du4gSvFazWs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/homes-with-higher-energy-ratings-sell-for-more-heres-how-australian-owners-could-cash-in-128548">Homes with higher energy ratings sell for more. Here's how Australian owners could cash in</a>
</strong>
</em>
</p>
<hr>
<h2>4. Enforce energy efficiency standards for renovation</h2>
<p>One easy win available to governments is to ensure compliance with existing energy efficiency requirements.</p>
<p>By applying the energy efficiency provisions of the national building code to renovations, the Beijing municipal government <a href="https://www.sciencedirect.com/science/article/abs/pii/S0959652618337946">substantially reduced emissions</a> from existing buildings.</p>
<p>Australia’s <a href="https://ncc.abcb.gov.au/">National Construction Code</a>, which sets out building regulations for new buildings, also requires major renovations to comply with its energy efficiency rules. But it’s <a href="https://apo.org.au/sites/default/files/resource-files/2017-04/apo-nid232106.pdf">poorly enforced</a>. </p>
<p>Governments must urgently clarifying and enforce the code’s energy efficiency requirements for renovations.</p>
<h2>5. Introduce standards for rental properties</h2>
<p>In the rental market, landlords and tenants have “split incentives”: tenants pay the energy bills, but landlords make investment decisions. This means investments to improve energy efficiency in rental housing aren’t often made.</p>
<p>It also means many private renters are paying high energy bills and face health risks from heat and cold.</p>
<p>In some countries, <a href="http://coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/Trajectory%20Addendum%20-%20Report%20for%20Achieving%20Low%20Energy%20Existing%20Homes_0.pdf">such as France</a>, rental properties must meet reasonable energy efficiency standards, which overcomes this problem. State governments in Australia should implement provisions like this.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&rect=0%2C89%2C4000%2C2904&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343640/original/file-20200624-56940-13yh2f4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Renters can benefit from energy efficient homes.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<h2>6. Offer financial incentives</h2>
<p>Local, state or national governments can provide direct financial incentives or tax incentives to create low-energy homes. </p>
<p>In Australia, states already offer financial incentives for energy efficiency, but tax incentives would require federal support.</p>
<p>In Germany, <a href="https://www.kfw.de/Download-Center/Konzernthemen/Research/Research-englisch/PDF-Dateien-STE-Reports/STE-Research-Report-April-2013-EN.pdf">a grant scheme</a> for energy efficient renovations and new housing created 253,000 jobs according to one measure. It also created a net benefit to public finances of about €10 billion in 2011.</p>
<h2>Looking ahead</h2>
<p>The COVID-19 impact on Australia’s construction industry is likely to last years.</p>
<p>But by adopting these six policies, Australian governments can deliver healthier, lower-energy housing, and bring us closer to meeting our climate targets.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">HomeBuilder might be the most-complex least-equitable construction jobs program ever devised</a>
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<img src="https://counter.theconversation.com/content/140939/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter is the Executive Director of the Global Buildings Performance Network, which receives funding from international philanthropic and government grants. He was funded by the United Nations Environment Program to conduct the cited study.</span></em></p><p class="fine-print"><em><span>John Thwaites is Chair of Monash Sustainable Development Institute and ClimateWorks Australia which receive funding for research, education and action projects from the Commonwealth and state governments as well as from philanthropy and industry. He is the former Deputy Premier of Victoria (1999-2007)</span></em></p><p class="fine-print"><em><span>Michael Li works with ClimateWorks Australia, which receives funding for research, education and action projects from the Commonwealth and state governments as well as from philanthropy and industry.</span></em></p>The controversial HomeBuilder scheme could come with a big upside: making old homes more energy efficient.Peter M Graham, Associate Professor - Architectural Performance, Monash UniversityJohn Thwaites, Chair, Monash Sustainable Development Institute & ClimateWorks Australia, Monash UniversityMichael Li, Senior Project Manager (Cities & Policy), ClimateWorks Australia, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1406272020-06-17T00:53:00Z2020-06-17T00:53:00ZWhat adds value to your house? How to decide between renovating and selling<figure><img src="https://images.theconversation.com/files/341429/original/file-20200612-93521-lbqvzj.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C998%2C630&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The government’s <a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder</a> scheme allows <a href="https://www.corelogic.com.au/news/homebuilder-renovations-where-are-most-owner-occupied-dwellings-below-15-million">certain</a> home owners to apply for a tax-free grant of A$25,000 if they are spending between $150,000 and $750,000 renovating a home or building a new home. Eligibility criteria are strict.</p>
<p>The scheme has boosted renovation talk in some circles (although, as CoreLogic has <a href="https://www.corelogic.com.au/news/vacuum-effect-and-its-implications-homebuilder-scheme">pointed</a> out, it may merely bring forward works that were already planned).</p>
<p>Here are some questions to ask yourself when trying to decide between renovating and moving – and how to add value to your existing home.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics</a>
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<h2>What adds value to a house?</h2>
<p>Property market observers <a href="https://www.domain.com.au/advice/how-to-make-your-home-stand-out-when-selling-932031/">advise</a> updating or renewing bathrooms or kitchens – even small fixes such as replacing a cracked or dated splashback, replacing a bath or adding skylights can go a long way.</p>
<p>Think about easy repairs that create an invaluable good first impression – a fixed-up fence, a new carpet or resurfaced flooring or even good old decluttering.</p>
<p>But remember you’ll only qualify for HomeBuilder if you plan to spend at least $150,000 on an owner-occupied home worth no more than A$1.5 million (CoreLogic has <a href="https://www.corelogic.com.au/news/homebuilder-renovations-where-are-most-owner-occupied-dwellings-below-15-million">listed</a> which suburbs have the most owner-occupied properties under A$1.5 million).</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=379&fit=crop&dpr=1 600w, https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=379&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=379&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/342065/original/file-20200616-23261-1ynzrgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Get expert advice before you dive in.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<p><a href="https://theconversation.com/newsletter"><img src="https://images.theconversation.com/files/320030/original/file-20200312-116261-a6ugi0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=90&fit=crop&dpr=2" alt="Sign up to The Conversation" width="100%"></a></p>
<h2>Factors to consider if you’re thinking of renovating</h2>
<p>How long till you retire? How secure is your employment? Thinking carefully about your earning potential between now and retirement will help you understand how what you can borrow and afford. If you are planning to stay, you will get the benefit and enjoyment of the renovations. </p>
<p>Do you need to stay close to school or work? If that’s a consideration, renovating may be worth more to you than buying further out.</p>
<p>Look closely at what your property is worth (there are plenty of online calculators) and keep track of how much similar local properties with one extra bedroom or bathroom sell for. That will give you a sense of the value-add to your home equity that a renovation might represent. </p>
<p>Be honest with yourself about the total cost of renovation. There are myriad expenses not always initially apparent. These may include:</p>
<ul>
<li>planning fees (the cost of getting a development assessed by council)</li>
<li>the cost of architectural drawings</li>
<li>consultants’ fees for environmental impact statements or arborists’ reports</li>
<li>extra costs due to a heritage listing</li>
<li>renting, if it’s not possible to live at home during renovation</li>
<li>the cost of protecting underground public assets such as water or sewerage pipes</li>
<li>extra costs caused by poor access or other limitations.</li>
</ul>
<p>Consider the possible long-term savings of retrofitting your home to be more energy-efficient. Proper insulation, secondary glazing, draught excluders and solar PV energy are expensive upfront but will save on long term running costs. It’s likely, as energy costs increase, homes that are at least partially off grid will be more attractive and valuable over time. </p>
<p>And remember that for some, even with help from HomeBuilder, renovation won’t stack up economically.</p>
<p>Some older people may eschew home renovation to put money aside to help children get a foot on the property ladder. </p>
<p>Others may decide potentially expensive renovation is worth it to hold onto a family home to which children return as they get older. It might sound sentimental but the idea of Christmas in the family homestead is worth it, for some. </p>
<h2>Tax considerations</h2>
<p>Find out what tax breaks, if any, you might be eligible for if you renovate to divide the family home into a smaller space (if you’re keen to downsize, or enhance the accessibility of your home, for example) and adding a self-contained granny flat. </p>
<p>However, if the granny flat is leased out, this section of the home would be considered income-producing. Your “main residence” is generally <a href="https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/Your-main-residence/">exempt</a> from capital gains tax when it comes time to sell, but you may not qualify entirely for this exemption if a section of the property is income-producing.</p>
<p>You may also consider remodelling the family home into a duplex and, depending on council planning laws, convert the title into dual occupancy. However, these suggestions may complicate eligibility for the HomeBuilder grant (which seems to exclude property investors, although there’s no mention of partly converting the main place into a dual occupancy). </p>
<p>The best option here is to seek advice from a tax specialist.</p>
<h2>Factors to consider if you’re thinking of selling up and buying elsewhere</h2>
<p>Use a <a href="https://www.realestate.com.au/home-loans/stamp-duty-calculator">stamp-duty calculator</a> and <a href="https://www.localagentfinder.com.au/selling-costs-calculator">cost-of-selling calculator</a> to get a rough idea of those costs.</p>
<p>How important is proximity to work? Particularly if the coronavirus pandemic has opened your (or your employer’s) eyes to working remotely, would you consider a move to a more remote area where you can afford a bigger house?</p>
<p>Chat with a range of real estate agents and get into the habit of reading market media coverage. Have a sense of what houses sell for that featured your desired attributes (such as more bedrooms or off-street parking). </p>
<p>As a chartered building surveyor, I’d advise would-be downsizers to be cautious when buying a brand new high-rise apartment, due to risks of potentially costly defects that might become apparent over time. </p>
<p>And remember, even if you do sell and buy a new place, very few are able to find the perfect home. You may decide to make renovations anyway. </p>
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<a href="https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/342073/original/file-20200616-23266-1wb6nme.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Find someone who has been through it and ask what they’d do differently.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>There are no easy answers. It comes down to your individual circumstances, your attitude to risk and ensuring you have a good grasp of the relative costs of each option. </p>
<p>Talk to a financial adviser, tax accountant, real estate agents, builders, architects and others who have been through each process about what they’d do differently next time. </p>
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<strong>
Read more:
<a href="https://theconversation.com/australias-housing-system-needs-a-big-shake-up-heres-how-we-can-crack-this-130291">Australia's housing system needs a big shake-up: here's how we can crack this</a>
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<img src="https://counter.theconversation.com/content/140627/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sara Wilkinson is a member of the Australian Property Institute and the Royal Institute of Chartered Surveyors. </span></em></p><p class="fine-print"><em><span>Hera Antoniades does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s not easy to choose between the costly hassle of renovating and the expensive upheaval of selling up, and buying a new property.Sara Wilkinson, Professor, School of the Built Environment, University of Technology SydneyHera Antoniades, Associate Professor, School of the Built Environment, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1401622020-06-05T01:51:15Z2020-06-05T01:51:15ZHomeBuilder might be the most-complex least-equitable construction jobs program ever devised<figure><img src="https://images.theconversation.com/files/339964/original/file-20200605-67347-1iw7go2.jpg?ixlib=rb-1.1.0&rect=0%2C28%2C3492%2C1450&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/@jasonpofahlphotography">Jason Pofahl/Unsplash</a></span></figcaption></figure><p><a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder</a> is a good idea gone bad. It is possibly the most complex and least equitable program the government could have devised to deliver construction jobs.</p>
<p>It gives $25,000 to people who already own a home or already have enough money to buy one while delivering a minimal stimulus to extra construction. It isn’t a program to create jobs, it is a way of making people who are reasonably well off richer.</p>
<p>It does not address homelessness, precarious rental or any of the other pressing problems that are caused by our current housing mix. </p>
<p>It might build more nice decks for sipping Chardonnay (most already planned), it might deliver ritzy new bathrooms with imported taps or even new kitchens with the latest European appliances, but it won’t help those suffering housing stress.</p>
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<strong>
Read more:
<a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics</a>
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<p>Construction is Australia’s <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/6291.0.55.003">third-biggest employer</a>, after retail and health care and social assistance. It employs one in every 11 Australians, and it generates other jobs in the building supplies industry and in design and engineering.</p>
<p>The Master Builders Association says construction is facing a decline of <a href="https://www.abc.net.au/news/2020-06-03/government-coronavirus-construction-stimulus-renovations-25k/12317786">40%</a>, with potentially horrendous implications for employment.</p>
<p>The industry has three main components:</p>
<ul>
<li><p>residential – apartments and houses</p></li>
<li><p>commercial – including offices, airport terminals, retail, tourism, education and factories</p></li>
<li><p>engineering – including roads, railways and airport runways.</p></li>
</ul>
<p>Engineering construction is doing reasonably well. </p>
<p>Across the country, governments are delivering a veritable infrastructure <a href="https://iview.abc.net.au/show/utopia">Utopia</a>. Continuing projects include the <a href="https://bigbuild.vic.gov.au/projects/melbourne-airport-rail">Tullamarine Airport Rail Link</a>, the second stage of the <a href="https://www.sydneymetro.info/citysouthwest/project-overview">Sydney Metro</a>, the <a href="https://northeastlink.vic.gov.au/">North East Link</a> motorway in Melbourne, the <a href="https://www.westconnex.com.au/">WestConnex</a> motorway in Sydney, the <a href="https://www.metronet.wa.gov.au/">Airport Metro</a> in Perth and <a href="https://crossriverrail.qld.gov.au/">Cross River Rail</a> in Brisbane. </p>
<p>All governments have to do is keep this pipeline going, which, by and large, they are doing.</p>
<p>On the other hand, commercial construction will be in deep trouble by the end of the year as current projects finish without new projects to replace them. </p>
<h2>Outlook bleak, then COVID</h2>
<p>The outlook for residential construction is desolate, although for some people with secure jobs working from home, COVID-19 appears to have ignited a mini home renovation boom.</p>
<p>Prior to COVID-19, commercial construction was <a href="https://www.masterbuilders.com.au/MediaLibraries/MB/Forecasts/Australia-Forecast_August-2019.pdf">forecast</a> to shrink from A$48.77 billion in 2020-11 to $41.3 billion in 2023-24. </p>
<p>Residential construction was forecast to bottom out in 2021-22 with only 168,000 dwelling starts, down from a peak of 233,872 starts in 2016-17. </p>
<p>Now, both forecasts will be slashed. </p>
<p>The tourism sector is dead, the education sector is near death and the multi-unit residential market, already badly impacted by confidence issues around <a href="https://theconversation.com/to-restore-public-confidence-in-apartments-rewrite-australias-building-codes-126678">construction quality</a>, is in terrible shape with many projects on hold.</p>
<h2>Not big enough, not broad enough</h2>
<p>The HomeBuilder scheme is not big enough or broad enough to do much to reignite residential construction. To be useful for jobs, it would need to deliver an extra 60,000 housing starts.</p>
<p>Given the only people who will benefit from the grant will be those some way down the track to either buying or building, it is hard to guess what the additional outcome will be, but it would be surprising if the scheme generated much additional activity. </p>
<p>Even if the full budget allocation of the scheme is taken up, it would fund only about 25,000 projects. Many would have gone ahead anyway.</p>
<p>Among the peculiarities of HomeBuilder are that it won’t work in much of Sydney where many houses are likely to be valued above the <a href="https://treasury.gov.au/coronavirus/homebuilder">$1.5 million</a> limit and it won’t work in regional towns where the required spend will overcapitalise existing houses.</p>
<h2>Complexities aplenty</h2>
<p>It will encourage people to build in fridges, microwaves, coffee makers and washing machines (many of them tastefully European) to bump the contract price up above the <a href="https://treasury.gov.au/coronavirus/homebuilder">$150,000</a> minimum.</p>
<p>It is a potential administrative nightmare for state governments that are already stretched administering existing emergency relief programs. </p>
<p>Who will establish that the value of an existing house is less than the $1.5 million upper limit? Will it be the value now in the middle of the COVID downturn or the value last year, or the value used to set local government rates? </p>
<p>Contracts are meant to be arms-length, but who will ensure the builder is not the cousin or the in-law of the owner, something that might be impossible to avoid in a small country town? If a garage is built on the side of a house, rather than as a separate structure, will it comply with the rules? And on and on and on.</p>
<h2>Few extra homes</h2>
<p>While these are legitimate questions, they ignore the big, central problem with the scheme: the opportunity to deliver a substantial program of social housing that would address real problems, including homelessness, has been missed. </p>
<p>And the government has done it in a way that will minimise the jobs created and maximise the wealth transfer to Australians who are relatively well off.</p>
<p>For a government that has mostly managed to do the right thing ever since COVID-19 hit, this has been a terrible policy clanger.</p>
<p>It will encourage everyone who cannot afford to buy a home, or who is homeless, to believe the government has forgotten them.</p><img src="https://counter.theconversation.com/content/140162/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoff Hanmer is a member of the Australian Institute of Architects. </span></em></p>The scheme will encourage people who can’t afford to buy homes or are homeless to believe the government has forgotten them.Geoff Hanmer, Adjunct Professor of Architecture, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1400672020-06-05T01:38:17Z2020-06-05T01:38:17ZHomeBuilder misses a chance to make our homes perform better for us and the planet<figure><img src="https://images.theconversation.com/files/339947/original/file-20200605-67372-ekn3pp.jpg?ixlib=rb-1.1.0&rect=94%2C103%2C2762%2C1590&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Lochiel Park in South Australia has demonstrated the benefits of building homes to a higher standard – a minimum 7.5-star rating in this case. </span> <span class="attribution"><span class="source">Stephen Berry/UniSA</span></span></figcaption></figure><p>The federal government’s new A$688 million <a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder package</a> <a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">might protect residential construction jobs</a> but it’s a missed opportunity to deliver sustainability benefits that would save owners money in the long run. The A$25,000 grant for new homes and renovations could have been better leveraged to provide <a href="https://www.domain.com.au/news/homebuilder-retirees-and-shovel-ready-projects-to-reap-benefits-of-cash-splash-960623/">broader</a> and ongoing benefits. In particular, it could have been used to ensure homes are more <a href="https://theconversation.com/sustainable-housings-expensive-right-not-when-you-look-at-the-whole-equation-60056">energy-efficient and cheaper to run</a>.</p>
<p>The grant is available for building an owner-occupied home with property values (house and land) under $750,000. Renovations costing between $150,000 and $750,000 for a property valued under $1.5 million are also eligible. Grants are means-tested against household incomes.</p>
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Read more:
<a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">HomeBuilder might be the most-complex least-equitable construction jobs program ever devised</a>
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<h2>Building new houses better</h2>
<p>The scheme could have required new houses to exceed <a href="https://www.nathers.gov.au/owners-and-builders/home-energy-star-ratings">minimum building code requirements</a> to be eligible. The development industry would then have had to deliver housing to this standard or risk losing potential buyers. Using the right design and materials would mean any extra costs are <a href="https://www.domain.com.au/news/the-cape-ecodevelopment-should-be-the-national-standard-for-a-zero-carbon-climate-resilient-future-experts-say-922298/">recouped over time</a>.</p>
<p>Heating and cooling energy use could be reduced by <a href="https://www.nathers.gov.au/sites/default/files/2019-10/NatHERS%20Star%20bands.pdf">almost 25%</a> across capital city climate zones <a href="https://www.nathers.gov.au/sites/default/files/Research%2520Rep%2520-%2520Cost%2520Savings%2520Through%2520Bld%2520Redesign%2520Pt%25202.pdf">with minimal requirements</a>. New houses could achieve these reductions with a solar PV system and 7-star performance rating (in line with <a href="https://consultation.abcb.gov.au/engagement/energy-efficiency-scoping-study-2019/user_uploads/scoping-study-energy-efficiency-ncc-2022-and-beyond.pdf">proposed changes</a> to raise the National Construction Code’s current 6-star minimum in 2022). This would reduce <a href="https://www.domain.com.au/news/the-cape-ecodevelopment-should-be-the-national-standard-for-a-zero-carbon-climate-resilient-future-experts-say-922298/">utility bills and carbon footprints</a> for householders.</p>
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Read more:
<a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics</a>
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<p>The use of majority Australian-made materials could be stipulated. Local renewable energy, insulation and energy-efficiency businesses would benefit from increased demand. Job creation would follow in these and secondary industries.</p>
<p>The $25,000 grant cost to government would more than <a href="https://www.unisa.edu.au/siteassets/episerver-6-files/global/itee/bhi/lochiel-park/berrydavidson_valueproposition-governmentexperience3.pdf">cover the costs of these requirements</a>. Various <a href="https://www.nathers.gov.au/sites/default/files/Research%2520Rep%2520-%2520Cost%2520Savings%2520Through%2520Bld%2520Redesign%2520Pt%25202.pdf">Australian studies</a> have found achieving a 7-star rating involves little if any extra cost for new houses in many locations. The cost of solar PV <a href="https://www.energycouncil.com.au/media/17320/australian-energy-council-solar-report-september-2019.pdf">continues to fall</a>.</p>
<p>Combining these sustainability measures through HomeBuilder would provide benefits across the lifetime of new houses. </p>
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<a href="https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=291&fit=crop&dpr=1 600w, https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=291&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=291&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=366&fit=crop&dpr=1 754w, https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=366&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/339962/original/file-20200605-67372-p64an.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=366&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Cape is a Victorian development where all houses have a minimum 7.5-star performance rating. The first ones built have running costs of 15% of the state average for homes of the same size.</span>
<span class="attribution"><span class="source">Trivess Moore</span>, <span class="license">Author provided</span></span>
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Read more:
<a href="https://theconversation.com/sustainable-housings-expensive-right-not-when-you-look-at-the-whole-equation-60056">Sustainable housing's expensive, right? Not when you look at the whole equation</a>
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<h2>Renovation to benefit everyone</h2>
<p>Restricting HomeBuilder grants to renovation projects over $150,000 excludes many modest renovations like upgrading a kitchen or bathroom. It has already been called a <a href="https://www.news.com.au/finance/economy/australian-economy/homebuyers-grant-scott-morrisons-homebuilder-scheme-panned/news-story/398dd7f3b6a61a6ded7837812d5c248d">handout for the rich</a>. </p>
<p>Much of the existing housing stock in Australia has <a href="https://www.sustainability.vic.gov.au/About-us/Research/Household-retrofit-trials">poor energy and thermal performance</a>. Many houses are <a href="https://theconversation.com/out-in-the-heat-why-poorer-suburbs-are-more-at-risk-in-warming-cities-66213">too hot</a> in summer or <a href="https://theconversation.com/stimulus-that-retrofits-housing-can-reduce-energy-bills-and-inequity-too-138606">too cold</a> in winter, or both. </p>
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Read more:
<a href="https://theconversation.com/when-the-heat-hits-how-to-make-our-homes-comfortable-without-cranking-up-the-aircon-110496">When the heat hits: how to make our homes comfortable without cranking up the aircon</a>
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<a href="https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=526&fit=crop&dpr=1 600w, https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=526&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=526&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=661&fit=crop&dpr=1 754w, https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=661&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/339960/original/file-20200605-67347-1b9qmw1.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=661&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Installing a heat pump hot water system is one way to cut household costs and emissions.</span>
<span class="attribution"><span class="source">Trivess Moore</span>, <span class="license">Author provided</span></span>
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<p>A better and more equitable strategy would be to provide renovation grants for energy-efficiency retrofits in owner-occupied and rental housing.</p>
<p>Retrofits could be undertaken for a fraction of the price of the renovation grant and still help a range of trades. There would be demand for heating and cooling systems, insulation and draught proofing to be supplied and installed. Households would save on bills and suffer less from extreme temperatures.</p>
<p>Energy-efficiency retrofits are a cost-effective way to improve environmental performance, thermal comfort, health and well-being. Much of Australia’s existing housing stock could be <a href="https://www.sustainability.vic.gov.au/About-us/Research/Household-retrofit-trials">upgraded to 5 stars</a> for much less than the budgets required by the announced stimulus.</p>
<p>Retrofits should be determined by an in-house sustainability assessment by qualified assessors - another potential growth area. Programs like the <a href="https://www.victorianenergysaver.vic.gov.au/save-energy-and-money/get-a-home-energy-assessment">Victorian Residential Energy Scorecard</a> already offer guidance on best practice. Identifying the best retrofitting opportunities for individual properties would ensure each household gets best value for money. </p>
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Read more:
<a href="https://theconversation.com/stimulus-that-retrofits-housing-can-reduce-energy-bills-and-inequity-too-138606">Stimulus that retrofits housing can reduce energy bills and inequity too</a>
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<h2>Capturing wider benefits</h2>
<p>A more strategic approach to HomeBuilder could help the economy and move us towards a lower-carbon future. </p>
<p>The need to upskill tradies and limitations of local manufacturing are often cited as barriers to improving the sustainability of Australian housing. HomeBuilder could offer incentives to overcome these obstacles. Setting higher building performance standards as a condition of the HomeBuilder grant would upskill workers and create jobs.</p>
<p>Tradies would have the opportunity to work on tens of thousands of houses with higher performance ratings. This would provide extensive professional experience of building more sustainable housing across the country. Local manufacturing and secondary industries could innovate and supply sustainable building materials and technologies for Australian conditions. </p>
<p>Improving housing sustainability would also help achieve broader federal and state government policy goals. For a start, it would help Australia achieve targets for reducing greenhouse gas emissions. It would also help with issues such as energy vulnerability and security.</p>
<p>As a final note, <a href="https://theconversation.com/money-for-social-housing-not-home-buyers-grants-is-the-key-to-construction-stimulus-139743">economists</a>, <a href="https://theconversation.com/coronavirus-lays-bare-5-big-housing-system-flaws-to-be-fixed-137162">housing researchers</a> and <a href="https://theconversation.com/the-need-to-house-everyone-has-never-been-clearer-heres-a-2-step-strategy-to-get-it-done-137069">social housing organisations</a> argue that a program designed to deliver more social housing would provide greater benefits. Australia certainly needs to increase its social housing stock. HomeBuilder could have helped with this. </p>
<p>If future stimulus schemes target social housing, we suggest environmental and energy performance should be top priorities from the outset.</p>
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Read more:
<a href="https://theconversation.com/why-the-focus-of-stimulus-plans-has-to-be-construction-that-puts-social-housing-first-136519">Why the focus of stimulus plans has to be construction that puts social housing first</a>
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<img src="https://counter.theconversation.com/content/140067/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Trivess Moore has received funding from various organisations including the Australian Research Council, Australian Housing and Urban Research Institute, Victorian Government and various industry partners. He is a trustee of the Fuel Poverty Research Network.</span></em></p><p class="fine-print"><em><span>Tony Matthews has received funding from the Australian Research Council and the CSIRO. He is affiliated with the Royal Town Planning Institute and the Planning Institute of Australia. He is an Ambassador for Planet Ark and a spokesperson for Greener Spaces, Better Places (formerly 202020 Vision).</span></em></p>There has never been a better time for public money to go into improving the performance of Australian housing. We could have cut household bills and emissions, as well as saving construction jobs.Trivess Moore, Senior Lecturer, School of Property, Construction and Project Management, RMIT UniversityTony Matthews, Senior Lecturer in Urban and Environmental Planning, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1400762020-06-04T07:48:12Z2020-06-04T07:48:12ZScott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics<figure><img src="https://images.theconversation.com/files/339713/original/file-20200604-67399-4qzt8u.jpg?ixlib=rb-1.1.0&rect=63%2C48%2C1589%2C821&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://easypads.co.uk/">Easypads</a></span></figcaption></figure><p>Scott Morrison’s new housing stimulus package is straight-out retail politics.</p>
<p><a href="https://treasury.gov.au/coronavirus/homebuilder">HomeBuilder</a> offers homeowners (including first home buyers) a grant of A$25,000 to build a new home worth less than $750,000 or to spend between $150,000 and $750,000 renovating an existing home. </p>
<p>The scheme is limited to owner-occupiers with reported incomes below $125,000 for singles and $200,000 for couples.</p>
<p>Giveaways to home buyers are <a href="http://politicsir.cass.anu.edu.au/sites/politicsir.anu.edu.au/files/ANUpoll-24-Housing-2017.pdf">wildly popular</a>. And who wouldn’t want their house renovated on the public dime? The trouble is it’s bad economics.</p>
<p>Take the new grants for home owners wanting to renovate. </p>
<p>To be eligible, they have to <a href="https://treasury.gov.au/sites/default/files/2020-06/HomeBuilder_Frequently_asked_questions.pdf">sign</a> a contract with a builder by the end of the year. </p>
<p>But renovations costing $150,000 or more take time to plan.</p>
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Read more:
<a href="https://theconversation.com/homebuilder-might-be-the-most-complex-least-equitable-construction-jobs-program-ever-devised-140162">HomeBuilder might be the most-complex least-equitable construction jobs program ever devised</a>
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<p>The plans need to be drawn up, finance approved, and any building and development approvals secured. </p>
<p>Which means that anyone who signs a contract with a builder today was already planning to renovate. </p>
<p>And chances are that many who sign contracts over the coming months have already planned to renovate.</p>
<p>The new grants will also encourage the in-demand tradies to raise their prices. </p>
<p>They’ll add up to a lot of spending for few jobs saved.</p>
<h2>Not many more homes</h2>
<p>The grants for buying new homes are more likely to support construction jobs. They will encouraging buyers to bring forward purchases. </p>
<p>It’s why in 2008, in response to the global financial crisis, the Rudd government <a href="https://www.smh.com.au/business/rudd-unveils-104b-stimulus-plan-20081014-50a6.html">tripled</a> the first home buyer grant to $21,000 for new homes. </p>
<p>There’s no doubt the coronavirus crisis has hit construction hard: in the past three months almost <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Latestproducts/6160.0.55.001Main%20Features5Week%20ending%202%20May%202020?opendocument&tabname=Summary&prodno=6160.0.55.001&issue=Week%20ending%202%20May%202020&num=&view=">7%</a> of the industry’s workforce have lost their jobs.</p>
<p>But most industry forecasters <a href="https://www.businessnewsaus.com.au/articles/hia-forecasts-new-home-building-to-fall-in-half.html">expect</a> at least 110,000 homes to be built (and sold) in Australia anyway next fiscal year. </p>
<p>And most of those first home buyers will be eligible for the grants</p>
<p>About 83% who had recently bought their first home in 2018 paid less than $750,000 for it. Of those, about 90% would have satisfied the income tests for the new grants. </p>
<p>That’s a lot of homes that will have to be funded first before HomeBuilder funds the construction of any extra homes.</p>
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Read more:
<a href="https://theconversation.com/why-the-focus-of-stimulus-plans-has-to-be-construction-that-puts-social-housing-first-136519">Why the focus of stimulus plans has to be construction that puts social housing first</a>
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<p>And stiff competition among prospective buyers of homes selling below the $750,000 price cap will <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">force up the prices</a> of those homes. </p>
<p>That’s a big win for developers selling house-and-land packages on the urban fringe.</p>
<p>Perhaps the best that can be said for the scheme is that it probably won’t cost much.</p>
<p>The grants are uncapped, but the government expects it to cost about $688 million for roughly 27,000 grants. And since many of those homes would have been built anyway the scheme won’t support many construction jobs either.</p>
<h2>What’d be better</h2>
<p>It’d be better to fund the states to build new social housing or refurbish existing homes, as <a href="http://www.nwhn.net.au/admin/file/content101/c6/social_housing_initiative_review.pdf">the Rudd government did</a> during the global financial crisis. </p>
<p>Many have forgotten about that scheme because it attracted so little controversy, unlike <a href="https://www.abc.net.au/news/2014-05-21/parker-lessons-to-be-learnt-from-the-pink-batts-disaster/5466762">other</a> of Rudd stimulus programs. </p>
<p>Public residential construction approvals <a href="https://blog.grattan.edu.au/2019/09/learning-from-past-mistakes-lessons-from-the-national-rental-affordability-scheme/">spiked</a> within months of the announcement, and more than half of the homes built went to tenants at risk or already homeless.</p>
<p>Building 30,000 new social housing units today would cost between <a href="https://www.afr.com/politics/federal/enemies-unite-in-call-for-10b-housing-fund-20200429-p54oej">$10 billion an $15 billion</a>. it would support the building industry, and as important, would help many of the 116,000 Australians who are homeless on any given night.</p>
<p>It might not make for good retail politics, but it would help people who need it. And it would be good economics.</p><img src="https://counter.theconversation.com/content/140076/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website.</span></em></p>It’ll have to fund tens of thousands of homes that were going to be built anyway before it creates a single extra house.Brendan Coates, Program Director, Household Finances, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.