(Image: Mitchell Squire/Private Media)

No matter what happens in housing policy in Australia, it seems homeowners always win. Always.

Labor’s “Help To Buy” housing policy, which will enable 10,000 low- and middle-income applicants a year to buy homes, with the Commonwealth taking up to 30% equity in existing homes and 40% in new homes, will only add to demand for housing.

Not significantly — 10,000 households is well under 10% of the number of first-home buyers alone in 2021, and the policy is solidly aimed at the low end of the market. The highest maximum cap will be in Sydney for $950,000. But it introduces — or reintroduces — the federal government into the housing market, in a way unseen since Paul Keating sold the Commonwealth Bank of Australia (CBA) in the 1990s.

You had to pay interest to the CBA, but you won’t have to under Help To Buy. Nor will you have to pay rent. But the government will keep the upside of its chunk of the property if it appreciates. So there’s a new source of interest-free capital in the housing market, which can borrow as much as it likes and pay far less on its borrowings than any bank.

Labor’s proposing to introduce this market distortion because its previous policy was to reform the existing, far larger market distortion, which is negative gearing, and direct it entirely at new home purchases, which would have incentivised new dwelling construction. Thanks to a scare campaign from the Coalition, the property sector and the media, that fell by the wayside.

Instead, we have a distortion to offset a distortion — 10,000 low- and middle-income earners will get help to compete against taxpayer-subsidised housing investors. It’s a lift of a scheme urged by the Grattan Institute earlier this year, but with the addition of the extra incentive for new housing purchases, which will make some marginal difference on housing supply.

The winners, of course, are homeowners who will have even more money chasing housing stock. The fact that the major property interest groups, the Housing Industry Association and the Property Council, welcomed the policy illustrates the extent to which this is a win for vested interests. But community housing sector peak bodies also welcomed it as helping to address the housing affordability crisis.

This is what economic policymaking is reduced to in Australia: vested interests benefiting from bad policy prove too powerful in the quest to remove that policy, so we introduce another bad policy — though one by no means as expensive or iniquitous — to combat its effects. At least it’s low- and middle-income earners benefiting from the distortion for once.

It’s a recognition by Labor that taking on vested interests is a sucker’s strategy for getting elected, that it can do more good by making overall policy frameworks less bad than by actually trying to get them to work well. The media and the commentariat shouldn’t complain about the lack of vision and dearth of big ideas from Labor — they were party to what was done to a reformist Labor program in 2019.

Instead, this is what you’ll get — unambitious, least-worst-in-the-circumstances, it-could-be-worse policy. Still, at least it’s motivated by a recognition that there’s a housing affordability crisis in Australia — a reality that has yet to dawn on the Coalition.