A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
Summary
This project develops a micro-simulation policy tool for the Australian housing market. The First Home Owners Grant (FHOG) (at $14 000) is found to sharply reduce borrowing constraints but to primarily attract into home ownership private tenants who would eventually have done so without the FHOG. Investors in the private rental market are found to face high effective tax rates. A Low Income Tax Credit is demonstrated to be more effective at promoting supply of low-cost private rental dwellings than the current Building Write-off Allowance.
Project Number: 80088
Research Theme: Home_ownership
Project Leader: Wood, Gavin
Funding Year: 2001
Research Centre: Western Australia
Research & Policy Bulletin
Issue 029: Increasing the supply of affordable private rental housing
The supply of affordable housing in the private rental market could be increased if the Australian government building write-off allowance were replaced by a low income housing tax credit, and by amendments to state and territory Land Tax and Stamp Duty.
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65 KB PDF Document
Research & Policy Bulletin
Issue 028: A model of the Australian housing market
AHURI has developed a microsimulation model to analyse the impact of existing and proposed government policies on the Australian housing market.
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50 KB PDF Document
Research & Policy Bulletin
Issue 030: Predicting the outcomes of home purchase assistance schemes
Government policies that promote access to home ownership have the potential to lift home ownership rates in the short run, particularly if they are targeted to ease house deposit and mortgage repayment constraints.
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65 KB PDF Document
Description
Most housing policies directly or indirectly impact on the price that households pay for housing. This research had the aim of constructing a microsimulation model that was capable of measuring the impact of Commonwealth and state government housing programs on the prices that households pay for housing, and the subsidies they receive. There were four particularly important features of this research:
- It builds on a theoretically sound conceptual framework that has received international recognition as an important contribution to our understanding of the dynamics of the housing system.
- It permits the typical demand-side analysis of housing costs and subsidies by tenure, but also allows supply-side factors and policy measures to be incorporated into the analysis. This is an innovative feature of the research.
- In addition to measurement of housing policy impacts, the microsimulation model will permit analyses of interactions with Commonwealth Government pension and benefit programs.
- Finally, the microsimulation model will be capable of generating reliable estimates of the budgetary cost of Commonwealth and state government policy programs and reforms.
The microsimulation model was based on the use of two contemporaneous cross-section databases. Supply side analyses of the rental sector used the 1997 ABS 1997 RIS Confidentialised Unit Record File (CURF). Demand and supply side analyses of the owner occupation tenure used the 1996-97 ABS Survey of Income and Housing Costs (SIHC) CURF. Finally, this same data source was used for demand side analyses of the rental tenures. An important output from the research was measurement of the effective prices paid by homeowners and tenants for housing, and the subsidies they receive as a result of housing policies. However, the model was also a resource that could be used to measure the impacts and budgetary costs of proposed reforms to policy programs. To illustrate the capability of the model in this regard, three policy reform simulations were conducted. These are analyses of:
- The impact of building write-off allowances and recent changes to this allowance on the economic costs of and returns to investor's financing the construction of residential housing for rent.
- The role of land taxes as an impediment to the emergence of multi-property landlords.
- The impact of first-home buyers grants on current public and private rental tenants relative price of home purchase.
More Information
Research and Policy Bulletin: Issue 029: Increasing the supply of affordable private rental housing
65 KB PDF Document
Research and Policy Bulletin: Issue 028: A model of the Australian housing market
50 KB PDF Document
Final Report: No. 033: A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
487 KB PDF Document
Positioning Paper: No. 028: A microsimulation model of the Australian housing market with applications to Commonwealth and State policy initiatives
874 KB PDF Document
Research and Policy Bulletin: Issue 030: Predicting the outcomes of home purchase assistance schemes
65 KB PDF Document
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