Housing affordability: Labor proposes ban on self-managed super fund loans

Labor will pledge to slug foreign property buyers and ban direct borrowing by self-managed super funds as part of new policy commitments aimed at cooling the booming property market.

The new measures – which pre-empt a housing affordability package the Turnbull government will announce in the budget next month – will be unveiled by the Labor leader, Bill Shorten, and the shadow treasurer, Chris Bowen, in Sydney on Friday.

In addition to Labor’s previous pledges to reform negative gearing and capital gains tax concessions, the ALP will undertake to restore a ban on direct borrowing by superannuation funds.

Since 2007, self managed super funds have been permitted to borrow money to buy assets, including property, and borrowing by such super funds has risen from $2.5bn in 2012 to more than $24bn.

A run on property investments by SMSFs over the past decade is one of the factors crowding out first home buyers. Clamping down on borrowing by SMSFs was a key recommendation of the Murray financial system inquiry in 2014.

Labor argues that allowing direct borrowing to continue would increase risk in the superannuation system, put pressure over the budget over the long term, and squeeze out first home buyers, who are competing with residential investors.

Labor will also double the foreign investment application fees that currently apply to residential real estate.

The fees applying to foreign purchases of properties worth $1m or less will increase from $5,000 to $10,000, fees on properties between $1m and $2m will increase from $10,100 $20,200, and properties valued at between $2m and $3m will attract a fee of $40,600, up from $20,300.

The change would apply from 1 July 2019. Labor is also proposing to double the maximum financial penalties for breaches of foreign investment rules that apply to residential real estate.

The new policy commitments also include $88m over two years for a “safe housing fund” to provide accommodation for people fleeing family violence.

Labor is also promising to work with state governments to impose a vacant property tax across jurisdictions, picking up a recent proposal from the Victorian government which is estimated to raise $80m in revenue over four years.

The opposition will also undertake to pursue a bond aggregator model to boost investment in affordable housing – an idea the Turnbull government is pursuing through its affordable housing taskforce. Under the bond aggregator model, the commonwealth would raise up to $200m through government bonds, which could be used to give loans to community housing providers or the private sector to provide social or affordable housing.

In a joint statement circulated in the lead-up to Friday’s announcement, Shorten and Bowen said the next round of changes would “improve housing affordability, create jobs, increase financial stability, and reduce homelessness.”

Key government figures have been publicly at odds in recent weeks over policies that should be included as part of the housing affordability package in the budget.

Options floated over recent weeks include possible changes to the capital gain tax concession – a reform championed by the treasurer, Scott Morrison, despite public resistance from the finance minister, Mathias Cormann.

Last week a row erupted over a proposal favoured by some in the Coalition that would see first home buyers given access to their superannuation to afford a deposit. The prime minister, Malcolm Turnbull, appeared to nix the concept by arguing the purpose of the superannuation system was to provide for retirement.