Housing costs slip through carbon tax cracks
Published: 8 June 2012
The building industry and housing affordability have been forgotten in the carbon tax debate, according to Master Builders, Queensland’s peak body for housing and construction.
Master Builders Director of Housing Policy, Paul Bidwell, says the introduction of the carbon tax on 1 July 2012 has received much media and political attention, with most commentators acknowledging it will have far-reaching implications for businesses, consumers and the Australian economy.
“Despite this, Master Builders has been surprisingly unsuccessful in pointing the spotlight at the inevitable impact the carbon tax will have on the cost of building and, in turn, housing affordability,” Mr Bidwell says.
“Unlike some industries, the building and construction sector is in a unique position – it is neither emissions intensive nor trade exposed. However, despite direct emissions from the industry being quite low in comparison to other sectors, the price on carbon will have a significant impact because the sector uses many emissions intensive inputs, such as cement, bricks, aluminium, steel and glass.
“The rising cost of construction will impact both supply and demand: the cost of building will rise, having a knock on effect on demand. Of course, the cost impact will vary depending on the materials used, the size of the building, location and ultimately the customer.
“We know the government’s compensation package will offset some of the impact. Steel producers and other trade exposed, emissions intensive industries, along with around 4 million Australian households, are set to share billions of dollars in financial assistance for rising costs.
“There are a range of forecasts, with the Centre for International Economics (CIE) estimating building and construction costs will increase by 1.4–2%, while the Allen Consulting Group estimates it will cost an additional $3,800 (approximately) to build its model two storey, detached brick veneer 200m² house.
“As 1 July draws closer, building businesses have had the tricky job of factoring in these additional costs for jobs that will run past the commencement date of the carbon tax.
“You would think it is straightforward to pass on these additional costs; however, builders have been placed in a tough position. Unless they are very confident of their estimates and can attribute the cost increase directly to the carbon tax, they cannot increase contract prices with the explanation that the increase is to cover the carbon tax.
“Where price increase claims cannot be fully substantiated, builders run the risk of breaking the law and running afoul of the Australian Competition & Consumer Commission (ACCC).
“Understanding and factoring in these additional costs are both challenging tasks given that many suppliers, manufacturers and distributors are still not sure how the carbon tax will affect their prices post 1 July.
“While the initial impacts of the tax will be offset in part by the government’s assistance package, the long term adjustment implications of the carbon price are a source of major concern for the building and construction industry, in particular, the knock on impact that the tax will have on housing affordability.
“The majority of end-users of building services are businesses and households. The CIE estimate that industry production could decline because of the carbon tax by 1–2.6%. Unfortunately, these effects are likely to increase over time as the carbon price steadily increases.
“There is a strong case for specific government assistance to offset the inevitable increases to the cost of building, such as topping up the existing First Home Owners Grant and re-focusing it on new home building, or at a state level, doing away with the need for rainwater tanks in new homes.
“Any measures that will counter the rising cost of building and make the building industry less vulnerable are imperative to Queensland’s overall economic recovery.”
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