5 common sense fixes for housing affordability

By Leith van Onselen

SQM Research managing director, Louis Christopher, yesterday released his weekly newsletter, which offered five common sense solutions to Australia’s housing affordability crisis:

1. Cut the immigration intake
It’s a rather obvious solution and is entirely logical. Yes, housing affordability is a demand and supply game. If you cut demand relative to supply, affordability will likely improve.

Sadly, some sections of the political left will use this idea as a weapon to attack the right by playing the race card. Others argue that with fewer migrants there will be fewer builders and a long term issue of fewer workers to support retirees. Well maybe, but who says the requirement is to cut the immigration intake forever?!

2. Encourage the growth of regional townships
Of course, this solution can’t be implemented overnight, but it’s a vital one if we are to keep sustainably growing our population and if we are to lower our economic dependence on the coastal capital cities, which can only be a good thing.

One of the primary reasons behind the US’s historic economic prosperity has been the prosperity of its inland towns. For those interested in reading how the US became economically successful, you will find this read most interesting.

By encouraging further regional township development, there would be a greater incentive for the populace to move into these towns and take advantage of lower house prices and a lower cost of living. Fortunately, there has been some movement already. May it continue through tax cuts and other subsidies. Regional areas in northern Australia are already benefiting.

3. Cut stamp duties for all and introduce broad-based land tax
This is such a no-brainer but it would be very difficult for the state governments to give up those juicy stamp duty receipts. Yet by removing stamp duties and introducing a broad-based land tax, it would make existing property owners far more mobile and help ensure easier entry and re-entry into the property market.

State governments would also have far more stable, predictable revenue streams instead of the boom-bust cyclical nature of their revenue now. Perhaps during the next housing downturn, state governments just might be “convinced” of this argument.

4. Reduce the break-even point to build a dwelling
The taxation and duties burden to those building a home in Australia is massive.Consider this paper from the Housing Industry Association written in 2011. The total tax burden was estimated at $268,000 for a house in Sydney, $184,000 for a house in Melbourne and $191,000 for a house in Brisbane. These costs no doubt have risen since that time. All of it is being passed onto the home buyer.

While nothing in the affordability debate is simple, reducing the break-even point for building a home should encourage greater supply relative to demand. The trick, of course, would be to ensure developers passed on the cost savings to buyers!

5. Phase out negative gearing
By phasing out negative gearing, so that is only offered only on new property over a longer period of time, this would improve affordability. Yes, back in the last election, we were on balance, against Labor’s policy. This was largely on the grounds that given the short phase in period proposed by the Labor party, this would create a potentially destructive boom/bust wave in the market. Our view is the phasing out period should be longer, about four years, to avoid this impact.

So, there you have it. We are not infavour of any solutions that effectively stimulate housing demand, such as cutting stamp duty for first home buyers and using superannuation to buy a property. Especially the superannuation solution.

Sorry to say, but I think that this is a really dumb idea as it means home buyers could end up putting all of their retirement savings into one asset class, which would be devastating for the country if we were to have a property crash. Besides, affordability would end up being worse as all that super money would just drive prices further up.

No! The answer must be focussed on addressing the supply side while not stimulating demand. It is the only way.

It’s hard disagree with any of the above, which are all sensible. But to the above list I would add the following policy solutions:

  • Tighten rules and enforcement on foreign ownership [reduces foreign demand];
  • Extend anti-money laundering rules to real estate gatekeepers [reduces foreign demand]; and
  • Have the federal government provide the states with incentive payments to:
    • undertake land-use and planning reforms [boosts supply];
    • swap stamp duties for land taxes [boosts effective supply]; and
    • reform rental tenancy laws to give greater security of tenure [reduces demand for home ownership].

As Louis Christopher notes above, policy solutions should be centered around reducing unnecessary demand while boosting affordable supply.

Of course, reforms in the above areas would put downward pressure on house prices (other things equal), which makes them hard to implement politically.

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Comments

  1. Decades after “market freedom” seemed to have comprehensively won the economic-ideological war by way of QED, we have politicians and pundits, including of the “centre right”, who are utterly clueless on this. Humanity’s worst, control-freak instincts have been resurgent – they want to be the instruments of every success, they want to issue commands, devise grand plans, have hands on controls and make things happen. The idea of a “free market” co-ordinating myriads of incentives and wants has been lost, in spite of its daily effectiveness in ubiquitous and plentiful goods and services.

    The lesson that needs to be re-learned in urban property, relates to “the invisible hand” of the market. Everything the planners and politicians do – look at the UK as the exemplar – creates further extractive powers in land rent. Every upzoning, every fast-track permit process, every local infrastructure investment, every subsidy to construction, every fee and tax abatement on developers. Land rent is like a black hole sucking in every bit of liquidity freed up anywhere else in the chain. And the actual shortfall of housing units gets worse, with the exception that in some markets, a speculative frenzy in the wrong kind of housing and /or housing in the wrong locations (not reflecting true demand at all) creates an oversupply that takes a long time to clear post-crash. The distortions to land rent via powers of extraction, feeds into distortions to location decisions (businesses, households, etc), worsens urban transport problems, and harms productivity.

    Almost nothing on the demand side need create a problem IF there is actual “freedom of the market to work” on the supply side – the crucial thing being the freedom to convert non-urban land to urban use. Problems will continue to exist even if everything on the demand side is “fixed”. You can have a shrinking population and still have unaffordable housing. You can have almost no mortgage credit at all, and still have unaffordable housing and a rentier/renter class divide. You can have no incentives at all for landlords, and still have unaffordable housing and as well, have a shortage of rental housing.

    There is hardly a subject more plagued with “unwillingness to learn” from real world evidence.

    I agree with the MB team on an “all of the above” reform package to resolve a runaway bubble, but once it has worked, which will ONLY be the case if the crucial factor of freedom to convert non-urban land to urban use has been included, every one of the demand-side reforms could be progressively repealed, to net benefit. Low interest rates and easy credit really do “stimulate” market volume (not price) if the supply side is right (look at cars, whiteware, TV’s, etc). Population increase creates economies of scale (in infrastructure as well as construction). Incentives for landlords stimulates the supply of rental accommodation and makes things as easy as possible for the unfortunate people who still can’t manage home ownership (in spite of affordability).

    • So what you’re saying is that if you can’t afford your tax obligations, you shouldn’t have to pay. Well F me, that’s the best financial advice I’ve ever received. Instead of withholding my tax and stumping up at the end of the year, I’ll just spend it all and then at tax time I’ll cry about how I can’t afford it. I am more special than a PAYE worker, I run my own business, so I can see how owning a business exempts me from tax. I have finally seen the light.

      Your argument about land tax leading to smaller development size is dubious. We have no land tax, yet the apartments are dog boxes, and there are 130m^2 blocks of land selling now. Try harder.

      • I didn’t say anything like those things you are talking about! Is your comment really intended as a reply to mine, and even on this thread?

        What I am saying about fees and taxes is, that under the status quo where the supply of land is rigged by planning regulations, if fees and taxes are abolished or abated, the price of land will simply go up by a commensurate amount – and land vendors will get the money instead of the government.

        I didn’t say anything about just defaulting on payment of taxes that exist. I didn’t say anything about land taxes causing tighter development, but that is true on principle. But rigging the supply of land via planning regulations and forcing up the price of land, also forces development to become tighter, at least as far as restrictions on density permit.

        A speculative frenzy in apartments seems to be unique to cities exposed to global speculators, and where the planners have a fetish for apartments anyway, and mistake the speculative frenzy for genuine demand, people “no longer wanting McMansions”, yadda, yadda, yadda.

    • Phil, that sounds like more neoliberalism, you know, the philosophy that led to the opening of the immigration floodgates in the first place. “Invisible hand” my arse.

      We actually need some intelligent govt intervention and rule-tweaking to stop the property market mayhem here.

      • R2M,

        Selective deregulation is a cornerstone of neoliberalism.

        The supply side of the Australian land and housing markets are highly regulated in the worst possible way.

      • What is a laissez-faire, open slather immigration policy but neoliberalism? What is lack of renter rights if not neoliberalism? Negative gearing? Allowing big corporations to landbank without limit? Lax foreign ownership laws?

        You guys make me laugh! 😂

      • I make you laugh?

        The problem was NEW regulatory approaches that ration the supply of land to “save the planet”. The solution would be reverting to the regulatory regime that kept housing affordable for decades in the past.

        Labels like neo-liberalism are just superfluous and time-wasting, the problem and the solution can be described in plain English for everyone to understand. Reverting to allowing rural land to be converted to urban use like it used to be, stands on its own merits and it is simple common sense and evidence-based reasoning. If anything, it was a feature of a politically “conservative” past that needs to be restored after a disastrous contemporary experiment in utopian regulating and central planning, which certainly has nothing to do with any political movement with the term “liberalism” in it. Unless you are using the term in the perverted modern American sense, to refer to leftist, nanny-statist, control-freakery (this is because the Left co-opted the term in truly Orwellian fashion).

      • The problem was NEW regulatory approaches that ration the supply of land to “save the planet”

        Bwahaha! I’ve got a bridge to sell you, Phil. But seriously, the environmental concerns were just a figleaf to cover the real motivation, which was to drive up land values, and therefore council rates, and also to enrich their mates in landbanking (the same mates with the cash-stuffed manila envelopes, operating on a typical neoliberal free-for-all basis).

    • Top comment, Phil. Thanks.

      And thanks to Louis Christopher for seeing through the maze of lies to the national interest.

      Exchanging Stamp Duty for State Land Tax would be a step toward the freedoms the so-called neo-liberals claim they want – mobility, choice, dynamism and opportunity.

      Ground rents are an ideal tax base. They are created by our aggregate activity and investment, not by individual landholders.

      And anyone who finds paying tax repugnant can not own land – this is the ultimate voluntary tax.

      • naturaltrustMEMBER

        “Exchanging Stamp Duty for State Land Tax would be a step toward the freedoms the so-called neo-liberals claim they want – mobility, choice, dynamism and opportunity.”

        You are absolutely blind, David.

        BLIND AND IN DENIAL OF YOUR OWN PROSPER AUSTRALIA REPORTS

        Your Professor Cameron Murray clearly states that it is an objective of Canberra’s Universal Land Tax to reduce the amount of land homeowners can have. In other words…Live in small dog box apartments and dog box boundary to boundary houses on very small blocks of land.

        Murray says, in Orwellian speak, on page six or the report (my capitalization):

        Many specific objectives were nested within
        the overarching ones. For example, one objective
        outlined in the Review was for INCREASED DENSIFICATION TO PROVIDE EFFICIENCY BENEFITS of
        lower infrastructure costs for new dwellings
        and commercial uses and meet equity objectives
        by charging rates based on the value of
        the consumption of land.

        https://www.prosper.org.au/2016/09/12/the-first-interval-evaluating-acts-land-value-tax-transition-full-report/

        The title of the report is:

        The First Interval – Evaluating ACT’s Land Value Tax Transition – Full Report

        You must have integrity if you are going to write for public consumption, David, and you must be seen as honest and genuine.

      • Thank you, naturaltrust, for further advertising the genuine progress the ACT is making to improve the quality of the lives of its residents by winding back a very bad tax in favor of one Treasury says no harm – and in fact, actually makes the Australian people a profit.

        Please read Prosper’s ACT report. naturaltrust has helpfully provided a link.

        Louis Christopher describes this change as a ‘no-brainer’, a phrase also used by John Freebairn, Gavin Wood and Saul Eslake in this context.

        Untax labour, untax capital, tax the land.

      • naturaltrustMEMBER

        Once again you misspeak to maintain your untruth, David.

        As I wrote above:

        “Your Professor Cameron Murray clearly states that it is an objective of Canberra’s Universal Land Tax to reduce the amount of land homeowners can have. In other words…Live in small dog box apartments and dog box boundary to boundary houses on very small blocks of land.”

        Come on, David, admit it. Or is your ego bigger than your heart, your honor or your integrity.

        Other interested people can look on page 6 of the report.

        QUOTE (My capitalization):

        “Many specific objectives were nested within
        the overarching ones. For example, one objective
        outlined in the Review was for INCREASED DENSIFICATION TO PROVIDE EFFICIENCY BENEFITS of
        lower infrastructure costs for new dwellings
        and commercial uses and meet equity objectives
        by charging rates based on the value of
        the consumption of land.”

        https://www.prosper.org.au/2016/09/12/the-first-interval-evaluating-acts-land-value-tax-transition-full-report/

      • Oh, naturaltrust, your defence of the indefensible goes on.

        Others on this comments thread have observed residential lot sizes have fallen in recent years even though principal residences are exempt from land tax. The big gains from this trend have fallen to developers, not households.

        Land is an ideal base to fund the infrastructure that creates land’s embedded value. Win-win.

      • naturaltrustMEMBER

        Once again David:

        Once again you misspeak to maintain your untruth, David.

        As I wrote above:

        “Your Professor Cameron Murray clearly states that it is an objective of Canberra’s Universal Land Tax to reduce the amount of land homeowners can have. In other words…Live in small dog box apartments and dog box boundary to boundary houses on very small blocks of land.”

        Come on, David, admit it. Or is your ego bigger than your heart, your honor or your integrity.

        Other interested people can look on page 6 of the report.

        QUOTE (My capitalization):

        “Many specific objectives were nested within
        the overarching ones. For example, one objective
        outlined in the Review was for INCREASED DENSIFICATION TO PROVIDE EFFICIENCY BENEFITS of
        lower infrastructure costs for new dwellings
        and commercial uses and meet equity objectives
        by charging rates based on the value of
        the consumption of land.”

        https://www.prosper.org.au/2016/09/12/the-first-interval-evaluating-acts-land-value-tax-transition-full-report/

      • If I can try and explain to NaturalTrust…

        Land taxes do encourage denser development. But they are the honest way to do so, which does not create wealth transfers like the status quo approach of Procrustean rationing of the supply of land.

        If the price of land in real terms remained what it was from, say, 1955 – 1985, then it would have to be a VERY stiff land tax rate to equal the status quo effect on housing costs for all new entrants to the market, of land price inflation thanks to the rationing of the supply of land. In fact a far lower land tax rate would provide a broader base against which other taxes (income taxes etc) could be abated to net benefit, and it would encourage denser development without harshly FORCING people to live in dog boxes like the current trend in distorted land prices.

        David is wrong to say “developers” are the beneficiaries of this – it is “land owners” and “site owners” who are the beneficiaries – developers are having to pay far too much for sites and pass the costs on. And this is a massive wealth transfer to non-producers – which is the reason that the status quo policy approach is the preferred one to “save the planet from urban sprawl” (in contrast to other, fiscal measures that do not create wealth transfers). Cui Bono. Follow the money.

    • Well said Phil.
      On top of the ideas suggested by SQM, here’s another one:
      MB compiles of list of politicians & RE commentators that includes the no. of investment properties held.
      The number of IPs held by a public figure is cited in the article, eg. Malcolm Turnbull (x IPs) and Scomo (y IPs) …
      Not all commentators will be coming from a Conflict of Interest position as shown by SQM in this instance.
      Making the number of IPs held explicit will be helpful for the average reader.
      Investment property owners can be part of the solution.

  2. naturaltrustMEMBER

    1. Cut the immigration intake
    Yes… To equate with a ZERO population growth target.

    2. Encourage the growth of regional townships

    Yes.

    But what is wrong with this guy, Louis Christopher! (He now says he wants to continue to increase population growth!!!)

    He writes: “…to keep sustainably growing our population…” No! We do not need to “GROW” our population.

    3. Cut stamp duties for all and introduce broad-based land tax

    “Cut stamp duties for all…”.

    Yes.

    Cut Stamp Duties to Zero.

    “…introduce broad-based land tax.”

    No.

    A broad based Land Tax is a backward step.

    See my comments about this below after I deal with Louis Christoper’s other comments.

    “…This is such a no-brainer.”

    Your NO BRAIN is showing Christopher when you advocate for a broad based land tax..

    “Yet by removing stamp duties and introducing a broad-based land tax, it would make existing property owners far more mobile and help ensure easier entry and re-entry into the property market.”

    There are far better ways of doing this than by introducing a pernicious Broad Based Land Tax, Christopher. I know that a broad based land tax seems simple to simple people but such a tax is like eating a plastic banana and expecting it to taste like a real banana as you will see in my Land Tax comments below.

    “State governments would also have far more stable, predictable revenue streams instead of the boom-bust cyclical nature of their revenue now.”

    Yes…but that is because you remove stamp duty, Christopher. It is not because you introduce a Broad Based Land Tax. Please think these things through before you write, Christopher!

    4. Reduce the break-even point to build a dwelling

    You are simplistically saying reduce taxes on housing, Christopher. OK…A simple argument…A simplistic argument. A no-brain solution that is part of the simplistic argument that if we have no taxes at all we will fix everything!

    5. Phase out negative gearing

    Yes… of course!

    “Phase out negative gearing” and take four years if you must.

    “We are not in favour of any solutions that effectively stimulate housing demand, such as cutting stamp duty for first home buyers and using superannuation to buy a property. Especially the superannuation solution.”

    Yes, Christopher: Stamp Duty must be cut for ALL property purchasers. And the superannuation solution is not a solution.

    Now regarding Land Tax:

    From my post yesterday:

    Californians had to stop their state government when bureaucrats and politicians kept raising the amount they had to pay in Land Tax!

    “PROPOSITION 13

    On June 6th, 1978, nearly two-thirds of California’s voters passed Proposition 13, reducing property taxes by about 57%.

    Prior to Proposition 13, property taxes were out of control. People were losing their homes because they could not pay their property taxes, yet government did nothing to help them.

    In the finest tradition of the Boston Tea Party, California taxpayers stood up and said “No more!” to excessive taxes.

    The Proposition 13 Revolution swept the country and made headlines around the world. It began a change in thinking about the tax burden property owners had to bear. Proposition 13 also started a revolution in the people turning to the initiative process to gain greater control over their lives. (Howard Jarvis Taxpayers Association)”

    As I have frequently warned Land Tax promotes smaller and smaller blocks of land. Say goodby to homes with yards and say hello to Soviet style apartment living in smaller and smaller dog boxes.

    Professor Cameron Murray clearly states that it is an objective of Canberra’s Universal Land Tax to reduce the amount of land homeowners can have. In other words…Live in small dog box apartments and dog box boundary to boundary houses on very small blocks of land.

    Murray says, in Orwellian speak, on page six or the report (my capitalization):

    Many specific objectives were nested within
    the overarching ones. For example, one objective
    outlined in the Review was for INCREASED DENSIFICATION TO PROVIDE EFFICIENCY BENEFITS of
    lower infrastructure costs for new dwellings
    and commercial uses and meet equity objectives
    by charging rates based on the value of
    the consumption of land.

    https://www.prosper.org.au/2016/09/12/the-first-interval-evaluating-acts-land-value-tax-transition-full-report/

    The title of the report is:

    The First Interval – Evaluating ACT’s Land Value Tax Transition – Full Report

    More About a Universal Land Tax:

    Land Tax distorts the investment property market in the same way as it distorts the owner occupied residential market. For example; Land Tax encourages developers and buyers to use as little land as possible in each separately titled property to reduce the Land Tax. For this reason new housing and other new property development projects become a race for the bottom in creating ever smaller blocks of land and ever smaller dog box apartments.

    As farmers go out of business because they cannot afford to pay the high Land Taxes on their farms all Australians who like to eat healthy fresh farm grown food will pay more for their food.

    Google and other similar businesses that use small office space for highly profitable businesses will thrive because they will pay proportionately less Land Tax than, say farmers due to their lesser need for Land.

    Further:

    State governments in particular are facing a tax shortfall of enormous proportions when the the property market falls (around 25% of their revenue is from property taxes). In any case, State Governments are keen to take as much in taxation as the population allows them to take. Land Tax is easy for them to take and investors and foreigners are an easy target. With a Universal Land Tax governments will increase Land Tax vis a vis property values if property values fall. Don’t expect the Federal Government to reduce taxes if property prices once again rise…they are almost certainly going to try and keep any increased revenue especially if we move to a greater component of renters like in the German (Soviet-like) system Leith supports.

    Australian State government’s moves to solve the problem of foreign investors pushing up real estate prices by increasing Land Taxes and other charges has little to do with what is morally right. It is simply a tax grab that does little, if anything, to increase supply under current conditions such as more than Zero population growth.

    It is morally right to prevent money laundering and other crime related cash from purchasing Australian (ie State) real estate by enacting suitable laws but there is not nearly as much potential money in it for the states if they take the high moral route/ground.

    It is something of a misconception by the states, and the bureaucrats who are grasping for this LandTax money, that it will further fill their coffers by keeping the criminals investing and taxing them more. They are likely to have some short term gains by way of higher tax incomes but they will kill the foreign investment goose who Paul Keating sought to get eggs from when he introduced the rules for foreign investment in new properties (and only NEW) as Treasurer about 30 years ago. Increasing supply by having more property built by locals OR foreigners will reduce property prices as will reduced demand by having zero population growth through reducing immigration to a level concomitant with zero population growth.

    It would be far more economically beneficial to Australians to maintain the NEW property rule and add a requirement to rent the property. That would push down rents and increase the supply of properties for sale while also not destroying the good faith of foreign investors who have previously invested in good faith.

    Instead we will now have reduced housing supply and continued criminal involvement to the extent that criminals can continue to flaunt the law due to the absence of international standard money laundering laws.

    Taxing foreign, or any, buyers out of the market is highly inefficient and wasteful.

    Increased supply and lower demand will cause a fall in house prices. After initially building residential (and commercial and industrial) property for rental (because there is strong demand as at present) foreign investors will become more and more dismayed as their property investments fall in value (think Japan after 1990). As the investment return on property will then be comparatively very low due to higher supply and lower demand (and ideally money laundering is stopped by appropriate legislation) foreign investors will go elsewhere (providing home ownership is not of benefit to obtain residency).

    The above reasons alone should be sufficient for you to see the pernicious attraction to, and effect of Land Tax. There are more reasons than this.

    The disease of high property prices is caused by a number of variables, and Land Tax is far from being an effective treatment for that disease. The variables causing high property prices include:

    Not keeping to a Zero population growth standard (high immigration levels), poor Federal, State and Local Government planning leading to under supply of raw land and re-developable home sites, excessive building and town planning regulations and delays, allowing foreigners to purchase property and not rent, negative gearing, Stamp Duty, Land Tax on investment property, etc

    Leith’s solution to impose a Universal Land Tax on all property only increases the cost of property and the cost of doing business. That is a ludicrous solution.

    There is another relevant problem with foreign investment in Australian Real Estate, Leith.

    The distorting effects of foreign property ownership in Australia is exacerbated by the laws of other countries such as China.

    The Australian Government must insist upon reciprocation by the Chinese (and others); and insist that we should have reasonably equal property investment rules. Then foreign property invaders such as the Chinese would likely substantially withdraw from Australia and return to their own turf and we would not have to deal with the distortions in the property market they are causing.

    “Foreign investors are not allowed to buy land in China. The land in China belongs to the state and the collectives.

    Obtaining land use rights:

    A land user obtains only the land use right, not the land or any resources in or below the land. A landgrant contract shall be entered into between the land user and the land administration department of the people’s government at municipal or county level.

    Article 12 of the Provisional Regulations on Grant and Assignment of Urban State-owned Land Use Right states the different duration of rights provided for different purposes.

    Purpose Years of Grant
    Land for residential purposes 70 years
    Land for industrial purposes 50 years
    Land for purposes of educational, scientific and technological, cultural, health care or sports 50 years
    Land for commercial, tourism or recreational purposes 40 years
    Land for combined usage or other purposes 50 years” (Wikipedia)

    Australia should make it a requirement that any foreign nationals buying land/homes/real estate in Australia provide reciprocal rights to Australians buying land/homes/real estate in that foreign nationals country of origin. That is fair.

    One of the reasons the Chinese are buying up the world (including Australia) is because they cannot buy freehold in China.

    It is a knee jerk. populist and self-serving reaction by Australian Governments to raise Stamp Duties and Land Taxes (and whatever other pea and thimble tricks they choose to use to deceptively claim to deal with the foreign investor aspect of property price increases) when the simple solution is to create a level playing field. We should simply lock out the Chinese and other foreign nationals from countries that do not reciprocate with similar property ownership laws.

    Also, as I mentioned above, Australia needs international standard money laundering laws instead of allowing criminals to buy real estate and further force real property prices up. Fundamental to enforcing these rational changes is transparency of ownership of each property requiring disclosure of directors names of foreign registered companies (as the Panama Papers have revealed is necessary).

    • So what you’re saying is that if you can’t afford your tax obligations, you shouldn’t have to pay. Well F me, that’s the best financial advice I’ve ever received. Instead of withholding my tax and stumping up at the end of the year, I’ll just spend it all and then at tax time I’ll cry about how I can’t afford it. I am more special than a PAYE worker, I run my own business, so I can see how owning a business exempts me from tax. I have finally seen the light.

      Your argument about land tax leading to smaller development size is dubious. We have no land tax, yet the apartments are dog boxes, and there are 130m^2 blocks of land selling now. Try harder.

      • naturaltrustMEMBER

        hellonathan.

        Hello Nathan.

        I have no idea what you mean by this. Please explain.

        And, as for your other comment:

        “Your argument about land tax leading to smaller development size is dubious. We have no land tax, yet the apartments are dog boxes, and there are 130m^2 blocks of land selling now. Try harder.”

        Please try harder and read the report I referenced which specifically states that I am correct. Then, I suggest, you realize that there are more variables in the world than just the thoughts in your head. Dog boxes now are a result of variables such as high real estate land prices and a ready market for dog boxes to Asian investors who are familiar with dog box apartments as being common in their own countries. I will let you figure out the other variables and pray for you.

        “So what you’re saying is that if you can’t afford your tax obligations, you shouldn’t have to pay.”

      • naturaltrustMEMBER

        hellonathan.

        Hello Nathan.

        “So what you’re saying is that if you can’t afford your tax obligations, you shouldn’t have to pay.”

        I have no idea what you mean by this. Please explain.

        And, as for your other comment:

        “Your argument about land tax leading to smaller development size is dubious. We have no land tax, yet the apartments are dog boxes, and there are 130m^2 blocks of land selling now. Try harder.”

        Please try harder, Hellonathan, and read the report I referenced which specifically states that I am correct. Then, I suggest, you realize that there are more variables in the world than just the thoughts in your head. Dog boxes now are a result of variables such as high real estate land prices and a ready market for dog boxes to Asian investors who are familiar with dog box apartments as being common in their own countries. I will let you figure out the other variables and pray for you.

      • “In the finest tradition of the Boston Tea Party, California taxpayers stood up and said “No more!” to excessive taxes.”

        A bit subjective there. The idea of excessive is in the eye of the taxpayer.

        Re: Dog boxes and tiny blocks, we’re already there, have been for years without a land tax. Are you suggesting that a land tax will make them smaller. Residence Tubes, maybe?

      • naturaltrustMEMBER

        This comment is meant to be further down the page.

        Hellonathan;

        I am talking about you. YOU. Not the farmers of the nation.

        You are inventing strawmen. The farmers of the nation are not you.

        You claim you are a farmer who supports a Universal Land Tax and a GST.

        ULT and GST are regressive and harm the poor and low income earners. You can keep them as your pets.

        I disagree that we should inflict these taxes on the Australian population and I have given you many of the reasons above.

        Do not distort what I am saying to try and justify your beliefs anymore.

    • Naturaltrust

      I don’t understand how farmers can’t afford land tax yet can afford income tax and GST on their input costs?

      But, I will grant you that food may be uncompetitive against imported food. .. (I guess).

      As for buildings and land becoming smaller, to reduce the burden of land tax, wouldn’t this be played out already in the commercial sector?

      Some one is eventually paying the tax either absorbed by the land owner or if passed on directly to the tenant is factored into everything they produce. … yet I’m not aware of buildings and space within them getting smaller and smaller.

      Houses in new developments or through subdivision of old blocks are already getting smaller, from changes in policy. Do you expect council policy to change to reduce sizes further?

      You make it sound like it’s the land owners choice to make sizes smaller… The first decision is with council policy. The land owner then tries to maximise return…. not reduce land tax.

      • naturaltrustMEMBER

        Escobar,

        Universal Land Tax is a tax on the number of square meters of land.

        Farms usually require much more land than houses or an office.

        Therefore a farm owner will pay much more Universal Land Tax than a home or office owner.

      • Naturaltrust

        You’ve assumed it’ll be truly universal.

        They’ll doctor it to suit certain areas and boundaries, I’m sure.

        They’d make it a workable tax I’m sure.

      • naturaltrustMEMBER

        Escobar: Regarding land size shrinkage due to a Universal Land Tax.

        Land size shrinkage is a principal goal of Universal Land Tax. Land size shrinkage is what the Orwellian supporters of Universal Land Tax refer to, in ‘Orwellian Speak’ as “increased efficiency”.

        By “increased efficiency” the Orwellians mean smaller homes and less yard and living space for occupants; i.e. homeowners.

        Yes, Escobar. The ultimate goal of Universal Land Tax advocates is, by definition, Residence Tubes or less. It is unfortunate that many Universal Land Tax advocates do not think through the consequences of ULT and they do not see that Resident Tubes, or less, is the ultimate outcome.

      • naturaltrustMEMBER

        Escobar.

        You say, “They will doctor it.”

        Yes.. “They” will doctor it and add to the problem. See below:

        Here is a little information from the Federal Government about why Land tax (socially and economically sensibly) was done away with at a Federal Level last century (Note that there are many more problems with Land Tax than mentioned in the following brief synopsis):

        As a form of wealth tax, land taxes became less effective over time as the productivity base of the economy diversified from being mostly agrarian at the beginning of the twentieth century, and wealth was held in more diverse forms. In addition to having no regard to other forms of wealth, land taxes were applied taking no account of net property wealth, such as the value of mortgage debt. By the middle of the twentieth century wealthy primary producers and large landholders had also been largely excluded from land tax requirements through exemptions granted to land used for primary production, restricting the application of land tax to urban property. Land tax revenue became less stable, susceptible to the fluctuations of town property markets. Land taxes were also unpopular as the federal and state taxes were not well integrated with income taxes. In 1952, land taxes were abolished at the federal level, but still operate at the state and local level, accounting for 24 per cent of state and local government revenue in 2003-04 (Australian Bureau of Statistics 2006).

      • We already have zoning. All land is already zoned. My farm is zoned as a Farming Zone.

        I am a farmer.

        I endorse land tax.

        Bring on land tax now.

        The way I see it, there are only two efficient taxes. Taxing that which cannot be hidden, land, and that which cannot be avoided, consumption. Any one who argues otherwise is probably like me, using family trusts, splitting income across businesses, leasing equipment from entities I control. Honestly, it’s such a effing nightmare in red tape I’d happily pay more tax to free up the ~2 weeks of every year I spend just on the finances. It would be time better spent with my kids or actually being productive, you know, doing worky stuff.

        Oh, and a UBI would be great. It would certainly mean I can put more hands to use. Hands that are idle because I pay shit (it’s dumb shit work) and they don’t want to earn a few extra grand a year because they lose their dole. They might even lose some weight along the way. Young idle people are getting fat, ~real fat~, in rural Vic.

      • naturaltrustMEMBER

        Hellonathan,

        I hear you.

        You support universal dog box living driven by a Universal Land Tax (with exceptions for yourself, other farmers and lobbyist supported elites).

        You support special concessions for people such as yourself so that you and your lobbyist supported elite do not have to pay the Universal Land Tax but the Orwellian ruled proletariat will pay your taxes for you.

        OK.

        We disagree.

      • Do we not agree? I am for efficiency in taxation, and what we have now is incredible complexity. It is in the complexity that there is wiggle room for tax avoidance.

        I’m not sure that the farmers of Australia are the elites seeking to derive rents from the proletariat. When you consider the registers of pecuniary interests of Members and Senators it isn’t hundreds of farms in their asset holdings, it is overwhelmingly residential investment properties backed by mortgages. There’s nothing in the registers of pecuniary interests of Members and Senators that looks like WORK.

        I’m a huge believer in using resources effectively. Sustainability is my whole game. The only two efficient and sustainable taxes are land tax, because land can’t hidden, and consumption tax, because consumption must occur.

        If we place the burden of taxation on these two things alone, people will use their land more wisely, and they may consume with greater concern.

        If we apply a second level of taxation burden on things that are unsustainably produced, and have demonstrable negative externalities, like consumption of energy derived from oil instead of photons, then the consumer when presented with two equally priced options, will err on the side of sustainability, unless they have a vested interest such as shareholding in an oil company, or a business that makes money from selling oil.

        Consider this thought experiment: 34% of the nation’s wealth is held in land.

        http://www.rba.gov.au/speeches/2015/sp-dg-2015-08-12.html

        According to the above paper, our nation’s net balance is about $10 trillion. So that’s $3.4 trillion in land wealth. If we taxed only that land, and the federal government wanted to pay its WHOLE bill of $454 billion, then it holds that a land tax averaged at 13% across the board would cover the entire nation’s federal tax bill.

        If we were to just focus on getting rid of income tax, which currently accounts for $201.3 billion, and keeping all the other crap taxes, then land tax would only be 5.9% and no worker would pay a cent in income tax.

        It would drive all those property sepculators nuts wouldn’t it? Having to fork out $236,000 a year on tax on their $4m portfolio! Land speculators shouldn’t pay tax! Outrageous they would have to pay tax while some bloke who used to be a PAYE pays nothing! What a bludger, working for his free money!

        Here’s a factoid: I’ll be making more money through running farmstays on Air B’n’B in two years than I will from selling ag. Lucky I can program and make machines, too. I don’t think there are many others looking to diversify their skills and adapt and change, many simply can’t and they’re going to be whacked in the face by all this progress. If I have to adapt and change, then everyone else can, too.

        The winds are changing. Land tax is coming. It has to.

      • naturaltrustMEMBER

        Hellonathan;

        I am talking about you. YOU. Not the farmers of the nation.

        You are inventing strawmen. The farmers of the nation are not you.

        You claim you are a farmer who supports a Universal Land Tax and a GST.

        ULT and GST are regressive and harm the poor and low income earners. You can keep them as your pets.

        I disagree that we should inflict these taxes on the Australian population and I have given you many of the reasons above.

        Do not distort what I am saying to try and justify your beliefs anymore.

      • drsmithyMEMBER

        You’ve assumed it’ll be truly universal.

        No, his (extremely dishonest) “assumption” is that the value per square metre of all land is the same and that it includes capital improvements in that value.

        Ie: a square metre of empty land barely adequate for grazing cattle will be valued the same as a square metre of office space in the middle of Sydney.

      • naturaltrust:

        UBI – That pretty much guarantees an income for the non-working poor.

        0% Income tax, replaced by land tax – that pretty much removes the burden of taxation from the working poor, and places it on the wealthy.

        Tax avoidance harms the poor and low income earners AND everyone else.

        Do you think you can sum up your position in one short paragraph instead of voluminous rambling?

        I’ll try for me:

        Tax that which cannot be hidden, land, and that which cannot be avoided, consumption. Stop taxing labour. Guarantee a minimum standard of living that is greater than homelessness.

        Your turn.

      • @ hellonation.

        Farmers have nothing to fear from land tax. Agriculture is a low-value land use on a per square meter basis and a properly constructed land tax will leave them unaffected.

        Farmers should be livid at council rating on capital improved value that taxes every shed, fence, pipe and dam that farmers add to lift the productivity of the raw land. They should also be cranky about the rural recreational holders and the landbankers free-riding on the deep consideration we rightly give to genuine agricultural businesses.

      • I’d happily pay more tax to free up the ~2 weeks of every year I spend just on the finances.

        Apparently you wouldn’t….

      • naturaltrustMEMBER

        More David Collyer fantasizing that governments will be kinder with a ULT than they are at present with other taxes.

        Note David, that Californians were so overcharged by their government that they voted in a 47% reduction and other very significant concessions.

    • two plus twoMEMBER

      NT/Peter, you want stamp duties to be lowered, yet I’m not sure what your suggested replacement revenue stream is. It’s one thing to keep on shooting down a land tax idea, but unless there’s some other revenue stream, you’re just advocating for less taxation. That’d be nice for tax payers in the short term, but probably not so good for government balance sheets and the provision of services in the longer term. I’d appreciate seeing a logical and well reasoned argument rather than spamming these comments sections with unjustified opinion all the time.

      • naturaltrustMEMBER

        Two plus two.

        Comment is not spam. You are attempting to shift the argument away from fact and make it personal.

        Your comment is naive as you assume that only more taxation is a solution to less taxation.

        I will let you think about what the other options are.

        I suggest you look through my many previous posts and you will learn what they are instead of making untrue assertions in an attempt to denigrate.

        Your deliberate misinformation is not appreciated.

  3. Small markets…. VoM…. volatility…. 24/7/367 incessant bombardment wrt RE ownership being the apogee of human endeavor… Plaza Accord allowing shadow capital flows into traditional banks markets thus setting up banks to increase activity in RE innovation [all under the umbrella of efficiency]… deregulation…. impairment of government via pay to play and neoliberal self interest apologia…. demand pull from securitization… front running of land supply by various suspects… lowering of credit underwriting to facilitate bundling of long term risk for short term price taking….

    disheveled…. decades of industry lobbyists driving the agenda…. tis a short list… freeloader off to work….

    • You are a “freeloader”?! You’re here almost constantly, you even have a series of lame catchphrases….I must say, I am surprised

    • The member bit is non offensive, but, the freeloader bit is a absurd marketing ploy that Bernays would highly approve of and Freud from a supply side perspective….

  4. Thanks for posting this Leith, it’s a good read..

    Land tax makes 100% sense to me. This willl help provide motivation to replace old-style quarter acre blocks with apartments, which is a much more efficient use of land. (This is assuming a land tax works on a metre-square basis).

    I love the new freeloader status, haha.

    • naturaltrustMEMBER

      Yes Kipron4747.

      You get it.

      A Universal Land Tax to create a more Orwellian world!

      • Or at least a better landscaped world. It pains me to see how much wasted space we have in our cities..

    • naturaltrustMEMBER

      Krippon4747

      How about having ZERO population growth, and environmentally integrated housing development based on higher living standards and an integrated environment for all. (That means lots of yard and natural, or landscaped as you wish, open space).

      I think you will find that a far better goal than the Orwellian dog box existence that Universal Land Tax causes

      • “How about having ZERO population growth,”

        For the record I didn’t mention that and don’t want to rain on anyone’s parade here. But if you must focus on population growth, please note that births currently outweigh immigration 2:1, so your best bet is to stop people having kids.. :p

        “.. and environmentally integrated housing development based on higher living standards and an integrated environment for all.”

        I agree! In my view this can only really be done with apartments/townhouses, unless you want urban sprawl. Apartments are also just generally preferable lifestyle wise. Low maintenance, high amenity. Building management firms create employment too.

        “(That means lots of yard and natural, or landscaped as you wish, open space.”

        I think you will find that a far better goal than the Orwellian dog box existence that Universal Land Tax causes”

        So I really think we just have different preferences on this. I wonder if there’s any data on what kinds of housing FHBs actually want? I would think that most younger people want modern apartments near shops and public transport. I could be wrong though.

      • [email protected]MEMBER

        immigrants show a higher fecundity ..cut immigration..: p

      • The price of urban land could be and should be SO LOW, that the “forced downsizing” effect of a land tax would be nowhere near as bad as the effect of the rationing of the supply of land by planning regulations.

        Please advise why the value of land in real terms (I mean relative to incomes), varies from city to city around the world by a factor of HUNDREDS irrespective of the existence of a land tax or not. There is plenty of dog-box living being forced on people already with no land taxes at all.

        For example, people in Liverpool live much more crammed than people in Pittsburgh. The real price of land in Liverpool is something like 100 times higher than in Pittsburgh. I merely use these two cities as an example because they are so comparable economically and in population trends. Liverpool has had utopian planned rationing of land supply since the 1950’s, Pittsburgh has not. If you are worried about people having crammed living conditions forced on them, you need to focus first and foremost on urban planning. Land taxes would be nowhere near as severe, unless the rate got so high that people would rebel anyway. The status quo land price appreciation should be causing a rebellion but is not as cut-and-dried a political issue as a land tax would be.

    • naturaltrustMEMBER

      Mr Walker.

      Two bads do not a good make.

      I hear you saying, Mr Walker:

      “Lets stop having Council Rates for any one municipal area and have one big Universal Land Tax for everyone with all its adverse consequences.”

      You are free to choose those adverse consequences for yourself, if you wish, Mr Walker.

    • footsoreMEMBER

      That depends, some rates are site value (land, no capital improvements) some aren’t. Since services are generally available to blocks that abut each other, and access to services are a great determinant of land values, vacant blocks end up being subsidised by the neighbours if rates aren’t site value based.

  5. 6. Raise the fucking rates.

    Seeing so many elaborate and exotic proposals except the bleeding obvious. Rates are now set well below the emergency GFC settings while there is an extremely bubbly boom going on in the east coast. Something about repeatedly doing the same thing and expecting different results.

  6. Jumping jack flash

    Well we can write off any of these measures that would have the slightest possibility of lowering existing house prices. That includes raising the rates. It isn’t going to happen except with an irresistible external force.

    1 and 5 therefore are immediately out.

    Land tax: nobody likes the word “tax”. So that’s probably going to be a hard sell, even if they do remove or reduce duties. In many cases FHB already get a stamp duty discount without a land tax.
    Reducing break even point: he even says that developers would not pass on any savings.
    Regional townships: This is a good idea, but it would only be a temporary effect. As demand to live in a certain towns grew, prices would grow and then we’d have this problem all over again. As “city money” flowed into towns they would experience the same problems. I have seen it happen in the small town where I live.

    The answer is to create a new environment or locality where house prices remain stagnant or fall. To do this desirability must be close to 0. This will keep investors away, and they are obviously the main reason house prices hyperinflate. That and cheap debt.

    This locality must be far enough away from existing houses so as to not impact their prices. Otherwise the NIMBYs would go nuts. Can you imagine?

    To make desirability close to 0, there either needs to be a huge stigma around some location or situation, or make it incredibly difficult to live somewhere. Like, a housing estate next to a tannery or something. Houses made from shoddy materials. Houses not near public transport. No public infrastructure at all. No shopping, schools, or hospitals. Incredibly high costs of utilities. No NBN, ADSL, television reception or mobile signals, etc.

    If the government subsidises building houses with these particular properties, then they will have affordable houses that will not hyperinflate in price in this environment of rampant “investors” and artificially cheap debt.

    • “make it incredibly difficult to live somewhere. Like, a housing estate next to a tannery or something. Houses made from shoddy materials. Houses not near public transport. No public infrastructure at all. No shopping, schools, or hospitals. Incredibly high costs of utilities. No NBN, ADSL, television reception or mobile signals, etc.”

      So, Western Sydney then…? 😀

  7. Of course he’d proposed four poor solutions to address this issue that is not at all a simple supply and demand matter. The only proposed solution that has any merit is tackling NG (along with CGT concessions though – it’s a bit like ‘Love’ and ‘Marriage’, you can’t have one without the other). However, that will only go so far in addressing the precarious state of the speculative housing market.

    In all of this, no one – incl. MB – is pointing to the elephants in the room. Big elephant 1: banks and credit; and elephant 2: the institution that’s evolved where people treat property as a speculative investment. And to be clear, banks enable and promote and contribute to the speculation, and NG and CGT concessions add further incentive. The impending crisis has to be the most predictable catastrophe facing the nation since ‘Neoliberalism’ trickled down to this great nation (and I hope no one responds by saying the nation is great bc of ‘Nl’). Stagnating incomes and negligible to no wage growth (along with profit’s share of the economy growing, especially in the FIRE sector) is a predictable by-product of ‘Nl’, as is a mountain of debt that’s funded excessive, unproductive consumption and fuelled a property bubble. And it doesn’t take a genius to work out that credit fills the void left by stagnating incomes.

    Until people, the media, the corporate sector, MPs, and basically everyone and everything else get real and honest about the situation, nothing is going to change. Proposing pathetically specious solutions to address an issue that is not caused by things that the solutions aim to tackle is a waste of time, and it’s almost embarrassing that some people believe this crap! People will continue to rise the speculative wave until it comes crashing down, dragging the economy with it, only to see the level of inequality rising after things subside.

    And where will the central banks and APRA be in all this? No where. Just as both institutions have presided over the bubble inflating without doing anything (mainly bc both are run by people who have an unfettered faith in the ‘market’ in the classic ‘Nl’ vein), both will be a passive bystander as the bubble pops and the economy crashes.

    • The Maralinga nuclear test site comes to mind. I think radiation levels have more or less returned to background by now. Ripe for development.

      “In all of this, no one – incl. MB – is pointing to the elephants in the room. Big elephant 1: banks and credit; and elephant 2: the institution that’s evolved where people treat property as a speculative investment. And to be clear, banks enable and promote and contribute to the speculation, and NG and CGT concessions add further incentive.”

      To be fair, MB have been very, very consistent about taking the banks to task on this, continually pointing out dodgy lending standards and out of control growth in mortgages, as well as lack of supervision/enforcement by APRA.

      • Agree that the banks have been mentioned, however, the seemingly obvious causal link doesn’t seem to made let alone emphasised. Constraining lending was not added as a measure to tackle the issue of bubble level house prices and housing affordability on top of the four poor and one reasonable solutions in the article above… Re APRA, there has been more consistent commentary and deserved criticism, definitely don’t disagree on that.

      • ^
        Fair enough Steve. Personally I’d like to see MB advocate for high quality infrastructure projects (especially suburban and intercity heavy/light rail, and HSR). Perhaps then I’d be convinced to stop being a free-loader too. :p

        The truth is there are many problems, and many solutions. I applaud Leith / MB for gaining traction on the most politically difficult ones (immigration and tax reform) even if I would place them lower on the list.

    • Jumping jack flash

      “In all of this, no one – incl. MB – is pointing to the elephants in the room. Big elephant 1: banks and credit; and elephant 2: the institution that’s evolved where people treat property as a speculative investment. ”

      you’re correct. To tackle these issues we need to take aim squarely at the reason for hyperinflation: Investors and cheap credit. And the why: desirability.

      That’s what they basically keep saying anyway. Desirable houses hyperinflate in an environment of rampant “investors” (including foreign ones) and mountains of cheap debt.
      If every house is desirable, every house hyperinflates.

      So tackle desirability, and you’ll create affordability. Its actually a no-brainer.

  8. Please can MB give naturaltrust the opportunity to publish a blog on his view of Land Tax so that every time this issue comes up, we are not subjected to pages and pages of rant repeating the same points?

    • AuRulesMEMBER

      What an excellent suggestion Dave – – reams of repeated long winded arguments does ones head in.

    • If you’re running Chrome or Firefox, hit ‘F12’ to open developer tools. Go to the console. Copy paste the following and hit enter:

      $(‘li.comment-author-naturaltrust’).remove();

      Voila! Site value instantly enhanced, by a freeloader no less! You can automate this with tampermonkey (chrome) or greasemonkey (firefox) if you want.

  9. ErmingtonPlumbingMEMBER

    My 90 year old neighbour built the second house in our street (Patterson st) almost 70 years ago in the late 1940s and yet the lots in our street, all around 600m2, were sub-divided and for sale in 1922!,…30 years before houses started to fill the street!
    Clearly the big developers and Government weren’t working in partnership back then to keep land prices high,…back then, the market was literally flooded with supply which couldn’t all be absorbed.
    I think this was done intentionally by Governments of the past to allow returned veterans and the working class to have access to home ownership, rather than sucking the dick of developers and speculators like Government does now.
    Rent controlls also kept a lid on money for nothing speculators.
    My Grandparents also brought into Ermington, in the early 60s (late 1940s built house on Victoria rd) after renting the same house in Gladesville for 18 years!. Similar regulation in favour of
    tennants need to be revisited.
    I digress.

    Next door it was a dirt road when old mate, first built his garage , for he and his young wife to live in, while they spent over 2 years building their new fibro house, with the sewer not yet in the street.
    The other nearby blocks spent decades as market gardens and horse padocks before being built on.
    Where are the equivalent cheap blocks for working class families now?
    Flying in and out of Sydney 100s of times when a FIFO worker for FMG, I
    would always look down on the Sydney basin and marvel at the vast amount of largely unused open land beneath me,…easily 80 -90% of the Sydney basin is still open land, you dont notice this East of Parramatta of cource (though the Ku-ring-gai Chase National Park would have to be good for a quarter of a million blocks) but out west there is ample land to re zone, subdivide and flood the market with and thus bring down prices.
    When I was an apprentice, half the Tradesmen I worked under brought a block of land first and then after several years of continued saving,
    Then later started to build,…most of them owner built.
    You rarely come People doing this now, even guys in the trade.

    If we dont break this Government/Developer collusion, with the reversal of land release legislation thats written in developers favor,…then all other attempts to address housing affordability are destined to fail.
    Like in the past, Supply to the point, that thousands of purchasable building blocks remain unbuilt apon for a decade or more, is the simple answer and can be brought about with the stroke of a pen,…if only we had a Government, who gave a real fuck about housing affordability.

    • You make good points, EP.
      ► rent controls must come back to discourage specufesting ✅
      ► landbanking rorts stopped ✅

    • EXACTLY, Ermington,

      Except: “…land release legislation that’s written in developers favor…”

      It is written in “incumbent land owners” favour, not developers. Developers are victims, caught in between the incumbent land owners and the final buyers of housing. Developers have to pay incumbent land owners gouging prices and then pass those costs on if they can. It is a high risk game and it is easy to go broke either carrying the inflated site costs, or being unable to sell completed housing expensive enough to make a profit.

      • Phil….

        In case you don’t know…. most developers are just facades for international financial capital, just need some aussies with certs and licenses as front men et al…

        disheveled…. btw the easy land was gobbled up a long time ago, mostly farm land – outside – city’s, last decade-ish is on land with inundation risks, sloping (compaction problems) or bush (environmental – habitat destruction) and pest problems (especially white ants).

        disheveled…. just talking about – land – like its one generic one size fits all object is absurd from more than a few academic disciplines….

      • More spaced-out babbling from Skippy. Conspiracy theory raving about Australian developers, most of who started out as small tradies and worked their way up, “producing” not gouging or troughing. I’d like to see you tell some of these troopers to their face, that they are front men for a global capitalist fraud.

        Vague hand-waving about the quality of “most rural land outside city limits”, as if this justifies a blanket ban on conversion of rural land to urban use outside an arbitrary and illogical growth boundary. In fact development on unsafe land has been increased because pig-headed central planners insist on contiguous, pushing-out carpet growth inside their boundary, and they do NOT net out “unsafe land” when they say they have zoned for “X years supply of growth”. In Christchurch, NZ, the earthquake a few years ago caused a lot more damage than otherwise because the planners had not allowed developers to leapfrog the known unsafe land. Same story in Boulder, Colorado, with flood-prone land. I challenge you to produce one single example of a growth boundary where the planners have netted out ANY land for ANY reason, in their calculation of how many years supply they say they have zoned for.

        “Just talking about land” – of course Skippy is intellectually incapable of understanding the process by which urban economists have determined how the inputs to urban land market volatility inter-relate – and the only way to devise a formula with explanatory power, is to put “land supply” as a binary-integer type factor outside the brackets that contain the rest of the formula. This is why demand-side factors make NO difference at all in housing markets with elastic supply. The “supply” derived integer outside the brackets, is “zero”.

        Wait for it: Skippy’s response won’t include any intellectual engagement with any of the above; it will just be a whole lot more pseudo-intellectual waffle, probably produced under the influence of inhaled narcotics.

      • Phil…

        Not really compelled by your theoclassical spleen venting and ad hominem in lieu of what you accuse myself of…. just saying…

        Contra to your accusations and pleas to authority [theoclassical economists – yeah M. Friedman’s little sojourn as a propagandist for the developer lobby as revealed during he Buchanan Committee hearings on illegal lobbying activities in 1950]…… yes…. many large and medium cap RE developers are just front groups for financial umbrellas. Custom and bespoke builders are just churn or taking advantage of the tide that lifts all boats as the result of the tsunami of credit issuance, RE is just a vehicle to generate financial paper for the BSD to play with.

        I think you completely missed the evidence pre and post GFC Phil….

        disheveled…. that’s not even including the short list I provided above thread…. to reduce the whole thing to a supply and demand simplistic rule of thumb without actually doing any forensic examination is folly….

      • QED. Nothing I said, supports your labelling of me as a Friedmanite (Friedman produced no urban economic literature at all and I do not agree with his monetary “insights”).

        You rant about “developers” as if they are synonymous with “land bankers”, when they are synonymous with “builders”. It is incumbent land owners from whom developers must buy sites, who I can believe might be in cahoots with the riggers of the game – and that rigging includes the urban land rationing that you support!!!!!

        Nevertheless even then I do not believe that there is complicity between any more than a small handful of very large “land investors” and the conspiracy that (I agree with you to some extent) exists. Does George Soros own much of a portfolio of urban land? Does George Soros fund land-conservation activism? Can you connect dots like these? Helloooooo?

        You’ve got the nerve of a true ignoramus, accusing ME of ignoring “forensic analysis” to determine the role of land supply and other factors in urban land price cyclical volatility. This after I patiently summarised exactly that forensic analysis!!! YOU have obviously read NOTHING of this kind of specialist literature; I am known to MB regulars as having cited such literature at length. I enjoy debating people like Cameron Murray who actually read the literature and can discuss what they think might be wrong with it. People wanting to learn something from discussions on a site like MB, appreciate that sort of discussion. On the other hand, you are the intellectual equivalent of an SJW protest mob chanting slogans and blocking their ears.

      • Phil…

        You need to stop with the projections and non evidenced based accusations…. and stick to the objective point… M’k…

        “Nothing I said, supports your labelling of me as a Friedmanite (Friedman produced no urban economic literature at all and I do not agree with his monetary “insights”).”

        Nothing I said implied such, knee jerk imo, still this does not refute that Friedman worked [payed along which Stigler] to write propaganda which was widely distributed to forward an agenda by the most powerful lobbyist group in its day. Something with has had a long lead time and ramifications out side simplistic supply and demand rule of thumb dynamics.

        I lived in Boulder CO for almost 10 years [late 80s to early 90s], the last flood was a bit epic imo, Boulder creek inundated a good swath of the CBD and residential areas. Down stream was even worse to include fracking infrastructure. The dominate view in Boulder was to always keep its intrinsic social value and environmental attributes for its citizens. Sadly being an Uni town [CU] with high desirability to out of state students [life style and good Ed departments] due to the privatization meme of American tertiary Ed, means a once state funded Uni for state residents is run on a 60ish out of state to 40ish in state ratio to burnish the profit margins. Sad thing is a state resident will get culled by and out of state student with a lower entry score just to fill out the out of state ratio [Meritocracy at it best imo].

        Having said that all the wealthy out of state students w/ mom and dads financial acumen and networks saw great poetical in Boulder RE [buy house or Apt and not rent, then rent out after kid has graduated] as well as developers looking to cash in on the wealthy out of state student accommodation racket. This in effect has gentrified what was once a very diverse and laid back little town with some nice attributes into a very expensive place to live for those that can’t access rent controlled accommodation.

        I don’t know but your line of analysis sounds a lot like the perspective forward by think tanks like the Heritage foundation et al.

        That’s not to mention I’ve had a finger in the construction Biz from industrial, commercial and residential sector since the 80s, from L.A. to US national, international and Oz. This gets right back to your plea to authority on theoclassical economics, FYI mainstream economics has not had an operational model of nether momentary nor functional finance. Hence observation of the problem is not incorporating all the data, self induced ignorance or playing dumb aside.

        disheveled…. yeah and an MBA from the late 70, executive background, and decades of experience, so…… if you want to compel me…. try the evidence based approach that is inclusive of all the data…. and not just resort to economic homilies from the dark ages….

      • QED again. You just change the subject. I don’t give a stuff what Friedman is alleged, by the lying left, to have done in “collusion” with “developers” some decades ago. Quite possibly the incident might support what I am saying rather than refute it.

        For someone who claims all the experience that you do, you are singularly obtuse at connecting dots between INCUMBENT LAND OWNER interests, existing property investment interests, mortgage finance sector interests, and the land-supply-constricting racket. You seem to have some sort of obsession with “developers”. “Developers” are producers, not rentiers. You don’t even know what I am talking about, do you? Economics isn’t your long suit, is it?

        If you have observed a “developer” acting as a “land banker”, that is a consequence of the racket that they have been forced into co-existing with. “Developer” means “someone who develops land” – prepping sites, installing services, building stuff. They either have to pay gouging prices from incumbent land owners or land bankers, or become speculative land bankers themselves.

        You have a nerve talking about custom / bespoke builders being on some kind of tide that lifts all boats, when the racket has developers (if not having morphed into clever land bankers) caught in a vise between what the land vendors can gouge out of them, and what final consumers of housing can afford to pay. Hence the increased rates of attrition among them everywhere that this kind of planning is adopted.

        To make them the villains in all this is the epitome of ignorance and / or immoral scapegoating and bullying. You really are on the bottom of the pond, pal.

        I continue this discussion for the benefit of anyone else following it. You’re like the fake news media, you don’t see when you’re already at nil credibility, and just keep doubling down on your BS.

      • Dill….

        Friedman was outed by the Buchanan Committee hearings on illegal lobbying activities in 1950, nothing lefty about it, unless the Congress during the Truman period is lefty in your perspective….

        I would also point out the never ending supply increases [desert] in my old home town of Maricopa county AZ and increasing prices.

        disheveled…. saying economics Dill is redundant, which school are you talking about – ?????

      • WTF does something that a monetarist economist was “outed” for in the 1950’s in the USA have to do with growth containment policies and the vested interests therein, that started in California in the mid 1970’s – and in Australia in the 1990’s?

        Changing the subject is not “winning the argument”.

        I am not interested in your 1950’s scandal. it is IRRELEVANT to the discussion on hand and the economist concerned is a non-entity in URBAN economics, and nothing to do with the urban economics I am referring to.

        Ahhh, the old “high supply in Arizona” red herring. Good, something relevant to discuss, first time so far from you!

        Arizona suffers from having most of its land off limits to development for reasons other than central planners drawing a growth boundary. Much of it is National Parks. The economics of this, when the land concerned hems in a growing urban area, are the same as having a growth boundary.

        The sheer dishonesty of using Arizona (and Nevada is a similar case) as a “disproof” of the “supply” argument is an epidemic I am well familiar with. In fact Leith Van Onselen covered this point on this site, years ago:

        http://www.macrobusiness.com.au/2011/11/how-phoenix-housing-boomed-and-busted/

        You’re an infant on this site, pal. Spend a bit more time here learning and a bit less freeloading, time wasting, and running interference like the useful idiot you are, for rentier-capitalist gougers. For someone who claims to care about fat-cat capitalist gouging and injustice in the world, your idiocy is enormous.

    • Thanks Ermo. You’ve written what many people are thinking. While there are many “remedies” to the situation supply is number one. As you say there needs to be oversupply to take the heat out. Sadly it’s never going to happen while the vested interests are in control. So we wait for the cleansing process that will come and make a huge effing mess.

      • Supply of credit to all participants involved drives RE prices…. not physical supply….

      • Actually Skip, restriction on the physical supply of a basic necessity ensures that people pay as much as they can afford.

        Easier supply of credit means that people can spend more.

        Resulting in the current situation where RE prices have little to no relationship to value but are simply a reflection of how much money people have access to. Adjusting either will have an effect but by far and away physical supply is the primary issue amongst a handful of others.

  10. Just towing the party line

    Immigration is an issue, but more of an issue for me is the type of immigrant. In the 70s we may have had migrants coming here with the shirt on their backs and 5 quid in their pockets looking for work and to build a new life

    Now they come with a 7 series BMW and a suitcase of cash

    Secondly, the Regional town centres thing won’t work.. give up on it please, nonsense

    A land tax is no better than stamp duty

    The issues we have are numerous, firstly cashed up overseas buyers smash through inner and middle ring suburbs in Melbourne and Sydney like locusts, once very modest suburbs like Glen Waverley are now out of reach for 90% of the population

    Lots are released at a very slow pace, Stocklands and Mirvac buy swathes of land, sit on there, release “stages” of 30-50 lots and then wait a few more months

    Recent changes to zoning in Melbourne have made certain areas very attractive for buyers, once less desirable homes on busier roads are now commanding top dollar

    Finally, there is a “no way I can lose mentality” in the market, people paying $900k for an old house on a 600sqm block in St.Albans is now the norm, have people forgotten it is a sh*thole and that you could have bought the same place for $400k five years ago

    Whatever, you can lose, it’ll double in price in 5 years, just buy it fool

  11. Why am I a freeloader? IMO all contributors, paid up members and non members alike bring value to the blog. The reality is that some people can afford a subscription and some can’t. The owners are entitled to paywall the site, but don’t put labels on people. All successful social media sites are free to use and completely funded by advertising or data gathering sales.
    I won’t be posting on this site anymore if I’m going to carry a derogatory label.

    • It also sends a message along the lines of: we’re getting desperate for revenue. Not a good look.

      • From which it follows that there’s a risk your $199 is paying for less than 12 months’ subscription, I guess.

    • ErmingtonPlumbingMEMBER

      Why not pay up and become a proper member of the Club,…it’s not as though you have to worry about being Blackballed for following the wrong order or anything, it’s a broad “charitable” church here Mal.
      You’ll get to learn the secret handshake,…nudge nudge wink wink say no more,…and the question “How old’s your Grandmother?” won’t sound so odd,… Once you’ve joined.
      Come On Brother,…become a Goat Rider!

  12. [email protected]

    Aussie housing “affordability” will be remedied, sooner or later. Check out Sydney’s sister city, Vancouver;

    https://www.youtube.com/watch?v=bJWUcQ6xqU8&t=10s

    • I suggest that Vancouver’s bubble could still run for a while and even have another growth spurt before it actually bursts properly. These demand-side restrictions do tend to have a temporary effect. Of course something has to pop the bubble eventually, or at least be blamed for doing so.

      And when you have a market with median multiples over 11 instead of between 3 and 4, it is hardly correct to say that this or that policy reform that reduced the median multiple to “only” 9 or 10, is “the solution” to the affordability problems that bedevil Australia or anywhere else. Surely the places to be looking, are the median-multiple-3 cities – and Australian cities themselves over several decades prior to the most recent era, would do. See what ErmingtonPlumbing said just above, about how development was done once.

  13. The believe that a lack of supply is the cause of affordability issues is based on misguided economics. The elephant in the room is on the demand side. Economists are against rent controls as they are an implicit subsidy to tenants, causing over consumption of housing. Yet this same logic is not then applied to freeholders, who are in reciept of an implicit subsidy worth over a hundred billion dollars every year, as they do not pay compenastion, as tax for their right to exclude others from valuable locations. Not only does this lead to market dysfunction, but the value of this subsidy is capitalised into rental incomes and selling prices. This then acts as a transfer payment from those that own relatively little land by value, compared to the taxes they currently tax, to those where the opposite is true. Typically from the young/poor to the elderly/rich. So affordabilty issues for some groups in society and excessive individual, regional and inter-generational inequality are but two sides of the same coin.

    While reducing this transfer payment by building more homes is a noble aim, it will do so by adding large and unnecessary costs onto the economy, while increasing existing inefficiencies in the housing market.

    It would be best to end the transer payment at source with a 100% tax on the rental value of land(location). Not only would this end affordabilty issues completely and perminantly, but would then allow the market to allocate immovable property at optimal efficiency. Thus reducing vacany, under occupation and costs.

    At the end of the day, all economic policy should be judged on cost reduction only. However, because the supply side ideologues have caputured the debate on housing, we are saddled with policies that increase them.