A vacant homes tax looks certain to be included in the upcoming Federal Budget. From The Australian:
According to Sky News, the measure could see foreigners pay fees as high as $5000 per property if their house or apartment is left empty…
The revenue measures will be used to fund other housing affordability measures in the budget, according to the report…
One proposal would be to investigate the daily water usage of each of the properties in co-operation with the states…
University of NSW research suggests up to 90,000 properties are sitting empty, while in Melbourne figures have shown almost 20 per cent of investor-owned homes were empty.
I’d take a vacancy tax over nothing at all. But a vacancy tax is likely to suffer from significant implementation issues, the biggest of which is how to measure whether a home has been left vacant?
As pointed out above, one option is to base the tax on water consumption, as Prosper Australia did in its Speculative Vacancies report. However, what’s to stop absentee home owners from setting sprinklers to run in a bid to mask that the home is vacant and avoid paying the tax?
The same applies for using electricity usage as the measuring stick. Again, the absentee home owner could set timers to turn on lights at night, again masking that the home is vacant.
A better solution that could not be avoided is to implement a Commonwealth broad-based (no exemptions) land tax, which existed between 1910 until 1953.
Not only would this confer significant efficiency benefits on the economy, since land taxes are one of the most efficient sources of tax available and create positive welfare gains to the domestic population of $0.10 for each dollar raised (since non-resident home owners are also taxed):
But it would also encourage vacant landlords to put their properties to “work”, either by developing them or renting them out in order to cover the cost of the tax, thus boosting the effective supply of housing.
Moreover, if land taxes are used to replace stamp duties, then it would further encourage households to ‘right-size’ into properties that best suit their needs, thus resulting in more efficient usage of the housing stock and boosting effective supply.
