A housing jubilee and lottery to solve affordability?

People fuss over housing being expensive without ever really thinking about what their ideal world would be. My ideal world is one where everyone has the benefits of outright homeownership—few ongoing housing costs with tenure security.

One way to get those desirable social outcomes is for everyone to own their own home outright. This can be done with the stroke of a pen. Simply convert all the current residential rental leases to land titles, transferring homes from landlords to tenants, then write-off all the existing housing debt (or shift it to the central bank’s balance sheet and adjust the interest to zero).

After this housing jubilee, all homeowners will become debt-free and all tenants will become debt-free owners.

Any other vacant and under-construction homes would be nationalised and given away in a lottery to anyone who missed out by not being a tenant at the time of the switch. Holiday rental housing stock can be exempt from the Jubilee if evidence is provided that the home has been used for holiday letting in the past year.

The whole jubilee could be enacted by Christmas and our housing affordability problems would vanish.

To maintain the affordability benefits of the jubilee the government can periodically give away homes to anyone who does not have one to allow for changes to population, household formation, and age distribution. We can also redo the jubilee every couple of decades if we like.

A public agency can build new homes at a bunch of different locations across all the major cities and towns, just like a private developer. Or it can purchase them from developers, get them through inclusionary zoning, use homes that end up at the public trustee, or get homes into the system in a variety of other ways. But instead of selling them they are given away.

My preference for how to do this in practice is a housing lottery. Anyone who wants a house and doesn’t have one would go through a screening process, then if found eligible, would get a ticket for a lottery for a new home in their preferred location. Every Saturday night, to great fanfare, the lottery would be drawn. Perhaps as many as 1,000 homes per week could be drawn nationally, broken down into regional sub-lotteries of local housing to qualifying local lottery entrants. Ideally, there could be statistical targets on the number of homes needed for the system so that the typical entrant, for example, is expected to win the lottery within a year of first entering.

The total cost of producing 50,000 new homes a year is about $15 billion. This could be funded ten times over by simply tightening up existing tax loopholes and giveaways.

Alternatively, and perhaps more practically, those homes transferred for free in the jubilee can be lifetime leases rather than perpetual freehold titles. This means that when people in these homes die or move to old-age care, the house re-enters the system to be given to someone else. If their children don’t have a home, which is unlikely, since they would have themselves been eligible for a free home, they can inherit the lease for their lifetime. Otherwise, the house re-enters the system to be given to someone else. There can also be controls on sub-letting or selling free homes back into the private market.

Alongside this system, the private market can continue to function as people sell and repurchase as they choose, though if they do sell and not repurchase they can then enter the lottery if they choose.

You might think this is radical. But in fact we do exactly this in healthcare.

We spend over $100 billion per year to provide health and hospital care for free to anyone who needs it, no questions asked. Politicians quite often even brag about how much they are going to spend on the health system. Imagine if they also wanted to brag about how many new homes they built to give away!

In healthcare though we have a system of medical professionals who decide on health needs, rather than a ‘medical procedure lottery’ which would be totally inappropriate. I personally think a lottery adds excitement to the whole process. It also adds fairness, as the homes won’t ever be exactly equal in terms of locational and quality attributes, so if luck determines who gets the slightly better homes, then so be it.

The only role for bureaucratic assessments will be to ensure eligibility to enter the housing lottery in a certain location. We could foster a system of professional ‘housing general practitioners’ who assess whether the person entering the lottery is eligible (they don’t already own property) and their need based on age, family size, and location preferences.

This is absolutely doable. If we can spend $50 billion on submarines we can do this. If we can spend $100 billion per year on free healthcare, we can do this. If can give away $30 billion per in superannuation tax discounts for the richest households, we can do this.

If this idea is too radical for you, perhaps consider whether you actually want affordable housing for all.

The views expressed in this article are the author’s and do not represent the broader views of MB.

Comments

  1. ErmingtonPlumbing

    I can not wait to hear the response to this proposal from our Reusachtige!
    I imagin it will be an even greater degree of outraged and repetative calls of Socialist!,…and,…Communist!,… than one would expect to hear from drunk and sluring Bronwyn Bishop!

    • Jumping jack flash

      Yes it would surely spell the end of capitalism, and probably society as we know it.

      The whole idea of capitalism is that lunch isn’t free, and that makes people do stuff to get their lunch. As soon as you get free lunch, there’s no point in doing anything anymore.

      • Well, governments resume property all the time for redevelopment upon payment of the worth of the property. When homes are free, the worth of the property would be…..?

  2. While I’d benefit…

    You haven’t addressed the loss side of the ledger.

    Or, how the hell the government would fight the inevitable massive class action suit in the High Court of Australia.

    Ever seen The Castle? The constitution is fairly clear.

    It’s the vibe of it.

    That’s not to mention the massive market disruptions and the plunging dollar as someone has to backstop the bonds.
    Pacific Peso? Hah! Australian Bolivar.

    • Yes. I like private property as a concept. Just not the mass financialization of houses as a speculative tax shelter.

    • The Castle is fiction.

      The High Court did indeed addressed the “just terms” provisions for compulsory acquisition of property . . . . . and allowed the Commonwealth to bypass it.

      In Pye v Renshaw (1951) (http://www.austlii.edu.au/au/cases/cth/HCA/1951/8.html) the High Court approved a procedure that enabled a State (New South Wales) to acquire property without regard to “just terms” and for the Commonwealth to pay for it through Section 96 grants. Provided that the State acquisition didn’t make reference to the grant and vice versa, the “double-shuffle” purchase was held to be constitutional.

      In every regime, members of the Elite (and their sycophant supporters) like to invent myths portraying themselves as noble, wise and just. The facts are often quite different.

  3. Cameron that is a very MMT like policy you put forward, debt jubilee and the like, you commie. Now lets look at China 50m empty apartments what could they possibly do given a CAS and their own currency mmmmh???? Do something similar? Maybe even house all their people and have no homeless but, but capitalism, rent seeking how will the world exist. Na better to have lots of homeless people in a so called advanced economy.

  4. “Simply convert all the current residential rental leases to land titles, transferring homes from landlords to tenants”

    Those living with parents and paying down an IP, lose their entire life savings to a random tenant?

    It wouldn’t be the first civil war started with the stroke of a pen.

      • I am trying to work out whether housing affordability would improve due to the number of people who are killed or imprisoned, or worsened by the number of houses that are burnt to the ground.

      • But think of all the coming suicides that will happen after this housing bust? It’s all relative I suppose..

  5. This is ridiculous. I’d benefit from this, but would not hesitate to move to another country if this were even considered.

  6. As long as the wealthy have the strongest influence on government policy, this will never happen.
    Probably also force a lot of people to consider if they really do want housing affordability.
    Although it still doesn’t address the fact that there are far more jobs in Sydney than housing is provided and I don’t see how this actually fixes that particular deficit, and will likely still see cbd and near cbd property unnafordable with a once off wealth transfer from the owners to the renters of that particular property.

    • I think forcing people to consider the ramifications of affordable housing is a good thing.

      It would ram home that it is an economic necessity for businesses to decentralise to other cities, both near and far, and probably also for that Very Fast Train that people keep claiming is uneconomical to be built. (It is NOT uneconomical if it removes the problem of people being unable to save up enough to retire, because they can’t get into the home market… you’re talking more than 30% of our major cities’ residents who are going to be affected by this eventually).

      For example, in the “near” case… I went out west to Parramatta (I know, it’s “near west”) yesterday for a Thai festival. One thing that struck me as I walked around the city more than I usually do was that it’s already decently set up for a Sydneyish CBD — if filled with more office towers as well as all the residential towers that are being built. Parramatta should not just be a non-business-hours warehouse city for Sydney CBD workers… it should have more office towers allowing more people to work there. It’s got decent transit that allows many people to get TO it as well as from it (as long as they don’t live in the Eastern Suburbs, where I live; it was literally nearly 2 hours each way to get there and back — one way involved a bus, a train, and a taxi, and the other way involved a long walk, 2 trains, and 2 buses). It’s got a riverfront mostly fronted by decent (read: lower-rise than city centre, for the most part, like developments near water SHOULD be) development. And a plus for those of us with allergies, there aren’t as many people there stinking up the footpaths with their tobacco use, as Sydney’s got; I don’t know whether it’s a cultural thing, but the people of Parramatta did seem to be less into the whole tobacco thing than people in Sydney are.

      But, there’s really no excuse for it to take as long as it took me yesterday to get from Town Hall to Parramatta, stopping at Central, Redfern, Ashfield, Strathfield, Granville, Auburn, Lidcombe, Clyde, and Harris Park before Parramatta. It’s 20-some km. It should be a 20 minute train ride, with maybe stops at Central, Redfern and Strathie MAX, and a secondary local metro line or light rail handling the neighbourhoods that seem to be 1-2km apart between Parramatta and whatever the eastern-most of (Auburn/Lidcombe/Clyde/Granville/Harris Park) is.

      Me: Renter who desperately wants a house, but every time I get close to a deposit, the goal posts change somehow that make me no closer to home ownership than I was several years prior. Even I say I don’t need to live in freaking Sydney, and am here only because my work is here. Face it, there is better quality of life elsewhere, for lower costs, for people who aren’t independently wealthy and whose families haven’t been here for at least a generation, due to the cost of housing — but unfortunately the jobs for many of us are in Sydney and Melbourne. My current plan is to live somewhere I won’t name, with a good airport with cheap and relatively frequent flights to Sydney, and just FIFO to Sydney 4-5 days a week to work, bunking in backpackers. Someone in our office was doing it several years ago, and living on acreage in Victoria, and I didn’t understand why anyone would do such a thing. Now that I have experienced trying to gain entry to the Sydney housing market for 6 years, I totally get it.

  7. If it needs to be pointed out in bold that the article does not represent the broader views of MB, perhaps the article shouldn’t be on MB.

    This sort of stuff really weakens your claim to be serious contributors

    • The article is quite serious. Probably the most serious proposal to actually make housing cheaper that there has been in this country.

      • The idea is far more feasible than a policy that reduced all home prices by 25%, wiping off $1.7trillion in asset value from the balance sheets of 7 million home-owning households.
        https://www.fresheconomicthinking.com/2018/09/free-land-dirt-cheap.html

        “In my view it would be more politically expedient to simply redistribute rental housing from landlords to tenants. It would amount to the same $1.7 trillion wealth transfer. But instead of from 7 million homeowners, to potential future homebuyers, it would be from the 1.5 million landlords to the 2.7 million tenants, creating twice as many winners as losers.

        If you think reducing home prices 25% is even remotely politically feasible, then acquiring all homes from landlords and given them to tenants is almost a done deal, politically speaking. I’m deadly serious. We could do this, shift any debts onto the central bank balance sheets, and wipe our hands, having solved the affordable housing problem for another generation.”

      • I highly doubt SAP would support any of their candidates publicly discussing expropriation as a serious policy consideration.

        Please advise whether they do so that I know not to renew my membership.

      • This is a bold and imaginative idea. However it threatens people sense of greed and ability to make easy money which occurred by making a necessity of life hideously expensive as we have. Many many people see housing as the only way they can make money. They don’t see inventing something or having innovative ideas as a way to make money. Nor is working hard and saving seen as a way to get rich, its become about loading up on debt and borrowing from the future. Of course many dumb people have made a fortune from the housing boom while the talents of many intelligent people have been smashed by the many strains and burdens the housing boom has imposed. If housing became supplied with the abundance here, many people would be freed from debt servitude to pursue their creative ideas and talents which will benefit the economy, exports and family/personal lives. However as I said it also threatens the dopes who just loaded up on debt and hoarded land and property to the greater social detriment of society. They got rich but they didn’t invent anything or have an innovative idea. Also I don’t see the amount of people on anti depressants and the housing crisis as mutually exclusive, I think it is closely connected. Likewise the housing boom and the strains of debt servitude is linked to many relationship breakdowns, of course there are other reasons but financial stress is also a major reason.

      • pingupenguinMEMBER

        Other than the serious issue of landlords not being compensated for loss of assets there is another issue. Imagine this were ever announced as a serious policy. I would have a HUGE incentive as a tenant to try to find the biggest and best house I could afford to rent in the hope I would just be gifted it by the gov a short time later. However, similarly wouldn’t every landlord then have the incentive to immediately kick out any tenant and “rent” the house to their close friends or family? Did you serisouly think through any of the ganme-theoretic implications? As a tenant now I would be seriously worried about finding myself and my family on the street with no where to go if landlords paniced and froze the rental market.

      • Cameron,

        I wish you had been on board the Titanic when it struck the iceberg.

        No doubt with your unique way of thinking you could have come up with a financial scheme to make lifeboat seats completely affordable to every passenger on board. Think how many lives would have been saved.

        There is only one problem with your plan Cameron. There is a shortage of housing. To get a better outcome we need more housing (and/or less people).

      • Does it really make housing cheaper long term though? It certainly makes the current distribution more fair, but jobs, especially high paying ones are still centralised, and houses close to them will still demand a premium from people desiring to live near this work. Unless work is created where the new houses are being built you will rapidly be back to the current situation with affordable housing and no jobs, or jobs but no houses available at reasonable cost.

      • Jumping jack flash

        Maybe the most serious proposal, but certainly not the easiest or best if you look at it in terms of practicality.

        Government subsidised desert slums could easily solve the affordability problem, but they do leave a nasty taste in the mouth. The trick of course is all in the marketing.

        The upside to desert slums is that the existing debt is maintained, and the economy and financial system wouldn’t implode.
        The downside to desert slums is the possibility of a Branch-Davidian style scenario occurring. But then again if something like that happened it’d be hundreds of kilometres away from people who actually matter so, meh.

    • @Cameron Murray, I can go a step further: Don’t shift the debt to the central bank — shift it to the tenant, subject to ability to pay. I’d GLADLY, GLADLY, GLADLY take over my landlord’s mortgage payments. I can do it on my current salary, and could even handle them if the interest rates went up to 6% without any change to my remuneration. Just what I can’t do, is save up a whole deposit whilst also paying Sydney rents.

  8. So I take it you’ve given up on your political career I see.

    Are the landlords at least reimbursed for their houses being stolen off them and given to their tenants?

    The healthcare system is not comparable as the goods it provides is not unique (yes there are different levels of service, but ultimately, one heart operation in Sydney is the same if it were performed in Perth). Housing is unique (size, proximity to services, location), and your proposal suggests we treat it as though it is not.

    If people are given houses for free, why work? Or have we nationalised the mining industry and all private enterprise, and all of Australia simply lives off the dividends, completely dependent on the state. Can I choose which hand to insert my chip?

    • Are the landlords at least reimbursed for their houses being stolen off them and given to their tenants?

      This. Some people have their life savings in an IP.

      This is just a masturbatory fantasy. Delete it.

      • I’m sure this is like a warm blanket for all those poor young working class sods locked out of owning their own home by these ‘humble’ IP holders. How about investing in something else…. perhaps one of your much hyped solar farms?

      • I don’t get to agree with R2M much nowadays but I am 100% with him on this one. It is a very poorly thought out expropriation policy that will probably be laughed at even by the left faction of the Greens. I am filthy that it has come from the mouth of an SAP representative.

        SAP existing policy of taxing investors to the point of selling to owner occupiers is adequate, and at least has some chance of being politically palatable.

      • @R2M
        You are right
        It’s much the same as saying the Treasury can forgive everyone’s debt by organising bonds and getting the RBA to buy them but the taxpayer has to eventually pay the interest plus the capital.
        That will be tough enough when the banks get bailed out.
        What happens when you move from one house to the other.
        It all still has o be paid for.
        We can’t even pay for the federal government debt of $665 billion now.
        Who gets Kirribilli and who gets Bourke.
        Who gets the 78 squares home and who gets the 1-bedroom unit in Granville?

      • > “SAP existing policy of taxing investors to the point of selling to owner occupiers is adequate, and at least has some chance of being politically palatable.”

        That’s an SAP policy? Really? That sounds yum to me. Residential property should be the least desirable “investment” class… but the only way that’s going to work is if demand is curtailed by reducing both temporary and permanent migration, of course. Because until that’s done, our cities will remain so desperate for so much housing built in so much of a hurry, that there have to be windfall gains on offer to get people to build so much so fast.

  9. Seriously? The Greens did not even make bus travel free when they had Gillard over a barrel.

    Qatar reportedly does give out free houses to Qataris when they finish year 12:

    https://www.youtube.com/watch?v=rDfMSfBligc

    —-

    Public transport buses run anyway, why not do away with the cost of printing tickets when you can simply put in a land tax to fund the buses? The poor own no land and it would be the fairest tax.

    Right wing pricks tried to put in a GP tax ($6 per visit) and that was thankfully shot down.
    But if I propose that a tax of minus $250 be put on each residential electricity bill ($250 rebate per voter per quarter), that is somehow not a good idea? Remember how angry people get about electricity prices?

    • Jumping jack flash

      Kuwait do some pretty nice things with regards to houses, and energy. The government owns all the houses and you get given one and live there rent free, after you get married, I think. Electricity, and maybe gas, is free for private residences. Businesses need to pay, but that’s only just come in.

      I’d move there tomorrow, but these perks are only for citizens.
      I also was told that foreign workers are not treated very well.

    • Or Collingwood. What does that mean for my matrimonial harmony with wife a Pies supporter
      Fortunately neighbours are Bears/Dees and Hawks

      PS great idea

      • Yes need to take all this into account when devising these type of random allocation policies. I was cheering inside but quite tactful around mourning Pies supporters at full time at the GF party I attended. Had a good giggle with like minded people, away from the Pies fans shortly after

  10. Taking private property without compensation never ends well. While it is an interesting thought exercise, the author got the economics wrong. After the ‘jubliee’, it will make housing even less affordable because neither property for rent or residential mortgages will exists, so unless you win the 1000:1 lottery, you’ll be living on the street.

    Or more simply, reduce immigration, and the problem will solve itself.

  11. Or just make the debt jubilee a debt haircut on all OO mortgages. Maybe down to 4x income.

    Allow specufestors (‘landlords’) to fail; bad investment choices and all that.

    Make an example of finance execs and regulators, capital punishment style.

  12. Doesn’t a lot of tax money come through building of houses? From the tax payed by the developers, to the construction people and then things like Stamp Duty etc? This would be a sizable drop in the amount of tax received wouldn’t it? I’m not really into calculating these kinds of things so maybe I am overestimating but it seems like there’s a lot of private investment money currently going into housing that wouldn’t be in this scenario.

    Not totally against it but I need to have it fleshed out a lot more before I take it seriously.

  13. Honestly, what an infantile article. The value of Australian housing is circa $7tn, about one third is rented, so we’ll just just transfer circa $2tn of wealth shall we? Absolutely no discussion on the impact on the people on the wrong side of that equation? No discussion on the impact of socialising our largest asset class? Let’s just steal from the rich and give to the poor, she’ll be right mate!

    Want a better car? Let’s just nationalise all cars and then have a lottery to decide who gets what car! Not happy with your job? Lottery time! Free stuff for everyone!

    How does an article like this appear uncommented (other than the disclaimer, which kind of says everything) on a serious economics website? It’s the sort of thing you’d expect from a ten year old child.

    • I see you’ve stumbled across the big problem with making housing cheaper – that old $7 trillion balance sheet. In fact, the balance sheet effect of this will be smaller than a 25% fall in home prices and affect far few people. If you are talking seriously about lower home prices, then my proposal should be taken more seriously than any other policy that would decrease prices 25%. After all, it comes with a smaller economic transfer affecting fewer voters.

      • The point of my comment is that you haven’t vaguely addressed any of the practical implications of such a radical proposal. A wealth transfer of this size is unprecedented in modern democracies; you would literally see rioting and bloodshed in the streets. Whether or not it has the same broad economic impact in terms of housing value is irrelevant when you’re asking people to forcibly gift material assets to others. You are challenging the core of private property rights that underpin the entire economy. If $2tn of housing assets can be redistributed at a whim, why not other assets? Share ownership is not evenly distributed in Australia – we could raise the living standards of large numbers of retirees by confiscating shareholdings and gifting them to people who don’t already own shares. The legal, constitutional, practical and political ramifications of your proposal are enormous, it’s not just the elephant in the room, it’s the whole room.

      • True, but what if the RBA raises interest rates a few % and crashes housing 60%. You have created a similar or greater wealth transfer, but just in a more subtle way, or how about reducing interest rates from 17% to 3% and engineering an even greater transfer of wealth to existing property/asset owners?

    • No, this article is creative out of the box thinking. And it may not look so crazy if we get an Ireland like housing crash in Australia.

  14. Very interesting but a bit complicated for the pollies and likely to give the editors of AFR and News Limited a fit.

    There is a simpler solution to affordable housing and it involves land reform.

    Effective land reform requires a rapid deconcentration of land ownership.

    Govt acquires bulk farmland across the country at 25% more than market price and rezones all of it for residential housing up to 10 storeys and services it to a very basic level with reservations for future parks, community facilities and transport corridors.

    The land is sold at public auction in quarter acre blocks.

    Auction is only open to individuals and they are limited to 1 block.

    No reserve.

    A land tax of 2% of the unimproved value from day 1.

    If an approved single dwelling is not constructed within 24 months the land is forfeit without refund and government will re-auction the block.

    Interest free first mortgages of fixed amount (approx 75% cost of construction) for home building will be available to purchasers.

    Amounts required for auction price will be paid in cash or by second mortgage.

    Simultaneously the residential zoning of all currently residential zoned land within 7 km of the GPO will be rezoned residential to 10 storeys.

    • What about even dividing small holdings up into, say, 1/2 or 1 acre blocks (with commensurate services e.g. town water/ sewerage).

      Careful thought needed to not cannibalise valuable, and fast diminishing, arable land.
      Also reduced immigration….

      • Yes – reduced immigration is very important as it would mean that very little farmland would need to be chopped up.

        Especially if the residential land within 7 km of the GPO is all zoned up to 10 storeys. That is a massive expansion in supply right there and would influence prices all the way out to the fringes.

        With reductions to immigration the problem would be solved right there and then.

      • Only to you Sweeper.

        No doubt you hate the idea that the government might purchase land and then sell it back into private ownership.

        Your preference as always is for nationalisation and centralised control by the vanguard.

        Fortunately most have paid attention and lack your peculiar enthusiasms.

  15. This proposal should be road tested in Tasmania first. If civil war hasn’t broken out after 6months then perhaps it could be expanded.

  16. THIS is the reason we experience “housing un-affordability”
    https://www.theage.com.au/national/afp-seize-8-5m-of-luxury-goods-claim-chinese-criminals-buying-homes-20181115-p50g6z.html
    Tax the “immigrants” an extremely punitive & extortionate rate & impose other impositions on them if they wish to use our services. CAD i s reduced to zero. Simples. If an Australian wants to buy a house or apartment in sg or HK….well, you go check the tax rates!

    • My interest was piqued after seeing you had identified the problem with housing affordability…. but as much as I looked, I couldn’t see “easy credit” mentioned anywhere.

  17. This is a very interesting proposition and there could be many deviations of it to make it work. But I think this kind of thing could only happen and actually work in a crisis scenario. When housing prices crash, say to where median is 3 x income… (oh wait problem mostly solved)…That is the time for the government to stimulate the economy with affordable housing and keep building housing until everyone has a place to live. While we are at it Australia can create a new Australian Government bank out of the ruins of CBA Westpac and NAB and mandate that loans can never be more than 3 x income.

    Problem solved. You’re welcome.

  18. disappointing that something this juvenile appears on this blog. I guess it’s clickbait…. but do you really need clickbait when you have paid subscriptions?

  19. Why do this? The ponzi is finally starting to unravel on it’s own. It’s taken a long time, but it should sort itself out eventually. And, those that were greedy are hopefully going to learn a very good lesson.

  20. Some big assumptions by Cameron that are just wrong. Specifically, that 25% price falls are not more politically palatable than providing free houses to everyone. Why? Capitalism! When people sign up to buy a house, they understand there is a risk prices can go down (albeit they think, and rightfully so, it’s a small risk). What people don’t sign up for when they buy a house is for the state (i.e. Cameron) coming in and effectively stealing your house to give to your tenant.

    If you are going to burn so much political capital, there are so many better paths to pursue (Pfh’s approach, mining royalties).

    I concur with other commentators, unsubscribe me from SAP if this is what they believe to be reasonable policy.

  21. Locus of ControlMEMBER

    If this were to be implemented, can the powers that be please give me three months’ notice or so before it kicks in? I will go out and rent myself the flashest, nicest, best-situated, most expensive place I can find. And then wait patiently until it becomes mine, all mine mwahahahahahahahaha

    Say I rented a place (let’s say harbourside mansion) for $2k or $3k a week. After paying between $24k to $36k over three months, you could wind up with the lot. Spectacular value in my opinion. Watch out Reusa – there’d be plebs like me in the ‘exclusive areas’.

    • If they were smart these wealthy landlords would give these nice homes to friends and family in during this window of opportunity.

      • pingupenguinMEMBER

        See my comment above, that is also a huge problem. All the rental property comes off market and tenants like myself get kicked out so the landlord can out their family in place. Great outcome!

  22. I’m still looking forward to MBs critique of Cameron’s The Conversation article yesterday extolling the benefits of stamp duty.

  23. Presumably people who drew the short straw in the lottery and ended up with a dud house would favour another Jubilee. After all, it is an observable fact that not all houses are of equal attractiveness.

    And then those who lost out in the second Jubilee would favour another.

    If one Jubilee is feasible, then why stop stop at one? A priori there’s nothing that makes one preferable to two, or a hundred.

    If it can be done once, why can’t it be done every year?

    The ancient Hebrews proposed a debt Jubilee every seven times seven years:

    https://en.wikipedia.org/wiki/Jubilee_(biblical)

    – – – –

    p.s. If you get wind of this happening please give me the nod. I’ll rent the very best property I can afford on a one year one month one week lease. Then again, I suppose everyone else in the know will be trying to do likewise.

    • Expect rents to become astronomical in the lead up. tens to hundreds of thousand dollars a week for desirable property. maye more.

  24. Even StevenMEMBER

    Cameron, I can only assume you are taking the piss. A 25% across the board fall in prices through the invisible hand of the market (even if given a decent shove by the government) is infinitely more politically palatable than what you’ve proposed.

    The reasoning is self evident.

    I would say I’d like some of what you’re smoking, but I’m seriously concerned it’s inducing insanity.

  25. Comments to this article show how much the site has changed.
    It is not that radical, it’s just a personal wealth tax and one of lump sum payment to tenants to even the ledger.
    Why is it unconstitutional? The Henry review recommended a wealth tax (in the form of a death tax).
    Supposedly it is fine to tax tenants and subsidise investors for decades but unconstitutional in reverse.

    • Even StevenMEMBER

      Rubbish sweeper. It’s not just a wealth tax – it’s a confiscation of property virtually irrespective of wealth. It fails the fairness test at the most basic level.

      I’m still waiting for a clever punchline from Cameron.

      • Not at all. Someone with 10 IPs would pay more wealth tax than someone with 1.
        It’s actually similar to the window tax. A very fair and progressive wealth tax.
        owner occupiers are better off as their equity increases.
        2/3rds of the electorate is better off. Politically an election winner.
        Having said that I think it could be problematic exchanging income earning mortgages for zero paying CB money and still having a solvent banking system.

    • Sweeper, it is way too simplistic. There are many people with a single IP living with family. There are also many wealthy people who don’t believe in owning their own home. Imagine a poor person handing over their house to the rich person.

      Admittedly, it could be made fairer. However, any discussion of expropriation in parliament would collapse house prices and AUD under the weight of wealth fleeing the country. It would be chaos.

      Look at the SAP policies of taxing the crap out of foreign investors, and apply the same to those with more than one property. Force them to sell over time rather than creating chaos.

    • Sweeper,

      “..Comments to this article show how much the site has changed…”

      You only think that because you have, for the most part, been sliding further and further away into some imagined nationalisation fairy story that thankfully never existed in Australia.

  26. All the renters need to get together and go on strike.
    We need to start up tent cities on the outskirts of our major cities and all renters need to move out for 12 months.
    Watch the cracks appear as the bankruptcies start.
    The screaming you can hear is from the landowners.
    After 12 months the prices should have dropped by 40%
    You know it makes sense.

      • I’m pretty open to anything that actually decreases housing costs.
        Anything except increasing the supply of decent housing and/or reducing the need for extra housing (reduce immigration).
        Maybe a slight change to the tax system could get every Australian and 400,000 immigrants per year, into great housing, with great transportation, great hospitals and great schooling.
        Why go to all the trouble of building enough hard stuff like houses and hospitals when some “Jesus-like” character can use his mind to solve the problem some other way? Cameron Murray does a modern version of the loaves and fishes, but this time with houses for all the immigrants. Thanks Cameron.

      • Even StevenMEMBER

        @ Claw

        Yes, a good reality check. However you want to slice and dice the tax/wealth equation, living standards are on the decline. Whilst tax settings are very important, the goal should be better living.

      • OK, Cameron, help me get funding for Camp Deposit, which I keep proposing everywhere, and several people have said would work, but I lack the funding and the right advisors to make it work.

        Imagine a non-profit set up to be a charity, to whom land bankers can donate use of their land within a bus or bike ride of a train station, which ideally has utility connections, for 3 years at a time, who leases back to Camp Deposit at very low cost the land to run its program. Now imagine all the mining dongas going unused. Move the dongas to the land – another tax deduction for the people who own them.

        Take applications, and require similar standards of affordability as rentals/buyers with the exception of deposit/stamp duty in the bank — credit check, job that would be enough to eventually afford mortgage payments on a minimal unit, etc. Pick people who meet the base qualifications either based on lottery or based on some sort of merit, such as skills that can be contributed to the community (I know, I know, sounds scarily like a temporary commune). People move in as singles or couples, maybe even as SMALL families, and pay market rents to live in small dongas. Out of the market rents received by CD, utilities are paid for and the rest banked or otherwise invested. After living there for 12 months, the person can choose at each 6 month point up to 3 years, whether to re-up or whether to withdraw their funds, which must be used as a housing deposit. If they leave without buying a house, it should work similarly to super… you can’t get the money out for at least another 20 years (to avoid people using this to save up for their Great European Holiday or whatever, rather than for a home). Average rent is $25,000 of after-tax income. In a perfect world, a financial advisor can figure out how to structure this so that there’s some charitable deduction portion of what they put into Camp Deposit that means renters don’t pay tax on the full $25K (think: it can’t be any less evil an interference on taxation than investor rorts already are). When they’re ready, pull out their funds, which should be at least some decent fraction of $25K per annum, if not more than that. 2-3 years WOULD get people into the market. It’s effectively like project housing designed to keep people OUT of project housing in their later years, by letting them live barebones but socially acceptably at Camp Deposit until they can get into homes of their own. I’d rather be living in a donga in my 30s or 40s, than in a laneway in my late 60s or 70s, and that’s what this project would enable.

        I’ve got more detail than this, but that’s the bare bones.

        2-3 years of living somewhat rough would get an aspiring home-owner a deposit. Believe me, a LOT of renters aren’t wedded to avocado brunches, and we’d do this, if a couple years of awkward living was all it took to break into the market.

  27. It’s an interesting idea Cam but the issue is it will absolutely run up against the sense of fairness – that is some folks benefit more than others. And the folks that benefit the most are most likely to be bad money managers who have blown their cash on smashed avo’s and overseas trips whereas the folks that benefit the least would be the ones who have been more frugal.

    I just got a bonus and paid off a whack of my mortgage. Under this scheme I should’ve blown it on overseas holidays and an SCG platinum membership.

  28. I think it is an excellent thought exercise. Imagine also low energy costs and Australia could be a low cost manufacturing powerhouse where the population non the less enjoy a first world quality of life. Lots of automation included.

  29. Cameron Murray’s idea is an uncomfortable one because it is so different and rubs up against set ideas of fair, just, right, wrong, and not to mention the much fabled and rarely seen common sense.

    Since this idea is about shelter, a necessity which some seem to deserve more than others, and it is about shelter, not commercial or industrial land, a panic abounds. Homeowners would still keep their homes. It is just that others who now do not have homes would also have them. Rent assistance would not be needed and we would not need to subsidise loss making investment properties. In some cases we would remove two subsidies with one pen stroke as both the tenant and the landlord are being subsidised.

    If he were talking about the abuse of patents by those that profit at the hands of the many then there wouldn’t be such an outrage. If he was speaking about bringing to heel the ridiculous fees charged by certain professional groups that have allowed their practitioners to go past the purse and straight into the bank account there wouldn’t be such an outrage.

  30. Errr. I hate the rental I live in. And we live in a place that is too small if another young one comes along. Why am I given a smaller house for free when the market is crashing anyway so I can buy what I want??

  31. As a socialist who hates most other socialists as they are weak idiots I think this is a stupid idea.

    As always I would settle with balanced and fair as the best solution to any issue.

  32. Congratulations Cameron on writing such a though provoking and original piece. I am all for thinking outside the box and this is certainly that. The biggest problem with modern Australian politics is that it is so risk averse and unoriginal. Whilst this idea may not work in its current form there are definitely some great ideas worthy of discussion.

  33. I could see this encouraging incredible housing speculation as one would know that whatever debt they had would be wiped out, or extreme rental bids as renters tried to secure the most expensive or desirable property which they would eventually “own”, in effect destroying housing affordability. The only way around this would be for the government to take control, freeze the market, and entrench the existing wealth divide. That would cease all kinds of RE activity, and while this might be fun would never be acceptable. Then the most obvious question – what happens afterwards? Say people want to move interstate, or from a regional to an urban area – it seems too impractical and difficult.

    • Jumping jack flash

      yes, exactly.

      Or people taking on huge debt and then not doing anything ever again. “I gots me house, I don’t need to do anything else ever again.
      Pension for me now.
      Government provides all.”

  34. Things need to be earnt to have any value.
    For example: public housing is often poorly treated by the tenants.
    Perhaps go back to government developers and government loans like landcom for your first home.

    • Ah, the inexperience of the young! If you went back to the 60s & 70s (in WA, at least) you’d have found 30 – 40 % of people living in public housing and there weren’t any problems. People would be in the same house for decades, in Perth suburbs like Glendalough, Tuart Hill, Nollamarra, Balga, Westminster, Hilton, Freo generally, Kwinana, Rockingham etc had predominately PH. In addition large numbers of War Service homes such as my parents had.

      My guess is due to that much lower level of public housing a greater % of PH tenants have drug / alcohol / mental health issues, making the public housing issue look worse than it is.

      The old WA Housing Commission started flogging off their public housing in the early 80s in a sale to occupants policy.

  35. I like the idea that a huge change is needed. However, I think there are fairer market based solutions that could achieve it. How about:
    – Property can only be brought freehold, no debt or interest payments allowed. Gets the banks out of it and would save the population billions in theft by interest to the banking parasites.
    – For each property a individual or couple own; 0% land tax on principal residence, 5% on the second home, 10% on the third etc. Stops the rich from hoarding the land.
    – Debt jubilee on one home for all current owners. People with more than one home retain the debt on the additional homes but cant expand it.
    – Government to create an agency to free up land for housing and build the initial infrastructure at cost for the otherwise empty sections so people can just come in and build the house they want.
    – Massively reduce immigration.

  36. This is disgusting, you are proposing to steal from people. Lucky you publiched this before I might have joined or voted for the SAP. Communist filth.

    • You know it is just a blog post designed to make the readers think differently about an issue, right?

      • Even StevenMEMBER

        Yes, but even so – this one is on the hairy edge. It is poorly targeted welfare for ‘renters’. Even worse than the poorly target welfare for asset rich we have at present (exemption of primary place of residence) for pensioners.

      • Cameron, I’ve been puzzling over this for a couple of days now.

        There seems to be a rough parallel between this proposal and the concept of anticipated and unanticipated inflation.

        As I understand my macroeconomics (correct me if I’ve got this wrong) unanticipated inflation can reduce unemployment by lowering the real interest rate and possibly the real wage rate.

        But it does so at the expense of those who get caught out: bondholders, and workers to the extent that their wages lag behind the inflation.

        Once people wake up to what’s going on they adjust their behaviour in anticipation of the inflation and the benefit of increasing inflation is lost.

        Much the same would happen with a Jubilee. Provided it was unanticipated, it would have the effects you described (which are in many respect beneficial). But it would come at the expense of those who get caught out: principally landlords.

        If the Jubilee were anticipated, behaviour would alter, as discussed in my previous comment. Rents would skyrocket and landlords would refuse to rent any properties in anticipation of having them expropriated.

        The degree to which the policy is unanticipated would be related to the length of leases. Given that it would require legislation, the moment it was mooted, no-one would offer a lease longer than the period leading up to the Jubilee date. Those landlords who had already entered into long term leases would be cruelled.

        Of course, as with some tax changes, the government might try to implement it by announcement and then legislate retrospectively back to the date of the announcement. This would catch more people but one can imagine that it would cause a massive transfer of wealth to those (possibly corrupt) “insiders” who got wind of the announcement.

        Once it had been done once, no-one would lease for more than a few weeks at a time, just as lenders stung by unanticipated inflation refuse to invest for more than a short period. (In January 1983, I was sitting on an overnight cross-channel ferry with a project analyst from BP. He told me that the company’s investment hurdle had become simply a 6 month payback period! There was no appetite for risk beyond that tenure because the investment climate was so uncertain.)

        Just as bondholders eventually developed indexed bonds to protect themselves from the risk of unanticipated inflation, so we might expect landlords to alter their lease agreements to protect themselves from Jubilees, possibly by including a penalty rent (equal to the value of the property) in the event of a Jubilee occurring.

        The link above on Old Testament Jubilees makes the point that it put a cap on lease agreements so that none exceeded the remaining period before the next Jubilee.

        Also, you might like to look at the effect of land reform proposals in places like India which had a similar intent of transferring land from landlords to those who worked the land. From my limited knowledge of this, it resulted in massive extra-judicial responses (violent expulsion of labourers from the land they were working) and corruption of the officials empowered to implement the policy. (It is described vividly in the novel “A Suitable Boy”.)