22 March 2022

Accused of 'strangling land supply', government says no simple answers to questions of housing affordability

| Lottie Twyford
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Aerial view of Canberra suburbs

The Opposition is laying the blame for the housing crisis at the feet of the government, which they accuse of “strangling” land supply. Photo: File.

It has been accused of ‘strangling’ land supply and ruining Canberrans’ hopes and dreams of detached homeownership, but the ACT Government is firm in its belief that there is no such thing as a “simple solution” to the housing affordability crisis.

Opposition Leader Elizabeth Lee tried to move a motion in the Legislative Assembly today (22 March) calling on the government to use all its available policy levers – including land supply – to stem the affordability crisis.

Had it passed in its original form, it also would have obliged the government to commission a new housing choices survey.

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However, Minister for Housing Yvette Berry defended the government’s approach to managing the affordability crisis – once again noting it’s a crisis occurring all around the country and much of the developed world.

“No one predicted this. We have to be realistic and recognise this is not just a question of supply,” Ms Berry said.

She also blasted the Opposition for presenting “simple solutions” to the housing problem and refuted the claim that it was drip-feeding land to the market.

“It’s not enough to put out a media release and say bulldoze this … there are no simple answers to delivering a well-planned city with communities for everyone,” Ms Berry argued.

Furthermore, Ms Berry said if the Canberra Liberals simply released more land, the shortage-plagued construction industry would be unable to deliver more dwellings.

She also referenced the government’s actions to address the affordability crisis, including gradually scaling back stamp duty, providing choice regarding housing type, and delivering affordable rentals.

Ultimately, Ms Berry watered-down Ms Lee’s motion to call on the government to, in turn, call on the Commonwealth to address housing affordability with the economic levers available to it, including by waiving the ACT’s historic housing debt.

It also asked the government to “continue” to deliver a variety of diverse, sustainable land and housing options to Canberrans.

Elizabeth Lee

Canberra Liberals Leader Elizabeth Lee said the government should pull the major policy lever it controls – land supply. Photo: Michelle Kroll.

In her address to the Assembly, Ms Lee referenced recent land ballots where demand had massively outstripped supply and said it was “unbelievable” that the ACT Government plans to “only” release 4171 single blocks in the next four years.

However, these are not the only homes the government will make available during that period. It will also release an extra 12,263 mid or high-density dwellings as part of its indicative land release program.

But Ms Lee argued this didn’t provide Canberrans with the choice they wanted.

She cited the government’s housing choices community survey of 2015 – the ‘Winton Report’ – which showed that almost 85 per cent of Canberrans would prefer to live in a detached house, with some support for dual occupancies and townhouses.

The report also found that under 2 per cent of Canberrans want to live in an apartment where the building is higher than three storeys.

READ MORE Would increasing land supply solve the ACT’s housing woes?

Ms Lee said it seemed the government had chosen to ignore this “inconvenient truth”, and while there is a place in Canberra for multi-unit dwellings, it should not be the only option for Canberrans.

“Canberra, the bush capital, should be a city where people can choose to live in a house with a backyard if that’s what they prefer and not get forced into high-rise apartment towers,” Ms Lee said.

Last week, Ms Lee said the government’s announcement scrapping stamp duty on off-the-plan property purchases up to the value of $600,000 was just another way it was pushing “everyone into multi-dwelling and high-rise apartments”.

“We know that Canberrans are wanting choice.”

This is now the third time in the space of a month the ACT Government’s land supply program has drawn ire from its critics.

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In a fiery debate in annual report hearings earlier this month, Opposition spokesperson for planning Peter Cain criticised Chief Minister Andrew Barr for the speed of land release, arguing it severely impacted and influenced the Territory’s “skyrocketing” house prices.

But Mr Barr said this was simply false and, because the release of new land constituted less than 2 per cent of the total market, it didn’t impact house prices in Canberra’s inner suburbs.

“The Chief Minister is not focused on economic fundamentals,” Mr Cain said.

“Everyone knows, if you severely restrict the availability of something, prices go up.”

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this another way cm barr controls prices to pay for his bloated train set
canberra deserve him
ACT debt will be more then a the rest whole country soon

The ACT government controls the listed prices of new blocks and the rate of new supply released on to the market. They decide who gets blocks, they decide the zoning of existing land, they decide the rate of land taxation and rates. They decide the level of investment into ACT social housing. The ACT government points the finger of blame but does not use the levers it has to redress the imbalances imposed by external actors.

HiddenDragon6:55 pm 24 Mar 22

A government which is heavily reliant on property-related revenues, and which is forever ratcheting up and locking in spending (and not just out of necessity), has zero real interest in affordable housing – the only priority is scrounging and gouging for every dollar of revenue.

The carving up of 1000 sqm blocks as an easy short term solution always comes up in discussions about affordable housing in Canberra. The only problem with this myth is that it never produces affordable housing. Handing over 1000 sqm blocks to the local small developers to convert into 4 to 6 townhouses and doing away with RZ1 zoning as Stuart Nulty suggests is the developer’s wit dream. After demolition costs, subdivision, construction costs, selling costs and developers margin you end up having to pay a lot more for a lot less. The only real impact is the per square meter cost of land goes up and rates, land tax and rent with it.

You only have to wander around the infill areas of Braddon, Turner, O’Connor, Dickson, Lyneham etc. to see the result of the rezoning. You don’t get affordable housing, you lose the family home, lose the front yard and the backyard, lose the neighbourhood, can’t find a park, increase the noise and congestion. Looking more like the hot and unsustainable new suburbs. Then after stuffing the neighbourhood up, a couple of years later you’re paying the same price for a townhouse that you did for the original 1000 sqm block.
This is up there with the other developer’s myth of the missing middle and lack of housing diversity. Go for another wander and you’ll see the existing diversity – apartments as far as the eye can see, townhouses, duplexes in all shapes and sizes, old blocks of flats, two-storey McMansions and duel occupancies. The only thing that is not being produced is family-sized affordable detached homes. A major issue is that the small developer is not interested in building affordable housing – there’s no money in it.

Nobody thinks that producing affordable housing is easy, but it’s not rocket science. Most people could quickly list the major factors that influence the cost of housing. Supply and demand is obvious. If supply of necessary goods such as housing is restricted the price increases rapidly. Note petrol. Schemes that encourage demand is another.

Price signals is a measure of demand and whether the market is being appropriately supplied. Thousands of buyers turning up for a supply of a hundred blocks is a clear indicator of under supply of what the market is looking for. Many buyers are looking for a detached 3 bedroom house that is affordable for the ordinary family. The Government’s decision not to supply this product puts pressure on the price of greenfields blocks and the blocks in existing suburbs.

The recent Allhomes report on the annual price increase for homes in different suburbs provides the evidence. Houses in most suburbs went up by 40-50%, apartments less than 10%. The $1 million record breaking median price in most suburbs.
The Government is not very good at supplying affordable housing. In 2017-18 only 16 of the 86 affordable housing land releases were sold. This was due to the land being for 1 or 2 bedroom units, whereas the purchasers were seeking 3 bedroom dwellings and single houses on compact blocks. The housing market must be one of the few where the supplier does not produce what the market wants.

Business, big and small, are capable of monitoring the price movements and responding to supply and demand almost instantaneously. The Government could bring together Canberra’s highly skilled people and residents to develop a comprehensive plan that produces affordable housing that people want while addressing the issues of climate change and sustainability. This is not rocket science.

Naive view of things. You think land is readily available where families want it? There is plenty of land in west Belco, Tuggeranong and Gunghalin that no one wants to live. It is a demand problem. People are too entitled and stuck up these days to deign themselves into living in apartments and think 3 bedroom detached dwellings just grow on trees. Land cost aside the typical build cost is over $500k with material and labour shortages for even the most basic cookie cutter house. This already makes it unaffordable for those whinging. The same $500k could get you a nice 2bedder apartment close to the cbd.

Capital Retro2:45 pm 24 Mar 22

Close to the cbd is also one of those other places that “no one wants to live”.

You obviously belong the the “Church of Urban Renewal”.

Sam,
A 2 bedder close to the City? It might be ok for singles or a young couple but most families want more. A lot more. They want to live in communities with families, somewhere where they can have a dog and a backyard.

I worked there for 10 years and saw nothing positive about it. In my opinion, the City is a cesspool of filth and is pretty grotty.

The Chief had said that he wants ACT Public Servants to have the flexibility to work from wherever they want to work from as part of lifestyle and family balance etc and while the Commonwealth is a larger employer, the Chief is basically saying there is no need to come into the City.

The government won’t do a thing unless there is a popular outcry that threatens their re-election prospects. Write your minister, and support petitions calling for action. Get others you know to do the same.

Vinson1Bernie6:32 pm 23 Mar 22

Its an interesting market which has no obvious simile – perhaps oil market as we are currently seeing. Any economic thunderstorm and people head into property presumably because of the capital gains tax free status of the family home which are 80%? of Australias 7m? homes. However putting the CGT on family home means that young buyers would be more disadvantaged as tax deductible interest ( as the result of CGT) is most of the loan repayments in first few years therefore paradoxically making entry level homes even more unobtainable.

It is actually mainly a supply issue – supply of affordable 3 or more bed room houses, town houses or or more bed room apartments suitable for young families. If we do not provide them the young people on fixed incomes we need to support our community will not come are will leave. I realize it is Australia – wide problem but at least we have the land here in the ACT to address it.

How about we address Canberra’s “crime epidemic”, “health system disaster”, “education system failure” and “transport system quagmire” first. A lot more pressing issues to tackle than a small proportion of the population unable to enter the housing market (emphasis on housing because they are too good for apartments)! Fake news and biased media reporting galore!

Sam Oak,
We get it, you like increasing housing unaffordability because it feathers your own nest as you’ve admitted previously.

No need to try and claim it isn’t a big societal problem or try to excuse it because of other issues, we know the real reason you don’t want it addressed.

Fake news and misleading sensationalist reporting deserves to be called out chewy, regardless if people have a vested interest or not. If it was purely a discussion about assisting the small proportion of prospective first home-owners to get into the market I’d be amenable to having a civilised discussion about supply and demand drivers for house prices. However whenever the word “crisis” is thrown about all sympathies are withdrawn as it sounds like typical whinging of the have nots expecting everything to be served up to them on a silver platter.

chewy14 – spot on. All Sam Oak cares about, and writes about most of the time, is that he is the home owner King and others pay his way…. let there be nothing to get in the way…..

how about we address the lack of common sense politicians if we can call them that .they seem to be completely clueless

If you asked everyone if they’d like to drive a Ferrari, you’d also get a very high affirmative result.

Does that mean the government should deliver everyone Ferraris?

Perhaps if those same housing choice surveys also included the costs of making available to everyone a big block with a backyard, you’d find out pretty quick that very few could afford it.

If you actually value Canberra’s bush Capital status, you would be supportive of targetted densification in existing areas, which will help to maintain green corridors and nature reserves.

Where exactly do the Liberals think all these new single dwelling blocks will go?

They’re called Teslas, and the government is delivery them to those who could afford to buy them outright anyway.

Silver,
Even though I’m not supportive of the subsidies you mention, they are hardly on the same scale as what’s being talked about here.

Small interest free loans and some free rego isn’t comparable.

There are no simple answers to housing affordability, but increased land supply is the starting point. Without that it’s all demand-side answers to a supply-side problem and they’re not going to work.

I’m no economist but I think I understand the basics of supply and demand, maybe better to than the ACT Government?

By restricting the release of land to less than the demand, the cost increases.

If there are less houses available for sale than the number of people who want to buy them, once again house prices increases.

Other tip for the Government is that their gradual scaling back of stamp duty, doesn’t help with housing affordability.

Let’s assume for a moment that the Government’s Stamp Duty revenue hasn’t improved through increased property values and just look at whether reducing Stamp Duty improves affordability.
Stamp Duty is a one-off upfront cost. Reducing that cost hypothetically lowers the initial entry point to the housing market, but it also increases demand, because it reduces the entry point to everyone, not just one buyer and as we know, more demand equals higher prices.

The other issue, which I’m sure most people can appreciate is that affordability is an issue that continues after settlement of your purchase.
Every mortgage payment, every Electricity bill and every Rates payment form part of a homeowner’s housing affordability.

A policy that replaces a one-off Stamp Duty with higher Rates, forever, doesn’t improve housing affordability. It actually makes it worse.

Kenbehrens,
Except in your example increased ongoing rates increases the holding costs of housing which decreases demand. Along with the fact that it also increases the efficiency of land by encouraging more productive uses.

It’s not as simple as you are trying to portray.

…and the government increased the cost of a 450m2 in Macnamara by ~35% over neighboring Strathnarin Rise from Sep 2020 to Feb 2022. Barr and Berry would have us all believe this is addressing the affordability crisis not causing it.

Assiduous,
The government didn’t increase the cost, the market did.

The government trying to control the market in the way you’re asking for wouldn’t be fair to anyone.

Hi Chewy, i’d contest that.

How government raises revenue is a policy choice. The government via the surburban land agency specifies the prices of new blocks available via ballot. They are not auctioned on the market. They could chose to halve the price and make up the difference in land taxes or rates.

The government controls dominates the market for healthcare but few would suggest public hospitals are unfair. Trust me, you don’t want the US healthcare system. I would encourage you to read the following…
https://www.fresheconomicthinking.com/2018/09/free-land-dirt-cheap.html

Assiduous,
I agree it’s a policy choice, the policy being that the price is set by market rates.

The SLA doesn’t arbitrarily set the price and there are blocks that are auctioned or sold through other means than ballots. They use market data to set the prices of balloted blocks you mention.

To change that policy choice to a centrally controlled price setting standing is just as bad as what Sam Oak promotes on the other side and would just as equally lead to price manipulation and inefficiencies.

It would also be grossly inequitable to people who have purchased property previously.

I’m for the government limiting their involvement in the market as much as possible, whether that’s for either increasing or decreasing prices.

At present, I think the main impact is the Federal government’s policy settings driving prices higher, which I disagree with. I would however not want the local government to try and offset that attempting to drive prices lower and I actually think it would create big market problems if they tried.

I’d suggest the high prices and vested interest profiteering behind those prices are what is grossly inequitable and what needs to be addressed. Previous buyers were exploited, and have the choice of in turn exploit current and future Australians, OR we can give ALL Australians now and in the future low-cost homeownership for life as long as they give up (some) of their capital gains.

“When something is really important, we never rely on markets to provide it. We bail out farmers in drought. We provide public education and healthcare. We run the courts, the military and the police. We run the road system.”

“We know that land is a monopoly for two reasons. First, it comprises the right, but no obligation, to be put to use. Second, there is no free entry— you cannot compete in land markets using inputs that are not also outputs of that same market.”

“A fundamental irony, however, is that once you accept that land is a monopoly, standard economics says you can regulate the price down to the marginal cost. Since the marginal cost of land is zero, an efficiently regulated market would set the land price to zero.” – Dr Cameron Murray

“I’d suggest the high prices and vested interest profiteering behind those prices are what is grossly inequitable and what needs to be addressed”

I agree, the last 20 years or so of policy mistakes should be revisited and balanced.

But you don’t fix those problems by swinging to the extreme opposite.

“Previous buyers were exploited, and have the choice of in turn exploit current and future Australians, OR we can give ALL Australians now and in the future low-cost homeownership for life as long as they give up (some) of their capital gains.”

Except that isn’t what the proposal would do, it simply replaces one form of inequity with another.

“When something is really important, we never rely on markets to provide it. “

Disagree completely. There are some services that naturally fit significant government involvement like police, the military and most of health and education.

But I don’t remotely see land ownership and property rights in the same way. I disagree with Dr Murray’s position that land ownership (and separetly property rights) is a monopoly in the way he’s claiming.

Individual owners can and do compete against each other and the government’s land supply can never meet the unlimited capacity that land values of zero would require.

There would also be little incentive for owners to use their land in the most efficient manner because of this. We’d end up with woefully planned and sprawling cities, benefitting no one.

Dr Murray addresses the issue of government land supply in his research and Singapore certainly manages just fine on their tiny island.

Residential property values reflect what people can borrow not the cost to build supply – who’s really benefiting here? How much money do Australians on average end up paying banks for what amounts to a loan servicing check and a new account? What purpose does this wealth transfer serve?

How much property and land is vacant or underutilized across Australian cities right now simply for the purpose of chasing capital gains? Start by looking at the books of private developers.

“Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of fortunes, the source of power.” – Henry George

“Dr Murray addresses the issue of government land supply in his research and Singapore certainly manages just fine on their tiny island.”

Except he doesn’t really address the issues of land supply at all in the local context. Apartments in Singapore are almost irrelevant to the Australian context, so unless you want to remove almost all environmental, heritage and other planning restrictions, his proposals cannot be achieved in reality. If you think more than 10-20 years in advance, Canberra is already beginning to run out of residential capable land.

“Residential property values reflect what people can borrow”

This is only part of the equation and doesn’t even consider who is doing the buying and how we could make it easier for younger, first home buyers without fundamentally changing the nature of the market.

“How much property and land is vacant or underutilized across Australian cities right now simply for the purpose of chasing capital gains? Start by looking at the books of private developers.”

Which is better fixed by creating appropriate broad based land tax regimes and altering Capital gains tax amounts, so that land efficiency is maximised. You don’t fix it by giving one part of the market free land.

When you actually look in depth at what you’re proposing, all it is doing is creating a massive centralised and hugely subsidised area of housing development. It’s not too dissimilar to how Canberra was originally grown through the 60s, 70s and 80s.

What did that lead to? The exact urban sprawl and housing affordability problems we have today along with the huge sense of entitlement and unwillingness to accept any change from existing residents. It just restarts the cycle anew, when what we need is more a more balanced and sustainable approach to housing.

“The New South Wales Land and Housing Corporation has four times the net assets of Singapore’s Housing Development Board at $54 billion. Queensland’s Housing and Public Works has $10 billion in land assets. Victoria’s Department of Families, Fairness and Housing has $17 billion.” The ACT is better placed than any of them due to having sole responsibility and control of land acquisition and development, and substantial land holdings.

Why should Canberra’s development be constrained by a decision in 1911 about where to draw the ACT’s arbitrary borders? Running out of land? Are you kidding me? That’s myopic. There is considerable vacant land all across the ACT. Just because the government says something doesn’t make it true.

Actually taking vacant land off developers and paying builders to put housing on it to be sold at cost, or rented affordably is very effective at solving a housing affordabilty crisis.

The government would ultimately make the decision about the mix of development – HouseMate doesn’t override this. Affordable medium density developments would be quite popular i’d imagine. It mentions in the article that under 2 per cent of Canberrans want to live in an apartment where the building is higher than three storeys. If they were half price and built for quality rather than profit margin, perhaps that number would rise.

A premise of Murray quoted by assiduous is: “ … regulate monopolies to the point where price equals marginal cost, which in the case of land is zero.”
Zero?
So, who is busy making land? Where is the factory, with its nil operating costs? Does new land descend with the sunlight?
The fallacy that land is free can be exposed in a few ways. If we consume all but one block of arable or livable land, does the last ever remaining block have no value? Price will increase as supply depletes and is non-zero now.
Use of land has infrastructure costs entailed in the supply.
If I head out west to tell a wheat farmer I will pay for their house, fences and machinery but zero for their land, should they willingly sell?
Land is a finite resource with a use value and with entailed costs varying with uses. it is difficult to accept Cameron Murray as a credible pundit when his first premise fails.

Phydeaux,
That’s sort of the point I was trying to make, the assumption underpinning his position is that land is always freely available and each parcel of land has the same value and utility. It might be a nice theoretical exercise to consider but it doesn’t match reality.

“Why should Canberra’s development be constrained by a decision in 1911 about where to draw the ACT’s arbitrary borders? Running out of land? Are you kidding me? That’s myopic. There is considerable vacant land all across the ACT. Just because the government says something doesn’t make it true.”

This is the fundamental point that shows you really don’t understand the issue when bringing Dr Murray’s work back from a theoretical position to reality.

The myopic position is that Canberra can continue expanding ad infinitum, which is the natural outcome of what you’re proposing.

The ACT government doesn’t need to tell me available and developable land is running out, I can read the freely available planning and research reports for myself.

The underlying assumption to Dr Murray’s work is that land is not finite, that each parcel has equal value and utility.

Have you seen the mountains around our city? Have you seen the environmental, heritage and other planning constraints that would/should prevent significant areas of the ACT from being built on?

How do you service these areas with utilities, transport, other community services etc. when each piece of land has zero value?

You can see these problems borne out in the “Housemates” proposal you linked earlier. A proposal which just bastardises the current market in favour of new buyers, who would use that benefit to leverage their own wealth, exactly as people like Sam Oak do now.

It would result in more urban sprawl and massive societal problems, because why would anyone choose to live in an apartment or support densification when land is “free”?

The only way to achieve what you’re asking for is to remove free choice and personal ownership for housing entirely. We would all live in apartment towers provided by government.

It will never fly.

Phydeux and chewy, you both aren’t getting it. Assiduous is proposing the government seize the land of existing landlords such as me and dividing it up. His family gets the block of land in Forrest while we all get the land in the outer fringes of society. What part of his proposal can you argue is unfair?

Love it when the left wing quibble. Just goes to show inequality is an inherent part of society. Doesn’t matter what way you carve up the pie we all jostle and squeal over our share. We are all pigs trying to get at the trough, some of us pretend we are not. But if you put lipstick on a pig guess what?.. I’m probably 7 investment properties too deep in the trough from being a full blown communist myself.

Sam Oak,
No I get it.

The underlying theory would be that private ownership of land shouldn’t be allowed and it should be nationalised.

But then, the actual “Housemates” policy put forward realises that won’t happen a day proposes a system that simply massively subsidises one part of the market, creating huge flow on problems in delivery.

Also hilarious that you think anything I promote is “left wing”. Particularly when you’re the one promoting such high levels of government intervention in the market…

But only when it suits your financial position of course.

Except I’m not promoting government intervention in the market am I? Tax is a form of government intervention, I’m in favouring of removing capital gains tax altogether. Negative gearing is simply allowing the investor to claw back the exorbitant income taxes we are subjected to.

Your left wing myopia goes so far as to say remove the CGT discount and negative gearing and suddenly houses will be affordable for everyone and it is sunshine and rainbows. NZ tried that and do you think housing affordability is no longer complained about over the ditch? Your proposals are just as useless and misguided as assiduous’ centralised government theories when it comes to addressing affordability.

I get it perfectly well thanks S Oak, and that notion of confiscation is too obviously absurd to need debate. For one thing, s 51(xxxxi) exists in our Constitution.
The rest was standard nonsense.

The ‘x’s seem to have run on a bit far there.

Sam Oak,
As I said, you’re in favour of significant government intervention but only when it suits your financial position. The current taxation settings are not the default natural order of things.

You’ll also not find anywhere that I’ve suggested removing the CGT discount, nor that removing negative gearing would make property affordable for “everyone”.

Also as usual, you’re only looking at this from your own personal perspective rather than a wider economic viewpoint.

My favourite bit was where you said you wanted to remove taxes on capital gains altogether and then in the next breath complained about exorbitant income taxes. LOL, and you call me myopic.

Lol what do you consider the “natural order of things” chewy? Is this the republic of chewy where you dictate government policy and have the perfect taxation settings to ensure welfare and equality for all? You are hopelessly misguided to think your viewpoint is purely altruistic and the best for our country. As long as it helps you sleep at night!

Singapore 728 sq.km, population 5,700,000, 90% home ownership.
ACT 2,357 sq.km plus land border that can be moved or developed across, population 431,400 66% home ownership.

I’m disappointed by the suggestion that heritage buildings, NIMBYs and empty environmental space are a higher priority than addressing the exploitative cost of housing and the human suffering it is causing right now. Singapore succeeded as they made the social benefits of affordably housing the population the priority. I’m aware that significant numbers of people are commuting by car from Yass, Goulburn and Googong? You consider this preferable?

I invite you to produce an evidence based proposal to address the cost of housing and standup a campaign for it’s implementation – i’ll happily support while offering feedback on how I think it can be improved. Dithering and nay saying on this issue only serves the elites profiting from unnecessary housing debt and the human suffering that goes with it.

You can’t consume land phydeaux. The marginal cost of producing it is zero – it’s already there. I refer you to the article below…

https://www.fresheconomicthinking.com/2020/11/why-does-land-have-positive-value.html

Sam,
Do you even read your own comments?
You are promoting policies that involve significant government intervention in the market, but only of course where they enhance your own personal financial situation.

Me pointing out that those tax policies you adore are arbitrarily enacted by government is just simply reality.

And once again, you completely misread my motivation. It has nothing to do with providing welfare and equality for all.

It is about providing an economic framework that provides opportunities for people to better themselves and incentivise more efficient capital allocation where it will benefit everyone the most.

Which isn’t remotely close to the current policy settings which benefit property speculators and spivs like yourself to the long term detriment of us all.

There’s also nothing necessarily altruistic about it. With the policies I promote, we’d all be richer in the long term, even you. If only you had the ability to see beyond your next rental cheque.

As I’ve said previously, probably the worst thing about our current system is how much it’s allowed certain people to exploit it and then convince themselves their success is due to their investment nous, rather than dumb luck and self interested government lobbying.

Assiduous,
Once again comparisons around Singapore are irrevant to the local context in the way you are trying to apply it.

Your position is that biodiversity, heritage and social amenity also have the same value that you think land does. Zero.

I completely disagree.

“I’m aware that significant numbers of people are commuting by car from Yass, Goulburn and Googong? You consider this preferable?”

Unless you nationalise all land and force people to live in apartment towers, you are the one that prefers an ever expanding urban sprawl and people commuting from the regions.

If land has no value, people will choose to live on larger, single dwelling blocks in a massively expanding city.

“I invite you to produce an evidence based proposal to address the cost of housing and standup a campaign for it’s implementation – i’ll happily support while offering feedback on how I think it can be improved”

I’ve already given my preferred policy settings many times previously here.

For example, things like:

Broad based land taxes to maximise more efficient use of expensive land and reduce hoarding.

Changes in Federal government taxation policy settings to stop incentivising speculative investment (ie. the Sam Oak’s)

Changes in local land development planning to encourage better and more innovative housing products to meet a mix of residents needs whilst still maintaining local amenities and environmental values.

That’s a start.

Chewy, the most efficient market settings has no government intervention whatsoever ( ergo no taxation). Taxation only exists to redistribute wealth and income towards public goods and support those unable to value to add to society (e.g. the dole or old age pension). So some level of taxation is fine, where we disagree is how much support we should be providing those unable to support themselves. My stance is that if we over allocate, it encourages laziness. Why work when you enjoy the same quality of life being unemployed?

You have previously expressed the view that EVERYONE should have the ability to afford their own home and on this point I fundamentally disagree. Those on a dole may find housing unaffordable but my view is that this is acceptable and necessary hardship to encourage productivity in our economy.

“Chewy, the most efficient market settings has no government intervention whatsoever ( ergo no taxation).”

Sam, you only can “own” and exploit land and the property market because of government intervention to set up the laws and regulatory frameworks to make it so.

So we need to have an initial understanding that the market will never be truly “free” even though we can have an aim to make it as “free” as possible. At least you admit that we do need taxation now.

And I actually don’t think we would disagree too much on the overall amount of taxation required, it’s where the government can most efficiently raise it that’s the biggest issue.

Land is clearly one of the most efficient areas for governments to tax and creates significant added benefits through better investment into productive assets if we remove the current incentives to speculate on unproductive property assets. It’s why I would promote higher land taxes but lower taxes in other areas.

“You have previously expressed the view that EVERYONE should have the ability to afford their own home and on this point I fundamentally disagree”

I think you have me mistaken for someone else as I don’t believe this. Some people will always be priced out, it’s actually a desirable part of the market.

I do think that everyone should have a place to live but that is a completely separate issue, they don’t need to own it.

“ It’s why I would promote higher land taxes but lower taxes in other areas.” You have not once specified what those “other areas” should be? You seem to think that if you tax property stringently investment will flow magically to other areas of the economy and everyone’s welfare will be improved and inequality will be solved. It’s incredibly naive.

The biggest industries by value add in our economy are mining, construction and financial services. Two of those industries have their bread buttered by the property market. The profitability and competitiveness of the banking sector depends on household lending and construction relies on new dwelling construction. Even established homes changing hands is extremely rare without significant renovations. The taxation system currently encourages knockdown rebuilds, subdivision and substantial renovations. This is creating jobs and higher house prices increases wealth for families who then spend on the economy.

If you adopt the authoritarian tax policies you are proposing you are just going to see the money flow offshore. In your dreamy view of the world you are imagining money flowing to Australian tech companies and entrepreneurs but this won’t be the case. It will go straight into Silicon Valley companies who do it more efficiently than us. That is exactly where my share portfolio would go. Instead of Aussie banks I’d be investing in US tech giants, padding the wallets of their far more efficient capitalist markets. The money always flows to the most productive asset. And you are mistakenly thinking that asset is in Australia while it is in reality overseas.

assiduous wrote: “ The marginal cost of producing it is zero – it’s already there.”
As oxymoronic phrasing goes, that is quite impressive. One does not “produce” that which is already there. It was very much my point that land is not produced, or manufactured, but is a finite resource. Continuing demand to utilise finite resources consumes such resources either entropically (e.g. burning oil) or by alienating it from other uses which can not be simultaneous. By your argument, the last livable block will still hold zero value. In what way is your proposition here not ridiculous?

“You have not once specified what those “other areas” should be?”

Actually I have. Repeatedly.

The key and obvious area being that Australia relies too heavily on income taxes. We should reduce the amount of revenue raised by these taxes over time amd replace them with more efficient and less distortionary taxes. Land taxes being one of those.

“You seem to think that if you tax property stringently investment will flow magically to other areas of the economy and everyone’s welfare will be improved and inequality will be solved.”

No magic needed Sam, of course it will lead to a shift in investment dollars to more productive uses because property investment will have reduced returns without the current incentivisation of government policy and tax settings. I would have thought a self confessed investment Guru like yourself would understand that.

Our economy is dominated by service industries, despite your attempt to claim property underpins it.

In fact it’s extremely perverse of you to claim that the actual problem of industries and investment based around exploiting the incentives given to the property sector is somehow evidence of how critical it is to our economy.

It’s exactly that reliance that we need to remove because of how those investment dollars would be better used in more productive areas.

“If you adopt the authoritarian tax policies you are proposing you are just going to see the money flow offshore”

How on earth do you think land taxes are authoritarian?

And apparently you now think land is somehow going to be shipped off shore? Where do you get this stuff from?

It’s literally because it’s immoveable that land taxes are so efficient.

My favoured policies would see investment in Australia increase, it’s your favoured ones that are tying us up and reducing returns.

“By your argument, the last livable block will still hold zero value.”

That’s neither mine nor Dr Murray’s argument, but rather your strawman.

“The money always flows to the most productive asset. And you are mistakenly thinking that asset is in Australia while it is in reality overseas ”
Horse. Cart.
You have just argued that Australia has less value-adding advanced industry, which problem arises over time from mis-allocation of resources. That is correct, it is so, and you are an external symptom of that cancer S Oak.

assiduous wrote: “That’s neither mine nor Dr Murray’s argument”
Well, you also wrote:
“The marginal cost of producing [land] is zero” and quoted Murray as saying:
“the marginal cost of land is zero”, and
“an efficiently regulated market would set the land price to zero.”
So, by what mystery is it not your argument that the marginal cost of land is zero? If proving land has a value is a “straw man” then how and when does land suddenly acquire non-zero value between now and the last livable block, given an integral of zero would be zero?
I am following your logic. It is your premise which is straw. As I commented earlier (11:53 am 24 Mar 22 ) which comment you have not addressed, “Land is a finite resource with a use value and with entailed costs which vary with uses.” Chewy14 made similar and related points more than once, and again you have not addressed them.
If your proposition is that the government provide a 100% subsidy for land value, retaining that ownership for future sale, then fine, but do not pretend it is cost-free, or a licence to print land.

The proposition i’m backing and it’s costs are all detailed here: https://fresheconomicthinking.substack.com/p/housemate?s=r

Assiduous,
The interesting thing about the theoretical talk of land having no value isn’t actually a part of that Housemates policy. It’s just a policy that massively subsidises first home buyers and allows them to use their Super to purchase property.

It’s doesn’t change the fundamental operation of the property market at all.

Which means, people who take advantage of the scheme will be incentivised to leverage themselves to the maximum possible amount and acquire blocks that are as large as possible because the land component is “free” to purchase but then will be equal to market value straight afterwards.

Which means that unless the government completely centrally controls all land releases and forces people in to certain purchases, every buyer of a Housemates property is given a massive incentive to buy a single detached house on a large block.

As I said previously, this would end up with massively increasing urban sprawl, which is the exact opposite of what we need to encourage.

And it doesn’t fix the fundamental problems underpinning housing affordability, it just subsidises one part of the market.

It’s just a wealth transfer to new purchasers that changes little.

Not quite, assiduous. If I go to the further link labelled “new paper” within your linked paper then it has an incomplete discussion of costs. That paper half-abandons Murray’s and your claim of zero marginal land cost yet does not include even that cost or budgetary impact in the “costs … detailed”.
I note it also flogs off public space, does not address economic impact of its obvious constraint on labour mobility (Australia is not the size of Singapore), ignores meaningful resource rents on land (odd for an academic who claims interest in rent-seeking behaviour), skirts discussion of retirement incomes impacts, and allows housing investment dollars taxed at 15% rather than marginal rates (the effect of paying from, or raiding, Super funds). Even Falinski managed to work out that making Super available for housing would raise prices (his last successful thought).
I do not support housing initiatives where we hand money to buyers given that almost the entire effect of demand subsidies is to raise prices. However, Murray’s notion needs both a wider scope of thought and more comprehensive analysis at the very least. As chewy14 noted earlier (though written below this) Murray’s proposal hands not merely housing but also windfall gains to the recipients.

Another strawman argument. If government is paying for the blocks they are not going to be ‘massive’. Your argument is analogous to saying starving people in poverty shouldn’t be fed by the government as they will demand a degustation.

You are utterly delusional if you think that efficient markets have no government intervention. Your last comment is just plain awful. So unemployed peopke should be homeless so to encourage priductivity. Presumably this happens by the rest of us being so terrified of ending up unemployed that we work harder. Just wow.

Lol “services industries” is such a broad umbrella which illustrates your attempts to dodge the question. The largest services industry is financial services and as I have said has built its foundations on the property market.

Anything relating to the internet and work that can be done from home is uncompetitive compared to the rest of the world. Anyone thinking they can wfh indefinitely will get a rude shock when they realise their job can be outsourced. For basic coding and programming, the Indians do it far better on low wages. Anything high tech and innovative the US do far more competitively. Throwing tax cuts at these industries aren’t going to help. You’ll find the tech companies will move their head offices here but profits and the work will still go offshore. Australia will effectively become a tax haven. If you had suggested supporting the mining or agriculture industries I might agree with you there but not useless “services”. Do you think cavemen needed a roof under their heads more or someone to stir their lattes?

I never said the unemployed should be homeless. I said they should be renting some dingy old apartment not able to buy a 3 bedroom detached dwelling for. A bit of a kick up the backside never hurt anyone and is what the younger generation needs I think these days.

I have seen beggars and so called “homeless” people outside the shops with the latest iPhone. Apparently it is a necessity in this day and age.

You’ll find the idiom is putting the cart before the horse, phydeux. Your ignorance of the English language is only exceeded by you lack of understanding of economics.

Sam Oak,
You take delusion to a new level.

No economy in the world is based around the property market and if it was, it wouldn’t be somewhere to invest in.

Also LOL at you thinking the financial services industry has its foundation in the property industry.

But let’s say you are right for a second, you’re basically admitting that we have a massive misallocation of capital investment in a non productive area of the economy. That’s literally the problem we are discussing.

As for your comments around the rest of the economy, if you actually believed that, property would be the last place you would invest in this country because you’re saying that fundamentally our economy is solely based on a ponzi scheme, with no wealth creation or productivity value add whatsoever.

And the reason I didn’t specify individual parts of the service industry is because there is so many of them. It’s also irrelvant because rebalancing our investment dollars will benefit them all.

Things like health, wholesale,retail, education, professional services, food, administration, arts, finance etc. will all benefit from reducing property speculation.

“Do you think cavemen needed a roof under their heads more or someone to stir their lattes?”

Assuming you meant a roof over their heads (lol) here also and yes I do think people need a roof over their heads which is exactly why I promote the policies I do.

Housing and construction won’t disappear if property is taxed higher, there just won’t be as many spivs leaching off the economy. Houses will still get built, new areas will still be developed.

Assiduous,
You haven’t addressed the point.

If the government is paying for the land, why would anyone interested in the scheme choose a small block or apartment?

Because of the windfall gains, they will leverage themselves as much as possible, to acquire as much of the subsidised product as possible. The land.

So either this would result in government tightly controlling the schemes reach through only allowing tiny blocks/apartments to be included or would result in massive urban sprawl.

If it’s the former, the value for first home buyers is reduced significantly, meaning less take up.

If it’s the latter, it would ruin the planning and long term sustainability of our cities.

And to further address these points, Dr Murray claims that this would be controlled by age limits, offering different products to families and singles, offering different products to multi generational households etc.

This just massively increases the complexity and administration costs of the scheme along with once again reducing its reach and effectiveness.

It would also be extremely open to rorting, you could drive a truck through some of the holes in it’s application.

you seem to have missed the following Phydeaux…

“The use of superannuation savings where available makes sense. Homeownership does more for security in retirement than does super.”

“Because the use of super would be quarantined to new HouseMate homes, it would be unlikely to push up the price of existing homes.”

“No other housing policy change would do anything like as much to make homeownership cheaper, or to free up income for families at the times they need it most.”

This is a no-brainer for every renter and public housing tenant in Canberra whether they want to own or not.

S Oak wrote: “ Anything relating to the internet … is uncompetitive compared to the rest of the world. …. Anything high tech and innovative the US do far more competitively.”
Tripe. I have considerable personal knowledge of this but will stick to well known public examples.
Ever used high speed WiFi? Invented here. Ever heard of Google Maps? Developed here. Cochlear implants? Gardasil? They are activities you strangle or curtail through diversion of surplus investment to housing.
“If you had suggested supporting the mining or agriculture industries I might agree with you.”
These can be and are done more cheaply or with higher technology overseas. We have some useful rocks. To imagine that should be, or could only be, the extent of our future wealth is the thought train of economic troglodytes.

S Oak, I did not write the inverted idiom but two punctuated nouns for topic reference, to mix in your mind. Please keep up.
If I lacked understanding of economics, I would be waiting a long time to learn were I to be schooled by you. In extensive posts across multiple threads you have yet to respond substantively to any economic argument by anyone, constantly falling back to “I, me, mine”.
Oh, and if you are having trouble spelling phydeaux (again), you can just copy it from the page.

I missed none of those assertions, assiduous. It was the lack of discussion I noted, along with other problems you do not mention.
I favour action on social housing but for your proposal on housing affordability I will take chewy’s summary:
“… it doesn’t fix the fundamental problems underpinning housing affordability, it just subsidises one part of the market.”.

Rather than acting in accordance with the Labor platform of equity and equality, Barr and Berry are destroying social capital via the neoliberal for profit ACT housing market and suburban land agency. Economist, housing market, and corruption researcher Dr Cameron Murray advises “just build more housing and get it into the hands of those without it at the cost of construction.” Singapore has been doing this for decades and have a 90% home ownership rate. First home buyers in Singapore can get a apartment at next to nothing up front, and 50-70% lower prices than Canberrans, have less debt and as a nation spend less as a proportion of their budget in housing subisidies than Australia. Send Barr and Berry, that the status quo is unacceptable by supporting this campaign for change: https://epetitions.act.gov.au/CurrentEPetition.aspx?PetId=214&lIndex=-1

Gave me a good chuckle, looking at the other epetitions there are calls to prevent children from getting run over by cars and then there is this laughable one to undermine household wealth by 50-70%. You can’t even make up this level of comedy!

Sam, you have admitted previously on RiotACT to owning multiple investment properties in Canberra, it is sad you can see no problem to solve, read none of the expert analysis of this issue, and cannot empathise with the great many people disadvantaged by the unequitable economics and politics of vested interest driving this

Lets review some of your prior comments on the Riot ACT…
“Oh and the quantitative easing/money printing that the RBA is doing can continue. It is good for house prices!”
“As a landlord I will passing this 3.75% on to my tenants plus an additional 20% in line with the revaluation of my UV of land”
“rising house prices is benefiting the entire population and not just home owners”

The scheme you are proposing is not fundamentally sound whatsoever. Even if the land was made free and seized by the government after 50 years, the cost of constructing a house is not cheap; it’s still large unaffordable for the same minority of the population struggling to get into the market. It costs $500k just to build a house with the material and labour costs skyrocketing right now. Much more effective if they suck it up and buy a $300k apartment.

I am a Rabbit™10:49 pm 23 Mar 22

Are you seriously using Singapore as an example of good affordable housing policy? They way they achieved that is fundamentally incompatible with both democracy and market liberalism. I’ll give you a hint though; Singapore forcibly acquired land from private land owners at rates which were pennies on the dollar. The benefits of being a dictatorship.

Not just me pal.

https://www.youtube.com/watch?v=2cjPgNBNeLU&ab_channel=BloombergQuicktake

Unfortunately it seems something always has to be pried out of the hands of the privileged to improve equality, whether power, the vote, wealth, slaves, or property and land ownership. Perhaps for profit capitalist markets just don’t provide affordable housing by definition.

“Historically, the social challenge of unequal access to housing was solved with public interventions to offer non-market housing at lower regulated prices to first time buyers and renters.”

You say democracy and market liberalism, i say neoliberal trickle-down Plutocracy.

Think we’ve found the red under the bed.

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