17 October 2022

Home Truths: a Region campaign on Canberra's housing crisis

| Karyn Starmer and Genevieve Jacobs
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Townhouses in Canberra

What are the solutions to Canberra’s growing housing crisis? Photo: CHC.

Canberra and surrounding regions are facing intense housing supply issues with flow-on effects for our economy.

Across the ACT, affordable rentals are rarer than hen’s teeth. While housing costs have declined slightly in recent months, Canberra’s median housing and overall housing prices remain the highest in the country.

The problem is bigger than simply putting a roof over our heads: as the ACT grows rapidly, we’ll all need housing security, whether it’s for teachers, service economy workers, health care workers or the public service.

This week, Region launches Home Truths, an in-depth examination of the problems we’re facing and potential solutions.

We’re looking at issues ranging from build-to-rent and whether abolishing stamp tax has worked to how we can provide vulnerable Canberrans with housing security. As the new territory plan launches, we’ll look at design, urban planning and our vision for the future.

This is not a future problem, it’s in front of us right now and it’s urgent. So what are the facts?

Home Truths logo

Housing security is no longer a problem just for the ‘disadvantaged’. Image: Region.

According to the latest ACT population projections, Canberra will grow by 50,000 in the next decade to 482,300 in 2031/32. That’s a faster population growth than Tasmania, which we may well overtake at some point.

Despite recent declines, Canberra has maintained its position as Australia’s most expensive capital city rental market and there’s a critical lack of affordable rental properties in some areas. In 2022, median house prices hit record highs and residential vacancy rates were at record lows.

Greenfield development is not the only answer. The government has focused heavily on increasing urban density, but this faces strenuous opposition from many in the community who want to preserve Canberra’s low-density neighbourhoods.

READ ALSO Housing crisis enters dangerous new stage and government needs to act

The government needs to review its housing strategy to allow for a diversity of housing choice to meet the needs of our growing and ageing population. This means having planning controls that allow multi-dwelling medium-density housing in our established suburbs. At present, the rezoning required on a case-by-case basis is costly.

Changes are forecast with the new Territory plan’s district focus, but much of the low-hanging fruit – dual occupancy on RZ1 land – is still impossible. Rezoning faces strenuous opposition from inner suburban residents guarding expansive house blocks.

Part of the problem is the ACT’s unique history and demographics. The city’s suburbs are young by comparison with other capital cities, only entering a major growth phase in the post-war period.

If you’re an ‘old Canberra family’, chances are you’re third generation at most.

In the Territory’s early years, retiring public servants would escape back to their place of origin or down to the coast, but increasingly, there are reasons to stay.

Retirees may not wish to rattle around in their emptied nest, but if they wish to keep their local butcher or pharmacy or GP, with few medium-density, freehold offerings, it isn’t easy to downsize in the community they know and love.

This cohort prefers the security of freehold, which apartments do not offer, while retirement villages do not necessarily meet the needs of all the upcoming retirees.

As retired people stay in place in the inner suburbs, young families must move out to the greenfield developments on Canberra’s fringe to find their homes. Small block sizes in greenfield developments don’t always offer opportunities for families to build or buy their forever homes.

This also means there’s nowhere affordable for workers to live, limiting the ACT’s economic growth. A rapidly expanding tertiary education sector also increases the number of people competing for affordable and accessible housing.

READ ALSO Release more land to boost housing, report tells government

Extended greenfield development puts a greater strain on our transport infrastructure, unlikely to be remedied in the short term by light rail.

Density is also putting pressure on Canberra’s ‘salt and pepper’ model for public housing. Inner city sites reserved for the most vulnerable become increasingly attractive for development, filling the Territory’s perpetually strained coffers.

But our most vulnerable have no wish to move further out where their networks are fragmented, transport is complicated and they face isolation and lack of access to services.

Older women are also increasingly vulnerable to homelessness.

So what should we do?

Will increasing supply solve the affordability crisis? What role does property investment play? Is better design the solution to affordable housing and retaining green spaces?

Watch this space: Region will speak to experts and pundits across the community as we seek solutions together.

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devils_advocate10:54 am 20 Oct 22

Oh lawd. Again, to summarise:
-rates and land tax are taxes. They are a deadweight loss. They impose a gap or a “tax wedge” between what the buyer is willing to pay (tenant) and what the seller will accept (landlord)
-the legal burden of the tax falls on the landlord. Where the economic burden falls (I.e. the extent to which the landlord can pass on some or all of the costs) depends on the market.
-there is nothing the landlord can do legally to reduce the amount of the tax.
-in a supply constrained market the landlord can and will pass on increased costs to tenants (taxes, interest rates, everything)
-because all landlords are getting railed on taxes there is no competitive pressure on landlords to undercut each other.

“-because all landlords are getting railed on taxes there is no competitive pressure on landlords to undercut each other”
Error. There is always competitive pressure between individual landlords in pricing their rental property. The question is market pressure. Currently, the market as a whole is high (see your previous point). That increases average profit margins, yet there is still competitive pressure within the market which is why prices cannot be raised arbitrarily high by a single landlord. There is a difference between whole-of-market and single price.

devils_advocate1:13 pm 20 Oct 22

The landlords cannot compete or become more efficient to lower the component of their cost base that is represented by tax. The whole-of-market on the supply side has been hit with the same cost imposts and the balance of supply and demand favours landlords. Leaving aside the theory, Canberra is now one of if not the most expensive rental market in the country. Why would the government add to the landlord’s cost base knowing they are in a position to pass it on in full?

devils_advocate, your opening sentence addresses a straw man of your invention, nothing I said or implied. I spoke about pricing, not “efficiency”. Single prices cannot be increased arbitrarily, as has been covered extensively below by more than me.
Your last sentence is riddled with small errors (and the ones between first and last do not matter).
Landlords are not in a position to pass on increased costs “in full”, despite it currently being a seller’s market. For example, raising rents improves the equation on purchase, especially in a context where house prices are now falling. Rental demand is not simply inelastic.

Some landlords are not borrowing-constrained so can well afford to undercut more stressed landlords to maintain a stable revenue stream on their CGT-advantaged capital asset (or even pick up another cheaply when a distressed landlord sells). That is, there is competitive pressure. In extremis, there is also a cap on rental increases for an existing tenant or a six-month lag on raising rents via no-cause eviction, the latter of which options will likely disappear next year in any case.

You speak of Canberra having high rents without considering that Canberra also has high incomes. No help to the poor, of course, but still it is erroneous to speak of one in isolation from the other.

“Why would the government add to the landlord’s cost base knowing they are in a position to pass it on in full?”

Because they aren’t in a position to do that.

It seems strange that you are arguing that Landlords aren’t in a position to compete with each other, which would mean that they can already increase their rental prices without the government increasing the tax burden. Also that demand for rental properties is completely inelastic to cost. If that’s the case, why don’t landlords raise prices right now?

You seem to be suggesting that landlords are running a charity and charging less than the market will bear right now for no real reason. Strange.

devils_advocate2:53 pm 20 Oct 22

The article is about affordability. By definition it is not looking at the entire market, so demand-side substitutability among tenants who can also afford to buy is irrelevant. As things stand today, at the bottom end of the market – which is the topic of this article – tenants are price takers and landlords are price makers. Raising the cost base for landlords has one result and that is a 1:1 cost impost on tenants. This compounds the taxes, charges, fees and regulatory hurdles that the ACT council has imposed on bringing new supply to market, as well as the ongoing rental reforms that will increase risks and costs for landlords.

devils_advocate3:08 pm 20 Oct 22

Let’s suppose the market is competitive, as you say. In a perfectly competitive market, economic profits reduce to zero. Certainly price information is nearly perfect. If the cost base were to increase, but landlords didn’t increase their prices, they would take a loss. There are only very specific reasons for businesses to take a short-run loss and none of them apply here.

For clarity, I am not suggesting that landlords are running a charity; indeed landlords would at a minimum seek to recover their expenses. I am simply saying that in a supply constrained market raising that cost base means raising costs for tenants. This is unremarkable in any other industry and I’m not sure why it’s controversial in relation to residential tenancies.

Devils Advocate,
Why have you now flipped from a completely inelastic demand argument to attempting to talk about a perfectly competitive market?

No one has said of claimed these things for the Canberra market except you.

And no, the article is not solely about affordability, it is about the operation of the housing market and prices which are inherently affected by demand side impacts as well.

Raising the cost base for landlords simply does not result in a direct pass through to tenants. Tenants are not remotely only price takers, unless you try to narrow the scope of your comments to become meaningless.

“Let’s suppose the market is competitive, as you say. In a perfectly competitive market…”

So, devils_advocate, you noted I said “market is competitive” and then went on to talk about a market which is “perfectly competitive” which you have just agreed I did not say.

Not the same thing, are they. The old game of changing the subject while hoping nobody notices what you have done.

What a waste of time are your arguments.

devils_advocate9:42 pm 20 Oct 22

Fair point – the arguments are probably a waste of time. The figures on Canberra’s rental market both in terms of price and vacancy speak for themselves.

“The figures on Canberra’s rental market both in terms of price and vacancy speak for themselves.”

Indeed, they do. Vacancy rates are low everywhere so prices are high in each capital relative to that city’s typical income.

If the ACT government really wanted to fix it they need to look at the housemate system proposed here https://www.google.com/url?sa=t&source=web&rct=j&url=https://osf.io/nxq2u/&ved=2ahUKEwjj3Y6B–j6AhWCwjgGHe74C0IQFnoECAoQAQ&usg=AOvVaw3DbfQPws7WKqcYt_iedylm . Cuts out the housing developer leaches and provides affordable housing at a cost that would be less than current rental costs.

“Extended greenfield development puts a greater strain on our transport infrastructure, unlikely to be remedied in the short term by light rail.”
We need to be very clear that the tram is unlikely to do anything for existing and new suburbs ever. The plan is all about building flats along Flemington, Northbourne, Adelaide and Athllon. Even in the optimistic government forecasts, it makes public transport slower for all existing Canberrans, and even those new flat owners if they’re silly enough not to go to school or work further along the tram line. It’s such an expensive stupid idea, I find it hard to discuss politely.

It is all about business, and big companies wanting huge profits $$$$.
Housing is viewed as a big corporate money making business in the USA and the UK, and this model is sadly now moving to Australia. Make no mistake, the government here (the ALP) is selling out Australian families, and selling Australian land and homes to foreign big business corporations and these big businesses will become your ‘landlord’.
The next step they want, is to remove small private landlords (mum and dad investors who might own one or two investment properties for their children or their own retirement) and to replace small landlords with big corporate company ‘landlords’ like Blackrock, Tricon etc. Big corporations will buy up homes (also the terrible rent to buy buildings), so they can rent them out and make huge profits for the companies. It is ALWAYS about the government doing deals for their corporate mates through any scheme they can (and this is particularly bad in Canberra with the terrible ACT govt). If you think anything else is going on, sadly you are disillusioned.

devils_advocate1:16 pm 20 Oct 22

Developers may or may not make big profits on land developments, depending on their efficiently and cost of capital. Indeed many developers and builders have gone out of business having been unable to absorb the cost increases in supply chains for fixed-price contracts.

What IS certain is that government fees, taxes and regulatory burden is adding hundreds of thousands (yes hundreds) to the purchase price of individual homes.

HiddenDragon11:33 pm 17 Oct 22

The ACT is not alone in facing this problem, as this fairly blunt piece by Alan Kohler points out –

https://thenewdaily.com.au/finance/2022/10/17/alan-kohler-labor-policies/

but it does seem to be “punching above its weight” – as the over-used expression goes – in badly mismanaging its little piece of the national population Ponzi scheme.

In the longer term, the problem will be eased for the ACT, and many other parts of the country, when fiscal reality truly hits and governments are finally forced to stop their chronic over-spending and start dealing with the cumulative consequences of a few decades of profligacy. That will take a lot of jobs and demand out of the economy and will likely have a serious impact on population growth, particularly here in the ACT.

In the meantime, a much better approach to housing choice and quality (instead of just talking about it and continuing to churn out shoddy, monotonous, over-priced, one-size-fits-all crud) might help.

Incidental Tourist7:25 pm 17 Oct 22

Looking for truth? The truth is when a landlord leaves the market so goes the tenant.

It’s no coincidence that Canberra once had, but now doesn’t have affordable housing for lower income earners, single income earners, pensioners and first home buyers. The change can be dated back and directly attributed to Barr and Rattenbury. Housing for both home buyers and home renters has became less affordable as a direct consequence of higher ACT taxes, formula driven increases in unimproved land values (30-60% last year), annual rate rises, land supply restrictions, densification, apartmentalisation and of course the expensive tram focussed policies of Barr/Rattenbury. Vested beneficiaries and promotors of these policies, probably without families and kids, but motivated by self-interest, continue to defend these policies and deny the impact on housing affordability. The lack of a viable alternative government means we are stuck with them.

Barr and Ratrenbury must be extremely powerful to have been massively increasing housing unaffordability over 10 years before they came to power, through the huge price increases of the early 2000’s.

Almost like a large part of the problem existed well before then and has continued through to today.

But you are right about the strong self interest involved in the housing market. Mostly around older, wealthier people and investors consistently supporting taxation policies (and repeated changes) that have enriched them, whilst objecting to any changes in urban planning and land zoning that would allow others to benefit from the same level of amenity they take for granted. These people have received massive windfall gains from these changes to government policy yet they still complain it isn’t enough.

You’ll even see them claiming that higher holding taxes on existing property somehow increases house prices, which is extremely strange seeing as it makes them less attractive an asset to own.

devils_advocate2:00 pm 20 Oct 22

Barr and Rattenbury have indeed made some of the more egregious policy decisions that have increased the cost and extended the time it takes to bring houses to market. The more recent rental reforms will double down on this, reducing supply, raising costs for landlords and driving rents even further up.

devils_advocate1:20 pm 17 Oct 22

The short answer is taxes. Landlords have to pay BOTH rates and land tax on the property, having already stumped up tens of thousands in stamp duty. These costs add hundreds of dollars per week to rents.
Urban infill is similarly saturated with tax. Stamp duty on the site, $30k in lease variation charges per unit, then the new buyer paying stamp duty on all that. Taxes being levied on top of taxes.
The new environmental requirements are another nail in the coffin, driving up costs for developers who must then pass it on to buyers.

This is not remotely correct.

If landlords could just arbitrarily increase rents and automatically pass on costs, they would already do so. They aren’t running a charity and will always try to maximise profits.

If tax rates truly were unbearable, property prices would fall as investors left the market, allowing former renters to be able to purchase their own dwellings, a net result of zero to the rental market.

In reality, it isn’t that taxes are too high for investors but the opposite. At a federal level they have been incentivised for the last few decades through successive taxation changes which has led to a large proportion of the problems with affordability that currently exist.

So tax reform at a federal level and the completion of the transition away from stamp duty at a local level will help.

If backed up with better urban planning to provide a greater mix of dwellings within the city, we’d be a long way to addressing the problems.

Land taxes and rates in the ACT are too high, hence why rent and house prices are high too.

If your UV says the old or new property is worth $500k to $1m then that is why otherwise crap house are being sold for $1m to $1.5m, as they can’t be worth less than the unimproved value th

Landlords can and do increase the rent to match the ridiculously high land tax and rates in the ACT, as the tenant pays for it so no need to get out of the market.

Yet with all the anti landlord policies like making it effectively illegal to evict bad tenants, more landlords will give up in disgust as they simply don’t need the stress.

Then when they sell their homes neglected by bad tenants they can demand ridiculous prices justified by the ridiculously high Unimproved Value if the property justified by the ACT to milk us all dry.

All thanks to Ba and the Rat.

Nothappyjan,
What you are saying is simply not true, it’s just a lie that landlords like repeating in their attempts to further rent seek and avoid having to pay tax.

If landlords could arbitrarily raise rents, then they would already be doing it because the market would pay the price they’re asking.

But in reality they can’t do that because the market determines what landlords can charge.

So if taxes are increased, the value of investment property is reduced because of the higher holding costs making the investment less attractive. You can’t just then arbitrarily increase rents because it would affect the supply and demand curves which you aren’t in control of. The market is self correcting to incorporate these factors inherently, matched against property values, yields and supply and demand of rental properties.

“when they sell … they can demand ridiculous prices justified by the ridiculously high Unimproved Value“
nothappyjan, in all cases I can directly recall, vacant land has sold above its UV, here and interstate. Valuations follow realised prices, not the other way around. House prices shift stickily compared with shares but it is still a functioning (if biassed) market.

Agree 100% with you @nothappyJan. Landlords have to charge high rents in order to be able to pay the ACT govt ridiculously high land tax and rates (that the ACT govt also increases every year).

jorie1, you are attempting to blame an irrelevant factor, probably for your own convenience. If you are a landlord (my recollection is that you are) then you charge market rents. Currently, supply is still low and demand high (i.e. a low vacancy rate) so rents are high. You are trying to shift any opprobrium for those high market rents from yourself to the government. If the government quadrupled land taxes tomorrow you would sell. You would not and could not raise rents to suit. It is absurd to claim you could. If you do not like your return on investment from renting, then sell.

Agreeing “100%” adds nothing to whether you are right. You are wrong.

Jorie1,
Yes we get it, as a landlord you are another who’s repeated comments on the issue show how you don’t like paying tax.

Exactly, they usually do sell well above the UV, and when the UV keeps climbing rapidly every year, so do the costs to the landlord.

Even if the actual realised value of the property drops, the UV in the ACT never does, and neither does the land tax or rates, therefore the rent won’t drop much if at all either.

I get what you are saying, but I think the ridiculously high UV does drive up prices and rent in the ACT, unlike Vic and NSW.

Of course landlords are already increasing rents to match their ever increasing costs like land tax, rates, insurance and maintenance.

Who do you think pays the majority of those costs? The tenant obviously, it does not reduce the value of the property because those cost are mostly covered by the tenant.

When all landlords in Canberra have ridiculously high base costs from land tax and rates, do you think they all just say that’s ok, I won’t pass that cost on to the tenant, I’ll take the hit on that instead?

“So if taxes are increased, the value of investment property is reduced because of the higher holding costs making the investment less attractive.”

By your logic Canberra’s ridiculously high land taxes and rates should result in cheap rent, but I’m pretty sure most don’t think rents here are cheap.

But I agree if the ACT keeps ramping up the UV, rates and land taxes then perhaps we’ll get to a point where both landlords and tenants can no longer afford to live here.

Yeah, it’s not rocket surgery 🙂

If the council quadrupled land taxes to pay for the next stage of the tram madness, which is believable, then I’m pretty sure most landlords in the ACT would not sell their property, obviously.

Some might sell, but most landlords wouldn’t or couldn’t sell, even if they wanted to.

Who would they even sell to, certainly not to tenants that already can’t afford to buy a home of their own in any price range in Canberra, even if house prices had a significant drop.

The most logical outcome is that rents would jump significantly to cover those costs across all of Canberra, as they have been since UVs have skyrocketed.

Nothappyjan,
Except what you are saying is incorrect because you are taking an extremely narrow focused view on the issue. Which ironically is all too common for landlords because all they are thinking about is their own immediate personal finances.

Once again, landlords simply cannot arbitrarily raise rents, they aren’t in control of the market.

“When all landlords in Canberra have ridiculously high base costs from land tax and rates, do you think they all just say that’s ok, I won’t pass that cost on to the tenant, I’ll take the hit on that instead?”

No, they realise that their holding costs are increased, so it lowers the value of their investment. Some may sell, some may not. Potential future investors factor in the increased costs to what they are willing to pay for future investments because they are now less valuable over time.

The market adjusts.

Renters also behave similarly to reduce their costs and seek out better deals as rents increase and decrease when supply and demand changes.

“By your logic Canberra’s ridiculously high land taxes and rates should result in cheap rent, but I’m pretty sure most don’t think rents here are cheap.”

Not sure how you’ve gleaned from what I’ve said at all but it’s hardly usurprising that you think being unable to think beyond your own pocket.

As the value of investments due to increased holding costs change, so too do the rental yields which also drive investor activity and fluctuations in rents. But there are many other factors that will impact rents far more significantly. In the case of the ACT demand is currently very high and supply is very low (for both rentals and owner occupied dwellings). When you add in generous taxation treatment for investors overall, it has led to long term higher prices and rents.

It’s hilarious that in all your comments you can’t see beyond your own nose on this issue. Never get in the way of a landlord and his literal rent seeking, they squeal like a stuck pig when queried.

nothappyjan wrote: “I get what you are saying, but I think the ridiculously high UV does drive up prices and rent in the ACT, unlike Vic and NSW.”
In what respect are our land values other than cheaper for comparable distance to city centre, compared with Sydney or Melbourne? Of course there are additional reasons they are valued more highly, but your plucking from the air of a false comparison merely highlights the silliness of your argument. UV is derived from land value. Yes, land value goes down; I have the notices to prove it, despite an over-all massive rise in the last five years here, a rise I consider consistent with leading property values in the suburb.
This is how land values are determined:
“Valuers assess the unimproved value of each block by analysing the sale prices of similar properties. When possible, they use the sale price of vacant land in the area for comparison, … If there have been no sales of vacant land in the area or in comparable areas, valuers work from the sales of improved properties and deduct amounts for improvements”.
Trailing assessment, not leading. You can find more information here: https://www.revenue.act.gov.au/rates/land-valuations

When properties sell, they do so in the market, ignoring whatever goes on in your head.

jan wrote unhappily: “Who do you think pays the majority of those costs? The tenant obviously, it does not reduce the value of the property because those cost are mostly covered by the tenant.”
One clarification please: what is “it” that might “reduce the value of the property”. It dangles.

The point to take up here though, are the two false claims: that the tenant pays “the majority of those costs”, or “those cost [sic] are mostly covered by the tenant.”
You are being evasive, misleading, over costs and payments. Rents cover all externally imposed costs by a significant margin, a factor of a few times; not “most” or “majority” but 100% with money to burn above that. So where might that money go? Your profits or your bank, which is your individual decision on gearing after ascertaining known or expected rental income and known costs. Purchasing a property with a particular loan level is a discretionary decision. Whether rent as a whole covers loan costs or you gear negatively is largely a function of your discretionary loan decision, not known taxes.

You also ignore capital gain from those supposedly shocking value rises in property. Given the tax regime, that is where the payoff is, but it seems you do not want to talk about that.

devils_advocate3:53 pm 20 Oct 22

Until we had emergency-level interest rate reductions, ‘negative gearing’ was a significant line item on national tax expenditures, meaning landlords were making a significant (in aggregate) cashflow loss on renting out houses. The concessional CGT taxation for long held assets may or may not have put them in a better position than, say, investing an index fund. Although I note you can’t house a family in an index fund.

Alright, landlords are evil, and they should register themselves as charities to help the ACT council avoid their public housing obligations, and give first home buyers a leg up.

Land taxes & rates in the ACT are negligible and have no impact on rents because landlords can just recoup their running expenses when they sell their property at the end of each financial year.

And the tram will pay for itself.

Got it.

nothappyjan, only you mentioned the tram, presumably to try to curry sympathy in some way. The fact is the government is slowly changing from inefficient and inequitable stamp duty towards land taxes, to tax rents on capital assets. That is a good move.

We know, you don’t like it. It’s tough on your unalloyed self-interest, isn’t it? Never mind, I noted above you said that even with a further increase in taxes you would not sell. This rather takes the legs from beneath your arguments. Must be happy then.

Phydeaux,
“Never mind, I noted above you said that even with a further increase in taxes you would not sell. This rather takes the legs from beneath your arguments. Must be happy then.”

Yes it is strange isn’t it. On one hand they say that the increased taxes make it more difficult for landlords to invest in property and then on the other say it has no effect on them because they can just increase rents arbitrarily, it doesn’t affect the value of their investments and they aren’t planning on selling regardless of what happens

So basically a situation where landlords can never lose and their profit margins are guaranteed. Truly funny stuff, seeing as how much they complain.

“‘negative gearing’ was a significant line item on national tax expenditures, meaning landlords were making a significant (in aggregate) cashflow loss on renting out houses.”

devils_advocate, why would a rational investor accept a current cashflow loss except for future gain exceeding current nett loss (which is the nett loss after tax deductibility advantage, not gross)? Just like other investment outgoings, one does so because future gain is expected to be greater. That being so, it is not a “loss” per se but a current deductible investment expenditure in expectation of nett gain.

What might facilitate that gain? The fundamental source is capital gain on the asset (a gain merely by virtue of holding the asset) with the lovely taxation advantage of being taxed on only 50% of capital earnings at your marginal rate, not on 100% of earnings (or income).

“The concessional CGT taxation for long held assets may or may not have put them in a better position…”
It did. Compared with non-concessional taxation, what else could it do?

“… than, say, investing [in] an index fund.” which is to say, doing something which is not investing in rental housing at all (though subject to the same beneficial CGT regime). You seem very confused. Do you understand any of this topic at all?

“I note you can’t house a family in an index fund.” Do say.
The house, however, exists anyway so a family is housed in it, owned or rented, which has nothing whatsoever to do with your putative index fund, managed fund, or direct share investments. All are discretionary choices in asset allocation.

Do you understand any of this topic at all?

devils_advocate9:48 pm 20 Oct 22

Yup I understand it all.
-the ACT government relies on private landlords to fill the gaps in the failed public housing system
-private landlords have a choice about how they invest their money
-in the past that investment decision has been more favourable as a result of a combination of tax treatment, potential capital gains and some level of cashflow
-the investment in property is now less attractive due to a number of economic factors as well as poor policy by the ACT Government
-renters who can’t afford to buy will end up losing out even worse

Let me know if there’s any other basic concepts I can explain.

“-the ACT government relies on private landlords to fill the gaps in the failed public housing system”

Ha, in reality, the private landlords don’t fill a gap, they crowd out would be owner occupiers and drive increased prices due to the favourable taxation treatment they receive. They mostly invest in existing property, they aren’t a large driver of new stock coming to market.

“-the investment in property is now less attractive due to a number of economic factors as well as poor policy by the ACT Government”

Good that you admit the investment is now less attractive. Which thus reduces investment demand and thus places downwards pressure on property prices. Now we are getting somewhere.

“-renters who can’t afford to buy will end up losing out even worse”

No, because now more renters can afford to buy because of the downwards pressure on prices that you’ve admitted above.

The house doesn’t disappear, a renter becomes a buyer.

And also due to the lower property prices and lower investment demand, there is downward pressure on rents because yields would otherwise increase once again driving increased investment as the market reacts to changing supply amd demand.

As for some of the other “basic” concepts you could explain, perhaps you could outline your understanding of strawman arguments and how correlation does not equal causation. You seem to be an authority on them.

devils_advocate11:50 am 21 Oct 22

Sure. A straw man argument is an attempt to shift the original argument by replacing it with some different or distorted premise and arguing against that instead.

For example, my argument was that significantly increasing the cost base for all landlords in the ACT through taxes in the current environment will result in rent increases.

Various straw men have been put forward relating to imaginary scenarios where landlords do not have the power to pass on cost increases with impunity.

I note things now absent from devils-advocate’s claims.

Apart from their first and last dashed points, they did quite well there by citing economic factors, albeit omitting that landlords are doing quite well anyway owing to low vacancy rates.

Devils Advocate,
How is your point a straw man?

A strawman would be arguing against something not said by others.

“Various straw men have been put forward relating to imaginary scenarios where landlords do not have the power to pass on cost increases with impunity.”

This isn’t a strawman and it’s not imaginary. Landlords do not have the ability to pass through costs with impunity as has been explained with reasoning in detail.

Oh well, I guess we can cancel that basic concept off your list, perhaps I’ve overestimated you.

Strange though that all these landlords seem to be charging under market rates when they can all apparently arbitrarily increase rents and they aren’t competing against each other. How generous.

Oops, I was too generous at 12.41 pm. devils-advocate is back with the ludicrous claim for arbitrary pricing power, while adding that they do not much comprehend informal fallacies.

As chewy14 pointed out more than once in other terms, if landlords can charge as they please then why would any landlord ever get into financial difficulty owing to debt over-extension? They simply raise their rents, don’t they? In fact, why not double them to get rich faster? It is only the ACT which caps rental rises by inflation (+10%) so other capitals can raise rents as they please; or they could if there were a shred of credibility in devils_advocate’s claim. Alas, none at all.

Maybe …… markets?

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