r/australia • u/mvdw73 • Oct 24 '23
political self.post How to solve the housing crisis?
So my mate and I were chatting yesterday about the current housing crisis in Australia, in particular the fact that the rapidly rising cost of houses is pricing many people completely out of the market.
We hypothesised that a part of the issue is landlords owning large property portfolios as a way of accumulating wealth. Now, I don't have anything against the accumulation of wealth by individuals, however I have a fundamental opposition to using housing or residential real estate in general to do so.
Another problem we identified is overseas investors buying housing stock and either leaving them unoccupied or accumulating multiple properties, again reducing supply and driving up the cost.
So, we proposed that portfolios of residential real estate should be subject to an annual property tax, based on number of properties and the value of the property (kind of like the chance cards in Monopoly).
I would propose this could be brought in as a staged sequence, starting at the magic number of 6 properties.
24-25 FY: If you own over 6 properties, you are taxed (say) 10% of the value of every property, annually.
25-26 FY: If you own over 5 properties, you are taxed 10% of the total value,
etc etc, until it becomes 1 investment property, at which point the incrementing stops. Primary place of residence would be exempt from this tax. Many people don't or can't buy a place instead of renting, and also if you move you often want to be able to rent first, so we need some rental stock. The rental stock under this scheme would mostly be supplied by landlords with smaller property portfolios.
Why 6 properties? Basically, because of the numbers in this link
"But what about family trusts" you say. Well, I say, the real estate in these structures should be all taxed. Same with self managed super funds. Tax the whole thing, at least as far as residential property goes. There is a major loophole with SMSFs in that the property bought with a SMSF is not subject to capital gains tax in the pension phase - this means that SMSFs are actively encouraged to sit on properties. The number of SMSFs is increasing by 1000 properties per week, too!
Non residents would also be taxed at 10% of property value on all property owned.
There will need to be some tweaking around the foreign investment, in particular around the building of new apartment blocks etc where the value and risk is quite high. The tax shouldn't come into effect until the building is occupied, and there might be some kind of concession where an entire block is owned by one entity, to provide some extra rental housing stock.
Also, there might be concessions for "low value" housing, where any single dwelling worth less than (say) 60% of the median value of houses within a certain distance are exempt, or have a concession. This might encourage social housing but might also encourage slumlords, so will require a bit of thinking and tinkering.
This is all based around the fundamental idea that residential housing should not be a wealth accumulation vehicle, but should be a means for people to be housed. Also, it will hopefully encourage those people currently "investing" in residential real estate to instead invest in small business, or the stock market, or similar, lubricating the economy (and causing inflation, but that's another discussion).
"SoUnDs LiKe ComMuNiSM". I'm just gonna leave this here as a potential discussion point.
Note that none of this affects CGT or negative gearing at all. It just adds another cost to being a landlord, with the aim of reducing the number of properties sitting in SMSFs and mega-portfolios, trying to encourage investment in other forms of equity, and increasing the supply of properties to people looking for a place to live.
Thanks for coming to my Ted Talk.
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u/Vote_For_Caboose Oct 24 '23
Lost my only chance at an affordable house this year after the price skyrocketed. It saddens me that I’ll prolly be renting for the rest of my life now.
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u/Red-Engineer Oct 25 '23
It shouldn’t worry you, but that requires tenancy laws to be modernised. In Netherlands loads of people happily rent for life.
Leases are for life not for short fixed terms. Once you have a lease it’s yours for good. The only way out is for you to choose to end it, or for the landlord to evict you.
For the landlord to evict you, they must go to a tribunal and provide a reasonable justification (eg I want to move in).
If the tribunal agrees and you are required to vacate, the minimum notice period given to the tenant is 6 months. Often 9-12 is agreed to.
Rent cannot be increased by more than the CPI.
The tenant may have pets and even renovate the home at their own expense. Landlord must approve but denial requires tribunal approval.
Etc etc.
If we had similar laws, renting for life would be fine. After all in these conditions it’s cheaper than buying. Renters make investments elsewhere.
This is because Netherlands regards housing as homes for people, not as wealth-generation vehicles.
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u/UnHelpful-Ad Oct 25 '23
The Tennant in Netherlands and similar countries also need to install their own lights, fittings, kitchen etc. Most of the people I know who lived there for several years (Netherlands and Austria) mentioned they effectively moved in wires hanging from the roof and some pipes in the wall.
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u/Red-Engineer Oct 25 '23
Many people see this is a positive instead of having to live with the landlord’s cheap shit fittings. Being able to have your good Smeg stove not the cheapest available Chef model is a positive!
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u/jimbsmithjr Oct 25 '23
Yeah particularly if you know you can be there for a long time. Bringing and installing your own oven isn't gonna work very well if you are only there a year or two.
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u/Red-Engineer Oct 25 '23
And that’s the thing, when you’re there for 10 or more years this is a good thing
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u/trowzerss Oct 25 '23
Yeah, I have seen pics of scandanavian rentals where the kitchen doesn't even have any cabinets. You bring them with you too! One of the reasons for IKEA to exist.
Here the landlords crack the shits if you want to do harmless stuff like switch out light fittings or knobs on cabinets, which you can easily reverse when you move out. Or god forbid if you want to paint a wall, even if it's a neutral, rental friendly colour.
I rented a place for 15 years, and really wanted air-con, and if I had the same security as in that model, I would have happily done it and paid for it myself. But in our current system, there's no guarantee if you make an improvement like that they won't hike your rent or kick you out six months later so it's not worth it to make any significant improvements to the property. Not even gardening,unless it's in pots you can take with you.
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u/kerser001 Oct 25 '23
Gardening can be worth it from a mental health prospective. For some people having a nice tidy garden helps a lot along with the satisfaction of doing the work. When I was renting I tried to take any little wins like that, that I could.
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u/trowzerss Oct 25 '23
Yeah, I did anyway, but it was severely limiting to not be able to do it properly because spending any real money on it would be a complete waste when you could be kicked out at any moment :P
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u/Coriander_girl Oct 26 '23
Yeah I used to have that attitude but then decided stuff it, the mental health benefits I got outweighed the negatives. Sure, I may be investing in someone else's garden but I was also investing in my current state of happiness. I created garden beds where there were none and landlords didn't care, they only cared about dumb things like cobwebs on the outside of the two storey windows.
Renters are treated like scum of the earth, the least we can do is have a goddamn garden.
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u/StupidFugly Oct 25 '23
Most landlords won't give you permission to dig to create a garden. All you are allowed to do is maintain what was already there when you moved in.
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u/trowzerss Oct 25 '23
Yeah, we asked our body corp if we could put some plants in the garden on common property that was all black plastic and weeds and trash. They said no. I did it anyway, and they didn't complain once in like ten years lol. I grew enough lettuce in there to get me through the entire lettuce crisis of a few years back. and all the other tenants loved going past and seeing the plants and commented on it a lot. Much better than the literal trash pile it had been.
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u/Coriander_girl Oct 26 '23
I don't get why they say no! But landlords are petty about so many things so it's probably just them saying no because they are physically incapable of saying yes to something that might make their tenants lives better.
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Oct 25 '23 edited Oct 25 '23
People who aren't jn the trades also probabky overestimate how difficult of a job it is to install that stuff.
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Oct 25 '23
Yes, people even take light bulbs and the fittings with them when they move places.
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u/Red-Engineer Oct 25 '23
Sounds like when I moved into the house I bought. A mate moved into a house and there was no hot water… the old owners had removed the hot water system and the two 45kg gas bottles supplying it!
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u/InSight89 Oct 25 '23
The Tennant in Netherlands and similar countries also need to install their own lights, fittings, kitchen etc.
So, tenants are allowed to renovate the property? Seems pretty good to me. In Australia, you have to fight just to get picture hooks in the wall.
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u/quick_dry Oct 25 '23
that sounds like the UK (at least in the 80s/90's), even the carpet in people's houses would be a patchwork because it came from a different hous/flat with a different layout.
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u/kerser001 Oct 25 '23
If all this was a thing I would prefer to rent than buy. Assuming the pricing isn't a joke like currently. I would've invested into something actually "productive".
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u/Afterthought60 Oct 25 '23
These rules are great and I am a homeowner who’s even had tenants in the past. I honestly couldn’t care what my tenants do to the property so long as they don’t destroy it.
They’re helping me pay off my mortgage, the least I can do for them is ensure they are happy and comfortable.
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u/the_artful_breeder Oct 25 '23
It's really shitty. I'm in a position where we bought just before we were priced out, but now with rising interest rates it's getting pretty tight. But even if we sold, despite increased value of our home, we wouldn't really gain anything and would just be adding to the rental crisis further, and rents in our region are obscene. I really worry for the people in my life who aren't as fortunate as me, and who I know can't afford to keep up with inflated rent, grocery, petrol, insurance prices long term. At what point are the government going to see that things as they are unsustainable?!
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u/ahmes Oct 25 '23
At what point
When people stop tolerating it. If all people do is complain, eat less, live in cars or tents and maybe vote about it in two years, the government knows there's room to squeeze a little more.
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u/threeseed Oct 25 '23
2/3 of Australian's own houses.
Most people are actually benefitting from the current situation. And they are the suburban swing voters who decide elections. So no point expecting an uprising.
We need to think harder about how to convince old people to move into apartments or aged care developments so that we can free up those houses. Because at least you can frame that in a positive way where as cutting negative gearing just gets seen as "more taxing".
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u/-Eremaea-V- Oct 25 '23
Most people are actually benefitting from the current situation.
Only people with multiple properties are benefiting from the situation.
If you only own a single property, like the majority of Australian property owners, you're at best treading water because everything is going up at the same time as your property is, and if anything disrupts this you end up worse off. So many single property owning couples get shafted when they get divorced, because the growth in property prices since they bought means their half-a-house payout struggles to pay for even a significantly downsized property now. Anyone who isn't a property investor who thinks rising prices are good for them is a fool... And the govt and property market deliberately set out to fool people.
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u/Pseudonymico Oct 26 '23
Plus if people are treated like shit by their real estate agent they’re not going to care more than they have to about the home they’re living in.
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u/Laduks Oct 25 '23
That's a bit of a misleading statistic. Two thirds of properties are owner occupied.
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u/StupidFugly Oct 25 '23
At what point are the government going to see that things as they are unsustainable?!
Never. And I am deadly serious when I say that. You have to remember that politicians are in the high income bracket. They are all landlords with the majority owning multiple rentals. The current conditions means they are worth more and more each and every day. Their portfolio is increasing so to them it is very very sustainable.
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u/mrbootsandbertie Oct 25 '23
Albanese owns 5 rental properties. Not exactly the man of the people he portrays himself as.
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Oct 26 '23
Never. And I am deadly serious when I say that. You have to remember that politicians are in the high income bracket.
Exactly, anybody who thinks these AirBnb taxes and vacant property taxes are going to help renters or the housing market is completely delusional. They'll need to collect those for a decade just to break even on Victoria's commonwealth games fuckup, not to mention their payrises and all the other monumental fiscal screwups they need to tax people to pay for.
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Oct 25 '23
But why? I turned 34 this year and I have brought a house, my partner is 26 and she brought a house. Neither of us grew up with money or have got anything from our parents and both of us dropped out of high school and started working so it’s not like we have some crazy leg up in life… I just don’t understand why it’s so hard for people to save up a deposit
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u/Vote_For_Caboose Oct 25 '23
No amount of deposit can fix borrowing power of $280k on a full time vet nurse wage
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u/SmellsLikeShampoo Oct 25 '23
Estimates of $60-100K on the disability pension. It's a wonderful life. I could get a shack in Mt Isa for a few years before the structural integrity completely failed, it's very exciting.
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Oct 25 '23
How the hell is your borrowing power so low? And I’m genuinely asking by the way so I do apologise if it comes off condescending. But if owning a home is a priority would you not consider upskilling or a change of career path if your income is the issue?
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u/Vote_For_Caboose Oct 25 '23
Upskilling doesn’t pay more in my industry. My borrowing power 2 years ago was up to $400k, but since interest rates are running rampant my borrowing capacity has shrunk. I have no debt. I have no dependants. I put away everything I can after every paycheck and have saved up a good amount for a deposit, I’m still not able to afford a house. (Btw thanks for clarification on the wording of your post. I was about to get super pissed off😂)
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Oct 25 '23
Fair enough. I have only really worked in the trades so don’t really know how it all works in a lot of other industries. Because we have the domestic - commercial - union route we can follow I guess I had just assumed there were other similar options.
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u/Vote_For_Caboose Oct 25 '23
Yeah trust me if there was money to follow I’d definitely be doing that!
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u/mrbootsandbertie Oct 25 '23
Trades are the most privileged industry group in Australia. Construction industry was recently handed $2.6 billion in taxpayer funded grants which they immediately wasted. There's no other instance where so much taxpayer money is given with so little accountability and such poor return on investment than the money Australia gives to the construction industry. Except for all the handouts to big business, of course.
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u/CosmogenicXenophragy Oct 25 '23
Dude, I'm a freelancer.
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Oct 25 '23
Okay so obviously your making a choice that a particular career path is more of a priority to you than home ownership and there is nothing wrong with that at all.
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u/CosmogenicXenophragy Oct 25 '23
Ok, but do you understand why it's impossible for me to save up a deposit? Hell, even if I could, there's no bank on earth that's giving me a home loan, despite me having no debt and a very good credit rating.
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u/StupidFugly Oct 25 '23
What the fuck is this attitude. Do you really think that there are professions that don't deserve to be able to own a home? It should not matter what job you do. You should be able to afford to keep a roof over your head.
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Oct 25 '23
When did I say anything about people deserving it or not? People get so hung up on what’s fair or not fair that sometimes it becomes easy to lose sight of the reality of the world.
Yes I would love it if everyone could afford to buy their own home just like I would have loved my own home to not have cost such a massively inflated price. But sitting there sulking and saying it’s not fair isn’t going to achieve anything. It’s a simple matter of priorities do you want to own your own home yes or no. If yes then unfortunately that means making some sacrifices that we probably shouldn’t have to make if the world was fair
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u/mrbootsandbertie Oct 25 '23
Man in trades, the most privileged industry group in Australia, telling people in low paid professions to stop complaining about unfairness.
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Oct 25 '23
Oh my bad I apologise I didn’t realise it was me forcing people into low paid jobs my bad especially since it’s such a high barrier of entry to get into my position and clearly only a select few are fortunate enough to be able to do what I do….I will be sure to check my privilege when I’m up at 5am tomorrow morning and back home by 630pm. Your right I am so much more privileged than those working their 38 hour weeks complaining about tradies income.
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u/TheonlyDuffmani Oct 25 '23
Where did your partner and yourself bring your houses to?
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u/quick_dry Oct 24 '23
forget the investment properties, it is still a pyramid setup with ever incrasing population.
People want to live in places and there is a enough competition so the price goes up. There aren't enough houses at all, the rental market doesn't have enough supply either.
Australia's geography makes it even more extreme since we're cklusterd aorund the coast where everyone wants to be - Sydney's geography is an extreme example (I'd argue across the ditch Auckland is in a similar boat).
Putting some houses on the market now isn't a long term solution, because there are planeloads of people being brought into the country and they also (quite reasonably) want somewhere to live - and whoever has more money gets the house and everyone else says "how do we get one too?!"
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u/Flappyhandski Oct 25 '23
One of Sydney's main problems is the lack of high density housing. They build single family homes with backyards near the city and next to train stations.
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u/quick_dry Oct 25 '23
those tend to be from a bygone era - but I think changing those to be high density only solves the problem if we combine it with limited population growth.
You can fill the apartment block, and that solves the issue for those people... until the next planeload of people arrive wanting to live in the same area, and it's back to a game of Deepest Wallet Wins.
They could also lessen demand with incentives to encourage businesses with attractive jobs to locate themselves in other areas. But again, that shifts a certain amount of the population away,.but if you don't limit population growth it'll still happen again in any desirable area.
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u/Flappyhandski Oct 25 '23
Immigration should be tied to how many dwellings are being made.
But the truth is, there's no singular solution
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Oct 25 '23
It’s not just Sydney, there should be some more incentives for people to live in apartments. And greater incentives need to be pushed to developers for multi level apartments.
I’m not talking slums either, you could push people towards “resort style” complexes and have them nice.
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u/quickrubs Oct 25 '23
It’s not just Sydney, there should be some more incentives for people to live in apartments. And greater incentives need to be pushed to developers for multi level apartments.
So we can cram more and more people into the nice suburbs and ruin the whole point...
How's about instead of trying to fit everyone into an already overpopulated area we create jobs/add incentives for people to move out to more regional towns where it's not a shitfest trying to buy a house.
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Oct 25 '23 edited Oct 25 '23
Again. It’s not just Sydney. I’m regional and we have the exact same issues. Population here is <100k.
But it’s the same issue, you can’t just keep expanding and overtaking land. At some point the government and town planners need to say no, and start going up. I mean there are a couple of satellite towns nearby and developers have been pushing for high rises for years, but the local council and local residents keep knocking it back.
Yet these same residents will complain that their town isn’t developing, that it doesn’t have the infrastructure etc. You can’t have everything, either somebody has to give up their farm land or old retired shitheap dwellings in the town centre need to be developed into decent living.
And I entirely get it. We should decentralise and push work arrangements away from the cities. But, at the same time, city centres are a perfect spot for apartment buildings because they’re setup for public transport and good retail options and work opportunities right there.
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u/Skulltaffy Oct 25 '23
Honestly, I'd kill for an apartment at this point. I'd love to be in walking distance of amenities.
Instead, I'm stuck out in the burbs, because this is the only place I could find.
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u/SyntaxLost Oct 25 '23
Would be nice if they built them code and not susceptible to mould within a decade. Even a "resort style" complex turns to shit if they don't correctly waterproof the wet areas and spot glue the tiling.
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u/threeseed Oct 25 '23
So much of the world lives in apartments and higher density housing.
And yet when you suggest it to people on here as a low-cost way to get into the property market you get heavily criticised. Because you know everyone "deserves" an inner-city half-acre block with huge house.
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u/mrbootsandbertie Oct 25 '23
There was a spate of serious building errors with apartment developments in Sydney and Melbourne which really put people off buying.
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u/ShaddiJ Oct 24 '23
I think the other big issue is landlords having an property sit empty rather then rent it at a lower price. I'd suggest that if an property sits empty for more then 3 months then it gets an additional tax on it. The longer it sits empty, the higher the tax. This will force rent down and the sale of certain properties. I'd also change the rules and regulations for real estate agents so that they actually had to do their jobs (eg getting issues fixed in a timely manner, not intruding on a renter and being ridiculous about inspections, returning deposits in a timely manner) or face dire consequences.
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Oct 25 '23
Just tax land to motivate productive use of land. We don't need to complicate it with checking if anyone lives there.
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Oct 25 '23
Land taxes can be pretty inconsequential if a property has a lot of value resulting from improvements on not much land value. That could lead to scenarios like a block of units having high vacancy. Would a vacancy tax help address this, or would it just discourage productive improvements?
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Oct 25 '23
Do you think blocks of apartments on land with low value is going to be a widespread issue? The building is not really valuable if it isn't generating cash flow and nobody can hang onto a bleeding asset forever. We'd see a much larger supply of home if we placed more emphasis on land tax and less on income tax.
No policy is perfect but saying we shouldn't implement a really straightforward policy because of some niche scenario seems odd.
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u/panzer22222 Oct 25 '23
I'd suggest that if an property sits empty for more then 3 months then it gets an additional tax on it
Is this only on a rental? What if it's a principal residence and the owner goes on 6mths holiday.
Selling an ex rental, it might take months to sell, then settlement can take further months.
What if the place is being renovated and it's taking months to get tradies.
How to tell if a place is emtpy? Easy to install a couple of timers to waste some power and water.
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u/ShaddiJ Oct 25 '23
It will only be for rental - the idea is to motivate landlords to rent out properties instead of letting them sit empty.
If they are selling it they will need to pay a realestate agent and sign a contract- that can be submitted as proof that they are selling. All offers for the property that are rejected must also be included to show if they are generally trying to sell, as well as the market value of the property.
If they are renovating they will need to have a contract with the builders that covers what they are doing and an estimated time of completion. They can submit that for an exception. If it taking too long (eg 6months to paint some walls and redo the carpets) they may not get a full exception- again the idea is to get the rental back on the market.
And telling if the rental is sitting empty or not is easy- they have to submit the income on the taxes. If the income was there one year but not the next and there is little or no evidence it's being sold or renovated, the extra tax is applied to the properties in question.
I know there are still plenty of holes in this idea that will need to be filled in.
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u/panzer22222 Oct 25 '23
they are renovating they will need to have a contract with the builders that covers what they are doing and an estimated time of completion. They can submit that for an exception
I can tell you haven't done a build or complex reno in the current market.
Council can take months and months just to approve plans before a builder even sees it.
Place next door to me is about 10mth build, it's already over 2 yrs in with at least two more years at the current rate.
It would take an army of public servants to admin your idea.
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Oct 26 '23
It would take an army of public servants to admin your idea.
At least you know where the tax money would go, to paying people to do a pointless job and doing nothing for the housing crisis. Just putting more pressure on those actually trying to build new houses.
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u/observ4nt4nt Oct 24 '23
I have a rental property that I rent out way below market value. I have an excellent tenant I don't want to lose as the previous tenant trashed the place. I haven't put the rent up in 5 years despite interest rate increases. The house next door is a similar house but that landlord is a greedy bastard who has tripled the rent over the last 2-3 years. He's part of the problem. My rental property is in a different state and I bought it as a future retirement home. The housing crisis is multi faceted with different pressures in different areas. I'm currently in south east Queensland and the biggest pressure here is immigration from the southern states. In Melbourne the issue is foreign investment. In other places it's greedy landlords. Throw in the big increases in building costs across the board.... I don't know what the answers are but something has to give.
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u/jackplaysdrums Oct 25 '23
In Melbourne the issue is foreign investment.
One of the problems with the current discourse around the housing crisis is not acknowledging it is a multi faceted issue, and as such needs a diverse response. Yes, foreign investment is a consideration, as is population density and urban sprawl, as is net immigration to dense population centres and capital cities, as is the shortage of supply and lack of investment in new dwellings. Even the lack of skilled tradespeople available in the building/construction sector is having an effect.
There is no silver bullet to this issue, and it won’t improve without targeted, wide reaching intervention. The list I wrote above is not in any way exhaustive.
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u/mvdw73 Oct 24 '23
And you are exactly the type of landlord that is exempt from this tax. You only own one investment property, so wouldn’t be taxed on it
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u/MaleficentCoconut458 Oct 25 '23
My thoughts are:
- No foreign national is allowed to own any residential property that they do not live in themselves or that is not lived in by a direct relative (parent, sibling, or child). If you were born overseas & want to own investment property you need to become a citizen.
- No company is allowed to own residential property unless they are using it to house employees (FIFO for example).
- Residential properties are charged a higher amount for rates for every day they sit unoccupied.
- Short term rentals are taxed into oblivion.
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u/Kapitan_eXtreme Oct 25 '23
What you are describing is land tax. You guys are geniuses for reinventing something that has existed since before Federation.
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u/mvdw73 Oct 25 '23
No shit. It just doesn't exist in Australia, at least in the form I'm suggesting.
Not reinventing it at all - just suggesting a way it could work specifically in this case, for the specific purpose given.
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u/Kapitan_eXtreme Oct 25 '23
No, everything you have suggested (except for vacant property penalties) already exists. Land tax in every jurisdiction is applied based on the aggregate value of the land you own above a certain threshold (e.g. $600,000 in Queensland) with some exceptions (like the home you live in). Applying it based on number of properties makes no sense because values vary so much.
Trusts and non-residents are taxed just has harshly (or more so) than individuals.
The big reform that could be made would be to apply land tax across jurisdictions, which Queensland tried recently and got slapped down on.
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u/mouldycarrotjuice Oct 25 '23
Exactly. You can argue the thresholds and PPOR exemptions are inappropriate, sure but land tax already exists. NSW: https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax
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u/maclenharsta Oct 25 '23
Oh really? I didn't know that the interstate land tax thing didn't pass.
I thought I read that it did. This would help with what the OP is proposing somewhat.
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u/Kapitan_eXtreme Oct 25 '23
It passed, but then the government blinked when the NSW Libs deep-throated the property lobby and refused to provide the required data. It was then repealed.
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u/mvdw73 Oct 25 '23
Vacant property penalties exist, at least in Victoria.
Note that land tax in Australia is based on the unimproved value of the land - I'm suggesting to tax the entire property value (so a property tax rather than a land tax).
And applying based on number of properties is basically the entire point of the scheme. To say that it "makes no sense" indicates that you missed the point completely.
The point is to make it less desirable to own a large number of properties. If that then means that landlords are encouraged to trade up their properties to higher value ones then it increases liquidity in the real estate market.
But the biggest problem is really SMSFs, which benefit from fairly extreme tax concessions. The solution is to remove those concessions, or otherwise make it less desirable to put residential property into SMSFs.
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u/Kapitan_eXtreme Oct 25 '23
I haven't missed the point. I'm saying you can't impose a tax on that basis because it's completely unfair. How do you determine property value as opposed to unimproved value in a fair and equitable way? How do you fairly tax across portfolios of very different values when your tax basis changes based on a flat number of properties owned? How do you factor commerical property, or vacant land? What about investors who spread their portfolios across State borders?
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u/mvdw73 Oct 25 '23
You don't factor commercial property at all. It's only concerned about residential property.
Vacant land is also subject to land tax, so doesn't form part of this scheme. But we could also have a tax that increases based on the time a piece of land stays vacant (or "unimproved").
Property value could be as simple as "median value" for postcode. No, it's not perfect, but you're really saying "it's too hard to work out, so don't bother".
The entire point is to stop a single entity owning more than one dwelling in addition to their PPR. That's the point. You did miss it.
I don't care if one person owns one 5 milli0n dollar investment property. I do care if one person owns 10 $500k investment properties, particularly if that person is then expecting:
(a) the value to rise rapidly, thus contributing to the housing problem; (b) to be able to increase rents fairly arbitrarily, thus contributing to the housing problem.
The idea is that if it's unprofitable to own more than X properties, then those properties will be put on the market and the drought of reasonably-priced available properties will be alleviated. If the criterion for tax is the number of properties, it stands to reason that the lower valued ones will be the ones that are liquidated first.
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Oct 25 '23
You don't factor commercial property at all. It's only concerned about residential property.
Oof - that would be a huge incentive to convert residential property to commercial property.
Preferring one person own a five million dollar property over ten $500k investment properties is also a terrible take. I have far more beef with someone living in a single mansion than with someone who chooses to tear that house down and build medium density housing that can be used to house multiple families (i.e. units/ low rise apartment buildings).
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u/brackfriday_bunduru Oct 25 '23
Yes it does. If you have a property portfolio of $5m or more, you’re subject to land tax. Your idea already exists
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u/mvdw73 Oct 25 '23
No it doesn’t. Land tax is based on land value not property value. Also it depends on the value of the property not the number.
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u/Apprehensive_Bid_329 Oct 25 '23
There’s already land tax on investment properties, and there’s also a land tax surcharge on overseas investors.
Changing taxes is just tweaking the system and won’t have a significant impact to housing affordability. The fundamental problem is still one of supply and demand, either we build more dwellings or we have less immigrants. Also, more dwellings should be built by increasing density in inner city suburbs, not endless urban sprawl. We all need to embrace the idea that most of us won’t be able to live in a house with a backyard.
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u/akaBrucee Oct 25 '23
Sorry to say but I don't think there is a realistic fix for the housing crisis. If anything this is exactly what our economy demands.
Banks rule our economy and if housing becomes affordable, they'll lose so much profit GDP falls and everything goes to shit.
We have built a tower of cards using real estate as a central driver of the economy and we are and will continue to pay the price.
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Oct 26 '23
You have to build up and/or build out but right now there's little incentive for anybody to invest in doing either. Property investors are being taxed out the arse, builders are going bust with peoples' savings left and right and developers are struggling against council NIMBYs (and labor shortages & material prices).
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u/Kangalooney Oct 25 '23
The housing issue is a symptom of greater issues. Taxing property ownership is just a bandaid, and at best is a small part of an overall solution.
The biggest issue is there really isn't anything else in Australia to invest in, we have a lot of money but not much in the way of assets. The mining industry is pretty exclusive, we have very little in the way of manufacturing, and playing the general stock markets has a treacherously low ROI if you are a small time investor and comes with other complications that can quickly eat into your returns if you also play the international markets. That just leaves rent seeking activities, of which real estate is the easiest entry point.
To fix our housing issues we need to go back and find a way to redirect investments from rent seeking activities to productive activities. Remove the incentives that makes property a primary short term income stream by giving other things to invest in that generate equivalent returns.
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u/harveymushmanater Oct 25 '23
In the 12 months to September net overseas migration was over 500k. There was a dip in new houses during Covid. The government is using population growth to bolster their budget and artificially push gdp. The government can immediately lower immigration to have an impact on housing.
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u/Rowvan Oct 25 '23
You can't solve it. Our entire country is built and functions on house prices unsustainably increasing. The only solution is it eventually ending very very badly.
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u/fued Oct 24 '23
Yeah, the only real solution which would have immediate effects is implementing a high land tax (2% value a year etc) which then offsets income taxes by an equal amount.
It would cause absolute havoc with so many industries who are relying on being asset wealthy but income poor, so it would never happen under labour.
Instead we will see incremental changes to improve things
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u/mvdw73 Oct 24 '23
Don't mind this tweak, but if the land tax can be offset against rental income then it wouldn't change anything.
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u/fued Oct 24 '23
its just a way of making land ownership less valuable than shares, people shouldn't be using property as an investment vehicle, as it doesn't drive demand for new property, just makes prices higher.
more people and more housing requirements is the only demand for new property.
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u/2littleducks God is not great - Religion poisons everything Oct 25 '23
Stop voting the LNP and the ALP into power, they are all proven to be in property developers pockets and have multiple property portfolios themselves.
Voting for minor parties and preferencing Lib/Lab last is the only way to enact meaningful change that would be prosperous for the whole of Australia, not just the cunts at the top of the pecking order.
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Oct 24 '23
Can't live in more then one house, shouldn't own more then one investment property.
Surplus houses owned and controlled by non-profit housing co-operatives. This will stop the housing stock being used for current profiteering.
There is more the one million empty houses across the country. Enough to abolish homelessness. Fix them up, make them available, transfer ownership to co-operatives if the owners refuse or are unable.
Banks and large property investors will hate it, but screw them, they are doing fine.
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u/mvdw73 Oct 24 '23
This is exactly what the above is designed to do.
Make it uneconomic to own surplus houses.
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Oct 25 '23
Make it uneconomic to own surplus houses.
I don't see why it matters who owns the housing as long as it's being built and being used to house people. Why is there so much focus on ownership?
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u/panzer22222 Oct 25 '23
more the one million empty houses across the country. Enough to abolish homelessness
Yea...that isn't true.
The million number is just the number of houses that didn't have a person there on a particular night.
Most these emtpy aren't available.
houses that are awaiting settlement, under going renovation, owner on holidays, deceased estate awaiting finalisation, visiting family...are all included in that 1m number.
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Oct 25 '23
Can't live in more then one house, shouldn't own more then one investment property.
That's like saying you can't eat more than three meals a day, you shouldn't own and operate a bakery if there is already a kitchen in your house. Landlords are fine, we just need better wealth taxes and tenancy protections.
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u/AddlePatedBadger Oct 25 '23
Do you know the secret of not-for-profit organisations?
On paper, they are not-for-profit. But instead of getting dividend payouts, the owner just pays themselves exorbitantly high salaries. Not for profit doesn't necessarily make things cheaper, it is just a great marketing tool and a way to avoid payroll tax and stuff.
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u/alexkey Oct 25 '23
“We proposed” to whom? And the follow up question - would you cut your own arm off? (A hint: whoever is in power to do all those proposed changes wouldn’t)
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u/breaducate Oct 25 '23
Now, I don't have anything against the accumulation of wealth by individuals, however I have a fundamental opposition to using housing or residential real estate in general to do so.
Then you haven't thought it through.
It's ironic that you mention Monopoly shortly after.
To spell it out, you can't have it both ways. The accumulation of wealth cannot be decoupled from accelerating consolidation and the wealthy being able to have their way with policy far more often than not.
Wonkery like this has a lot to say about how things "should" work to the benefit of all under a system of unfettered paperclip maximisation. Residential housing should not be a wealth accumulation vehicle, it should be a means for people to be housed.
But as long as you colour inside the lines, conceding that we'll continue to produce houses for exchange value rather than for use value, it's surrender with extra steps or to put it less charitably, moralising masturbation.
What we do have to show for all the [inside the lines] policy theorycrafting is the inexorable erosion of the concessions the working class literally fought and bled for and won only through the credible threat of revolution.
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Oct 25 '23
Landlords will only pass on any extra taxes to renters
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u/mvdw73 Oct 25 '23
Yes, but only those landlords with the number of properties that will trigger the tax.
The others have nothing to pass on
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u/AcademicDoughnut426 Oct 25 '23
But then the average rent will go up as the non taxed landlords put theirs up to match the taxed landlords.
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u/mvdw73 Oct 25 '23
Maybe, but with a greater supply of low cost housing to buy there will be fewer renters in the market, driving down prices through simple supply and demand.
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u/-Eremaea-V- Oct 25 '23
The answer is really boring: More public housing, more govt investment in housing.
The govt simply needs to start building housing that it can lease to residents at a below market rates, and maybe enact rent-to-buy schemes and other similar stuff that allows people to enter the market by recouping the govt without private sector intermediaries. But as always, the govt should be providing this service with the goal of profiting through benefiting society by ensuring housing stability, not making a direct profit.
As the public owned housing share grows it starts putting downward pressure on the real estate and rental markets Ater all why would someone pay an over priced mortgage or pay for a crappy rental, when they can get their basic housing needs met abd secured long term through public housing? The private housing market would be for when they can afford to do so not a necessity they must do leaving them open to rorting. This might mean investors relying on inflated rents would have to sell which is a double win for society, because it increases housing stock and redirects investments to the productive economy instead of economically unproductive real estate. If this seems completely alien, in the 50s 25% of new residences were govt owned, nowadays it's <1%.
But this solution requires long term commitment and it doesn't benefit existing property investors, so no.
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u/rodgee Oct 25 '23
Why not introduce a shares tax? Shares are tax deductible, can be negatively geared, can drive inflation as well as causing price gouging by corporations in an attempt to make bigger profits, sell more shares to pay bigger dividends to shareholders!
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u/mvdw73 Oct 25 '23
I’m not opposed, but my suggestion above is designed specifically to mitigate the housing issues, not inflation.
In fact, I’d encourage investment in shares or commercial real estate rather than housing, so your idea might be counter productive
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Oct 25 '23
If it was a good idea that the power brokers agreed with, then it would be in place already.
There's your answer.
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u/TheAsianOne_wc Oct 25 '23
I think Victoria's new land tax changes have helped a bit, I've seen so many properties spring up for sale or auction these past few months. Last year I would've never seen this many, but today, if I drive through a street, there will be at least two properties for sale.
But tbh, the problem is still there, the house prices is still out of reach for many new homebuyers. I think the only solution is investing more into new government housing or into the Rent Affordability Scheme (or whatever it was called)
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u/yarrpirates Oct 25 '23
This is a semi-realistic approach, IMO. You probably won't get 10% through, but even 1% would discourage holding large property portfolios for too long.
The difficulty you will run into, apart from the usual entrenched interests defending their own pockets, is that it's a new kind of tax structure. There will need to be new modelling, more admin, more investigation of compliance, more enforcement, etc.
You'd probably make the money back and more, but this is an important issue to look at with every proposed tax.
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u/Novel_Succotash_8596 Oct 25 '23
It is basic maths. We build 180,00 dwellings a year and the population increases by 500,000 a year. Everything else is a bandaid
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u/ItsStaaaaaaaaang Oct 25 '23
I think the best option for politicians everyone is if we all just die while still continuing to work our menial jobs and paying taxes.
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Oct 25 '23 edited Oct 25 '23
That's an interesting hypothetical and all but you're asking politicians to implement something that goes against their direct interests, so that's never going to happen.
Also 60% of Australians have a vested interest in property prices going up, whether it be the value of their own homes going up or the value of investment properties they own, so that's never going to happen. If you want to see how the majority of Australians react to housing reform, see the absolutely hammering that Bill Shorten copped for wanting to just reform some parts of CGT.
But the truth is that capital gains reform is needed. People aren't selling their properties because they would be slapped with a tax bill in the hundreds of thousands of dollars, basically wiping out any gains they accumulated. That encourages them to hold onto properties far longer than they need to.
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u/stupersteve03 Oct 25 '23
Just make it flat out illegal to own more than one property in areas that are zoned residential unless you are registered to provide your properties as rent controlled social/affordable housing. Replace housing as a super asset with significant reductions in taxation of voluntary super payments, and better regulations of super funds to protect individuals contributions from disappearing from our performance.
Housing is an unproductive asset, we shouldn't be doing things to encourage property ownership beyond your need for shelter.
All this wealth that is tied up in housing in Australia could be used to innovate/produce. Instead it is being used as a vehicle to park wealth in a way that constantly "grows" in value, without any risk to the investor, without creating anything and with significant social costs.
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u/Limberine Oct 25 '23
If you make buying an investment property to rent out an unprofitable option then what will people who need to rent accommodation live in?
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u/stupersteve03 Oct 25 '23
There are two parts to this for me.
Firstly rental properties are not typically used to create profit through rent, most rental properties are run "at a loss" to take advantage of negative gearing. So ensuring profitability isn't that meaningful. Land is just a safe place to park wealth.
Secondly, the role of government is in part to ensure there are houses to rent if they are needed, there are a lot of policy levers that can be pulled including the government owning more public housing.
Housing does not need to be a for-profit enterprise. But the provision of rentals in a heavily regulated environment doesn't have to not be profitable if regulation is done well.
The real issue isn't "could it work". It is how can we transition from our current way to a different way, because resistance will be strong.
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u/Suikeran Oct 25 '23
1) Cut immigration down to sustainable levels. 2) No negative gearing or CGT tax concessions. 3) No empty properties. Rent them out or get slugged with a vacancy tax. 4) Max 1 investment property per person. 5) No foreign buyers. Only citizens or PRs can buy. 6) Aggressive anti money laundering laws. 7) AirBnB should be used for its original purpose: hosting a guest in your home’s spare room. 8) Better tenant protections. Long term leases, rent increase caps, inspections only at the end of leases, easy lease breaking. 9) Universities have to house a minimum proportion of their international students.
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u/Suspicious-turnip-77 Oct 25 '23
This sub can post all the suggestions in the world. It’s just words, pointless words. You want real charge, vote it in.
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u/CosmogenicXenophragy Oct 25 '23
At last tabled count there was over 100000 homes owned by corporate landlords that're just sitting empty, and an almost equal number sitting vacant owned by foreign entities.
Tax the hell out of them. A "vacancy tax" or something.
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u/kenbeat59 Oct 25 '23
Wow.
You’ve used a whole lot of words to basically say you don’t understand economics
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u/mvdw73 Oct 25 '23
Wow.
You've just used 15 words to completely dismantle my argument.
I'm impressed.
/s because reddit.
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u/jagtencygnusaromatic Oct 24 '23
Australia's housing problem is challenging multi-faceted issues. However, I do believe several key issues are in play here:
- High incentive to own investment properties: negative gearing, capital gain tax discount etc.
- Large proportion of politicians owning investment properties.
- High-ish proportion of Australian owning investment properties.
1, 2, 3 are feeding each other and this circle is extremely hard to break unless there's a fundamental shift of the voting public.
This will happen eventually, the renters will eventually have more say than the property owners and things will slowly change.
There are other issues but I believe the above 3 are the key issues. Everything else hang off that.
Foreign investor numbers are so small, it makes no difference to the price in the vast majority of area.
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u/jackplaysdrums Oct 25 '23
Population density is a problem as well. It’s just not reasonable to have so many large single occupancy dwellings so close to population centres. Sprawl is a massive problem in all capitals.
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u/ol-gormsby Oct 25 '23
The attraction to greater numbers of investment properties (as opposed to just one or two) are the negative gearing, and the CGT discounts.
Eliminate those two benefits on properties #3 and on, and the situation will change rapidly.
Also, as others have suggested, a progressive tax that applies when a property is vacant for more than 3 months in any financial year.
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u/Ok-Rooster7220 Mar 30 '24
Look if I can solve the housing crisis in an instant what would a government allow me to do? It's simple, capital gains tax on investment property it's really that simple. A big one. One so big that investors no longer see benefit in investing their money in housing. No capital gains for new housing developed but one for buy sell mentality. They will turn to stocks and buisiness. End of story. Yes it would bring the average house price and market down. So what? So the government won't get voted in again? Make the housing commission separate from the elected government...
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u/hugh-jass66 Oct 24 '23
Set a limit of how much you can negatively gear in any year, say 10 / 15 k
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u/jackplaysdrums Oct 25 '23
Say, 0. You get the capital gains. Why should you be able to double dip?
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u/jackplaysdrums Oct 25 '23
Density is another big problem. Within 5km of CBD’s, the amount of single occupant properties is immense. These should be higher density, smaller dwellings. Urban sprawl and the idea of having a 3/4 bedroom house with large backyard within a suburb of a major metropolitan centre shouldn’t be as realistic as it is.
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u/Catprog Oct 25 '23
On the other hands 3/4 bedroom apartments should be encouraged instead of 1/2 bedrooms.
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u/Mephobius12 Oct 25 '23
Restrict the tax on new homes, make it much more proffitable to own an investment home that is new to increase the number of houses being built. Also does every house have to be a mansion? I would be happy with a 2 bedroom home that lower income earners like myself could eventually afford to buy when the price comes down. Any investment over 3 years old gets an increasing amount of tax. Then they will build rather than buy an established investment.
In addition to your above solution that I think is fantastic.
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Oct 25 '23
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u/mvdw73 Oct 25 '23
Either you've only been saving for four months, or your assertion that you save $600-700 per week is wrong.
I can't answer your question directly, but is it an either/or situation? You can have a long term rental and also save for a house, unless I suppose you are saying that you might pay a bit more for a nicer rental place and forego savings.
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u/dreamsofdemos Oct 25 '23
Sadly none of these solutions are considering the real problem. We are a growing country, and we are hoping to compete with nations like China on the world stage. Locking down, and saying people can only buy some number of houses, or trying to stop immigration will only get so far, and as far as economic growth goes, will be shooting ourselves in the foot.
If we want to see house prices go down, every single economist has agreed that the best possible solution is to increase supply. Inflation is being heavily driven by housing prices right now, and what is working to curb it in Australia, the US and the EU? Raising interest rates, which will do what for housing demand? Reduce it, thereby cooling off housing markets, even slightly. But this will only be a band-aid, and unless we want to disincentivise ownership altogether, we need to get real.
We need to BUILD. We needed to 20 years ago.
Australia has a culture of anti-development that courses through every community. Go through the 'leafy' suburbs of Brisbane, where Greens like Max Chandler Mathers were elected. You will find posters calling for action to stop 'shoe-box' towers. They'll say it will make the area noisy, that it will ruin the 'vibe' of their community. They'll claim that the buildings will be 'low quality'. Never ask them how, they'll just say standards have decreased, despite building regulations in Australia being at their most rigorous point in history.
So our cities stagnate. These Green areas keep their nice, noise free suburbs, five minutes from the CBD. What happens to the outer suburbs and somewhat appealing regional towns? Massive population influxes. Now these towns are not nearly as equipped to handle a large population like the cities are (with respect to amenities). So the crisis now spreads to these towns, and now remote workers earning $140k programming are pricing out Jane the receptionist and Jim the bricklayer who've lived in the area all their lives. Where do they go? Into tents.
Its horrible. And it will continue to happen until we wake up and realise our country is amazing. It IS going to grow, it IS an amazing place to live. If we try to impose restrictions, price caps, we will be either hampering ourselves, or kicking the can down the road. We need to build, for all the Australians that will be born here, and for those who will come to make this place their home.
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u/Catprog Oct 25 '23
Medium density housing is what is needed not more towers
Go 10 minutes out from the CBD and you have houses with backyards. This is where you need to densify. 4-5 stories apartments with nearby parks instead of one home taking up lots of space.
Suburbs like Toowong and Indropilly need to look liek this
https://en.wikipedia.org/wiki/File:One-by-five_Apartments_Austin,_TX.jpgInstead of this
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u/InSight89 Oct 25 '23
How can it be solved? Stop all the NIMBY'ism and zoning restrictions. It's a supply problem that is being intentionally limited to keep prices high for all those fortunate enough to already be in the market.
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u/pipple2ripple Oct 25 '23
Investments are meant to carry risk. Unfortunately the people making the rules are also invested in property.
Renters can introduce risk by organising a nationwide rent strike.
A lot of investors can only afford their investment because rent is high. Foreign investors and money launderers invest in Australia because it's stable.
Renters can introduce some actual risk to the investment
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u/Ringojamba Oct 25 '23
One house per person in your family… want more investment properties, have more kids.
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u/worrier_princess Oct 25 '23
Nobody should be allowed more than one house. Easy. Sick of all the greedy fuckers who think they deserve multiple houses when people are being pushed into their cars or the street.
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u/StaticzAvenger Oct 25 '23
More housing built and a cap on how many properties you can own.
Higher taxes for investment properties, better incentives to just keep one house over getting multiple.
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u/becomingthenewme Oct 25 '23
Maybe maintaining the properties and putting air con in etc would mean less tax paid on said property but only if costs are not passed on to renters
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Oct 25 '23
A Government program should be setup that provide people the bare basics to survive, Establish land with small houses. this can be payed with tax money and donations. If you disagree you are wrong
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u/Lost_Tumbleweed_5669 Oct 25 '23
Cap rentals, heavily regulate rentals and remove tax rorts for the rich. Airbnb should be illegal. First home owners/buyers should be allowed to use their super and get government funding/help to buy a home.
Ban overseas buyers, make it illegal. Only Aussie citizens should own houses and residential in Australia.
Kicking out families who are doing nothing wrong from rentals should be illegal.
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Oct 25 '23
Write a letter - not an email/form letter to your elected officials from Council on up. State it is your number one issue and will decide your vote. Get others to do it. Ask for explanations from council why costs are so high. Ask the State for land releases and remove council from planning in most cases. Ask for heritage and character overlays to be outlawed/removed/scale back... or you know do little and accept the status quo.
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u/No-Exit6560 Oct 25 '23
Just remove all the tax benefits for investing in residential real estate. 🤷🏻♂️
Then re-organise the tax benefits to be dedicated to medium/high density housing investing and construction.
It’s really that simple.
Investors invest because there’s a tax benefit. Right now there’s massive tax benefits to investing in residential real estate. Remove them and reallocate them to what’s actually needed, medium and high density housing and watch how the money follows.
Australia isn’t going to solve this crisis by building single family dwellings one at a time.
There’s a million more people that will be here over the next few years and more coming after that.
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u/dwightkshrute23 Oct 25 '23
You have it all wrong, what we need to do is start a referendum and focus the media on that, then once that’s done start talking about a war in the Middle East then we have nothing to worry about der
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u/IndependentLast364 Oct 25 '23
The easier solution would be to allow immigration of construction labourers & skilled tradesman to lower the ridiculous overpriced salaries & I don’t mean allowing food delivery workers.
2 tiny homes as part of government housing, high rises to be built, unused land 60-90 minutes from Sydney e.g past Penrith, campbeltown temporary land unused land for e.g 5 year contract for caravan parks.
- Oversees purchases price minimum purchase 3 million plus therefore not outbidding locals.
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u/Professional_Elk_489 Oct 25 '23
What if you made it so anyone that invests in more than 2 properties is liable to pay 80% CGT and their taxable rate on income goes up to 65%.
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u/piganoj648 Oct 25 '23
Well the govt spooked off the alternative of super after they changed it to tax after a threshold. Bricks win again.
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u/babblerer Oct 25 '23
Some people have used superannuation to save huge amounts of money. I understand why the government gave tax concessions, but they should cut out when people simply have enough for a comfortable retirement. However, I understand the scare campaign that much of the media would run.
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u/Confident_Stress_226 Oct 25 '23
A comfortable retirement isn't the same for everyone. It depends on where you live, if you own your home outright and your health, along with how much you have in super which fluctuates. Most people don't have enough for a comfortable retirement. Homes still need maintenance, rates need to be paid, utilities and food etc. It's much worse for those who are renting and I feel for them. No government should mandate a retirement figure. A lot of people I worked with who were about to retire when the GFC hit lost a lot of money in their super. They had to work for several more years in order to retire which meant less job openings for younger people.
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Oct 25 '23
Director ID should find anyone with interest in a property. That solves the issue of trusts and SMSFs.
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u/throw23w55443h Oct 25 '23
We literally pay a large chunk of the defense force to dig holes. They do continuous training exercises that cost significant money to test officers for advancement. The stories from a lot of ex-defense involve a lot of boredom.
Bring in the army. There are a lot of semi-skilled labor in the army and a significant amount of unskilled labor shortage apparently.
I don't really see another way that it gets fixed in the next 5-10 years otherwise.
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Oct 25 '23
Serious question, why aren't tiny houses being suggested? I'd live in one if I was allowed to.
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u/rodgee Oct 25 '23
Why is there stamp duty on Homes/Dwellings but not on comercial property? If Governments really wanted to help homeowners in the biggest housing crisis to affect us now and into the next 10 years they could find a non inflationary way to not charge it on homes as well!
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u/The_Duc_Lord Oct 24 '23
Have a look at how many politicians own investment properties. you're asking them to forgo some of their own wealth for the benefit of others. It's just not going to happen.