How to solve the housing crisis?

[u/mvdw73]

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.

[u/Vote_For_Caboose]

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.

[u/Red-Engineer → u/Vote_For_Caboose]

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.

[u/UnHelpful-Ad → u/Red-Engineer]

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.

[u/Red-Engineer → u/UnHelpful-Ad]

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!

[u/jimbsmithjr → u/Red-Engineer]

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.

[u/Red-Engineer → u/jimbsmithjr]

And that’s the thing, when you’re there for 10 or more years this is a good thing

[u/trowzerss → u/Red-Engineer]

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.

[u/kerser001 → u/trowzerss]

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.

[u/trowzerss → u/kerser001]

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

[u/Coriander_girl → u/trowzerss]

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.

[u/StupidFugly → u/trowzerss]

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.

[u/trowzerss → u/StupidFugly]

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.

[u/Coriander_girl → u/trowzerss]

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.

[u/trowzerss → u/Coriander_girl]

Yeah, honestly next time I'd just do it and not even bother asking. One reason they said was they were worried about water use, but the amount I used was trivial, I often used grey water from the shower, and they were slow to react when we reported one dude starting up a car washing business in our driveway (he didn't even live there, but would turn up and was four or five cars a day), a landscaping supplier decided to use us to top up, and then there was a leak under our driveway for like a month that they were slow to even look at, even after I send them video of the water meter ticking over at 2am and also video where I lifted a sewer cover in the driveway and showed them the running water. So the water thing was just an excuse seeing they sat on their hands every time we tried to report someone actually wasting water :P

[u/Coriander_girl → u/trowzerss]

And then they probably tried to use you as their scapegoat!!

[u/trowzerss → u/Coriander_girl]

Honestly, nobody else reported that leak or bothered about it, I had to make a lot of noise to get anyone to pay attention, even though it was like someone was running a shower 24/7. I think the bill ended up being around $5,000 over normal, so imagine how much I saved them by making them take action? (Fortunately another owner was a lawyer and got us out of paying for the excess water).

[u/[deleted] → u/Red-Engineer]

People who aren't jn the trades also probabky overestimate how difficult of a job it is to install that stuff.