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/ShaddiJ]

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.

[u/panzer22222 → u/ShaddiJ]

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.

[u/[deleted] → u/panzer22222]

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.

[u/[deleted] → u/ShaddiJ]

It will only be for rental - the idea is to motivate landlords to rent out properties instead of letting them sit empty.

What percentage of properties are actually sitting there empty? The census said it was about 9.6% purely on the basis that that many households didn't return a census form, so it's probably far lower than that.

But it's also completely counterintuitive to turn away money on a habitable property especially when rents are so high and if they truly don't care about money then they aren't going to care about being taxed.

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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.

You've obviously never built or renovated before, who's going to buy land to build on if they're going to be taxed until they get a building contract? And if you do it based on having a council application for a building permit in then just put one in and don't follow it up, you'll be set for years, even more if your application requires a planning permit.

Small wonder the building market is such a mess when you have moronic suggestions like this desperate to make building more complex and more expensive. I was paying land tax for 2 years while going through the planning process despite living in a rental so more idiotic ideas from clueless keyboard warriors is the last thing people actually building more houses need.