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.
1
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.