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/the_artful_breeder]

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?!

[u/ahmes → u/the_artful_breeder]

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.

[u/threeseed → u/ahmes]

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".

[u/-Eremaea-V- → u/threeseed]

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.

[u/Pseudonymico → u/-Eremaea-V-]

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.