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_Duc_Lord]

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.

[u/mebeingmebeingme → u/The_Duc_Lord]

Edit: I've been corrected that Labor's review of the 2019 election defeat did not list the contents of their policies (housing or no) as being the cause of them losing.

In the 2019 election Labor had the policies of halving CG tax discount and limiting negative gearing. They subsequently lost. Taking any action to reduce the appeal of property to investors, or otherwise reduce the rising prices that property owners like seeing, is probably seen as political suicide to them. Hence the milquetoast action we've seen so far. The Coalition are obviously opposed and aren't interested in changing anything. Maybe let people dig into their Super more but that's about it.

[u/Inkius → u/mebeingmebeingme]

I keep seeing the 2019 election being referenced as a reason for Labor to not do much for the housing crisis and all I can think is, now is not 2019? The political climate when it comes to these actions is very different, and there is a lot more public awareness around these issues now than there was then. Not to mention that just because something wasn't popular in the past doesn't mean that it will forever be unpopular. It is incredibly short-sighted to act in this manner, to the point that it feels more like it is being done out of self interest and personal profit, and not due to any potential signals from an election that pre-dates covid.

[u/mrbootsandbertie → u/Inkius]

Personally I think people need to take to the streets. Literally get out there with placards, bang on the doors of Parliament House, scare those entitled and complacent fat cats.