Prosper Australia

With the growing pressure to find affordable accommodation and our excitement at the Canberra Land rent proposal, we thought it high time we showed you a growing trend through the northern hemisphere – Community Land Trusts

by Prosper Tasmania’s Leo Foley

(Based on material from the Institute of Community Economics, Massachusetts)

A Community Land Trust (CLT) is a democratically controlled nonprofit organization that owns real estate in order to provide benefits to its local community – and in particular to make land and housing available to residents who cannot otherwise afford them.

CLT’s recognise that land is a finite resource and will naturally appreciate in time due to social progress and population growth. This natural appreciation in land values is recycled back into the Community Land Trust to ensure that future home owners can afford to enter the CLT.
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P.S – to check on the issues raised in yesterday’s post, check our new-look sister website over at Earthsharing Australia for an interesting development.

Today’s Sydney Morning Herald article on Empty Dwellings in a City Desperate for Places to Live has exposed the raft of vacancies prevalent when land banking trumps housing affordability.

It quotes how 122,211 sites were vacant in the 2006 census, reminding us of the findings from the I Want to Live Here report. Negative gearing is blamed. An inaccurate solution is offered in charging a differential rate on vacant property. This increases administrative costs. Far more effective would be to raise the overall Council Rates and use this finance to offset inefficient indirect taxes like GST and payroll taxes.
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Our Policy Position on the hotch potch of property taxes is now online. With affordability reaching epic proportions, it is time governments of all levels looked into the eyes of the problem – inaccurate council rates and land taxes.

With council rates going out at present, we have seen headlines promoting all the usual scaremongering. The Herald Sun said inner city residents would face a 90% increase. Flying in the face of this, the City of Melbourne announced just a 3.5% increase in rates! Why are there such inflammatory reports?

Any charge placed on land is unavoidable, as compared to company taxes, for which it was revealed this week that the millionaires factory at Macquarie Bank paid only 5% out of the 30% set for company tax.

The day after the 2008 Federal Budget, Gavin Putland (our Research Officer) sent three letters to newspapers.

This one was sent to THE AGE, which exercised its editorial discretion not to publish:

Cop-out On Inflation And Rents

If a Budget is to be anti-inflationary, it must stimulate supply more than demand. Most importantly, it must stimulate supply of accommodation, not only because residential rents feed into the CPI, but also because goods or services cannot be supplied unless (a) enterprises can afford commercial accommodation, and (b) employees can afford housing within commuting distance of the enterprises, on wages that the enterprises can afford to pay.

To boost the supply of accommodation, the Budget could have made the First Home Owners’ Grant available only for new construction, or confined negative gearing to new construction, or made the discounting of property investors’ capital gains contingent on new construction, or at least on offering the properties for rent. None of these things happened.

Meanwhile the Government proposes to increase the intake of immigrants, ostensibly in order to boost the supply of labour. Never mind that immigrants also demand goods and services and, most importantly, housing!

These observations show that the top priority of this “Labor” budget was not to contain inflation — let alone rents — but to maintain a desperate shortage of housing in order to drive up rents and prices for the benefit of incumbent property owners.

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Saturday’s Age article on Melbourne’s rental growth outstripping all other states is reflective of current government policy at all levels – local, State and Federal. When combined with record immigration levels, property flipping will continue unabated.

Prosper Australia spokesman Karl Fitzgerald was quoted in another Age article on Home Buyers Lose out in Tax Change. We would have preferred a longer commentary covering the topic from this perspective:

The fillip to demand prevalent in Swan’s housing budget of $2.3bn will more than compensate for the comparatively small tightening on GST that the property lobby faces. The half a billion earmarked for infrastructure under the Housing Affordability Fund will result in higher land prices that alone will dwarf the closing of this GST loophole. The lack of supply side policies is the real criticism of this budget. Swan has failed economics 101 with the First Home Savers Accounts, creating additional buying capacity for first home owners with the $1.178 billion proposed. This capacity will be capitalised into higher land prices.
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By Bryan Kavanagh

Treasury’s mission is “to improve the wellbeing of the Australian people by providing sound and timely advice to the Government, based on objective and thorough analysis of options, and by assisting Treasury Ministers in the administration of their responsibilities and the implementation of Government decisions.”

It aims to assist:

1. A sound macroeconomic environment
Although it covers monetary, fiscal and monetary issues, Treasury has little or no understanding of the theory of valuation insofar as it relates to the national real estate market, a proven driver of the economy. This is demonstrated by the manner in which it allowed the residential real estate bubble to continue develop ever since 1999. Of course, it is possible that it did offer advice to the government in this regard but was ignored. If this was so, we need to know so that blame may be sheeted to the Howard government.
Mark: 2/10
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Yesterday’s Federal budget surplus of $21.7 billion raises the spectre of a global trend tied to the principles represented on this website. Take the foreign reserves of Singapore (US$176bn), Hong Kong (US$160bn) and Russia (US$563 bn). Singapore and Hong Kong have raised a significant proportion of their revenue via the capturing of economic rent from land. Russia is a new boom entrant with the capturing of oil rents.

However, the returns on foreign reserves from government bonds are dropping, especially when denominated in the falling US currency. This has seen a diversification away from countries holding their budget surpluses in foreign reserves and towards what is called sovereign funds.

Fifteen of the top 20 sovereign funds in the world are dominated by revenue raised from the resource rents that nature’s resources provide. Australia has benefited greatly from China’s resource boom. Hong Kong and Singapore have maintained their growing funds by ensuring the public share in the real estate bonanza of the last decade. (Remember, land appreciates, housing depreciates.)

We propose a balance of the two strategies, capturing money from both land and the resources below and above it. Then small business can be freed from the shackles of the compliance required in meeting the 56 taxes Australian businesses face.
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The Swan Federal budget was limited in its’ vision, giving with one hand in the old welfare game but taking away with the other by providing further subsidy to propertied interests. Whilst it is widely reported that the wealthy were hit by means testing, fellow Georgists were busy joining the dots between the $40billion worth of major projects and its’ effect on land values.

It must be remembered that your tax dollars will finance infrastructure that increases land values, making it harder for renters to get into the property market. The government is investing your money but giving the return on the investment (the higher land values) to people with the most land. Its about time the government start collecting the return on its investment by collecting the site rental on land. Then it wouldn’t need to tax our income as much.

The largest migrant intake in 60 years added to the smiles of those in the know. More people means more demand. With the government only promising 50,000 new homes, the excess demand will curtail the effects of the global credit crunch.
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March 08 figures reveal that loans for first home owners dropped to just 16.4% of owner-occupied approvals. Yes 16.4%! The Great Australian Dream is being dominated by baby boomers and/ or speculators. Those that most need a roof over their heads are the last in the queue. Why is this so?

Loans for new dwellings dropped a massive 11.5%. The building industry must be extremely worried with this trend. Job losses come next. Interest rates are hurting.

Negative gearing on all second investment homes must be addressed in the first Swan budget. If this policy was designed to improve the supply of housing, at the very least it could be limited to only new housing. Best of all would be to abolish it and the First Home Owners Grant.

If a Site Rental on all land was implemented, we wouldn’t have the ridiculous situation we have today where small business owners and first home owners, traditionally the Messengers for future opportunity, are penalised, whilst speculators in the fruits of the earth are subsidised by the productive sector’s tax funded infrastructure.