Prosper Australia

Letter published 8 March

You’ve got to love real estate spruikers. They are so consistent and always so wrong.

David Morrell purports to be a buyers’ advocate. On 5th March in The Age he was saying how you can’t go wrong with “land banking” in Toorak. Well maybe.

Land banking is the quite revolting activity of buying up desirable land (often in the path of government infrastructure projects) and then holding out until you get your desired price. “Land bankers” (or should that be “bankers” with a “w”) help force up prices and slow down development. Their activities and profit seeking mean that the rest of us who want land for mundane uses such as housing ourselves end up paying more.

If David Morrell thinks this is good for buyers then I wonder what he has been smoking.

photo credit: eqqman

Letter to the Editor
Andrew Gunter
Hawthorn East

THE Housing Industry Association’s Gil King says that “any policies that aim to speed up development applications and increase Victoria’s housing stock are welcomed” (The Age, 10/9).

So does the HIA support the replacement of stamp duty and payroll tax with land tax collecting the same revenue? The replacement of local council rates based on capital improved value and net annual value with rates based on site value?

Those policies would lead to an increase in housing stock (the HIA’s stated aim), make it available at lower prices, and tend to reduce urban sprawl – but would drive a wedge between HIA members whose focus and interest is planning, engineering and construction (delivering the physical improvements) and those whose greater interest is land banking, land speculation and monopolising economic rent (to drive up land price).

On which side of the divide does the HIA stand?

photo credit: tholmb

Letter to the Editor – The Post (W.A)
Niels Charlier
Jolimont

Dear Editor,

Re your report, ” ‘Wrong’ rates ping home builder” (POST 15/8). Gill Vivian is absolutely right when she says she is being penalised for helping to improve her suburb, and that the system is wrong.

The alternative is however much simpler and more obvious than Cottesloe mayor Morgan seems to suggest.

Instead of basing the rate on the gross rental value, it should be based on the unimproved value of the land or “site value”, which is only determined by the location of the property.

While the value of improvements are created by the land owner, site values are created by the community and depend on closeness to schools, government services, economic and social activity and so on.

Taxing improvements naturally causes a decrease in improvements and an increase in house rents.

Site value taxation, however, is the only tax that has no negative effect on the economy because the supply in land is fixed; this has been acknowledged by all economists since Adam Smith.

On the contrary, site value taxation heavily encourages land owners to use land productively and discourages property speculation (which bring about housing booms and busts, one of the main causes of the global economic crisis).

Shifting rates from the gross rental value to the site value would therefore increase the supply and lower the prices of accommodation.

It would thus benefit people with the lowest incomes the most. Taxing land and natural resources in replacement of taxing useful economic activity should be a policy of higher governments too.

More information on this topic can be found on http://www.prosper.org.au.

photo credit: Dean Terry

Letter to the Age
DAVID BARKLEY
19 July, 2009

Dear Editor,

Graham Wines (Letters, 18/7) refers to the cost of urban sprawl. Some people hold land unused and grow rich while they sleep, as the land value increases.

The best way to curb the resulting outer metropolitan sprawl would be to have a flat rate land values tax. This would deter people from holding land unused to take advantage of rising prices over the years.

It would be a fair tax, as government expenditure is higher in denser areas.

The revenue could replace taxes impinging on productivity and other unfair taxes and charges. A good start would be payroll tax.

Yours sincerely,
David Barkley

photo credit: Birta Rán

Letter to the Age 01/06/09
Buy Australian veto
David Barkley
Box Hill

Dear Editor,

Finance Minister Lindsay Tanner says the Government will not accept a push that breaches trade rules (29/5). All we hear is what it won’t do. The Rudd Government should be saying what it will do, – not what it won’t do, to increase manufacturing in Australia. If we are to reduce future unemployment we need to stop penalising manufacturing.

The relatively high Australian wages are blamed for our uncompetitive prices, however the amount of production wages, here and overseas, in many items is only a small proportion of the final selling price in the market. There are 56 or more taxes and other charges in Australia, many of which impinge, directly or indirectly on manufacturing costs.

Government could exempt or rapidly refund taxes and other charges that unfairly affect manufacturing and make up the loss in revenue by a Federal flat rate tax on land values. A parliamentary inquiry into the effect of taxes and charges on our competitiveness in manufacturing should be held as a matter of urgency.

Yours sincerely,
David Barkley

photo credit: Xava du [photographer padawan]

Letters to the Editor
THE AGE
April 29, 2009
Dr Gavin Putland

The supply of land is fixed; they’re not making any more of it. Therefore the owners of land automatically constitute a cartel, even if they don’t bother organising themselves. And because access to land is essential, the rents and prices of land are competed upward to absorb the economy’s capacity to pay. That’s why the first home owners’ boost went straight into land values.

Any policy that would weaken the power of the land cartel — e.g. letting land tax rise with land values, so that absentee landowners have to seek tenants or buyers to cover the tax bill — is condemned as an assault on property rights.

And woe to any producers of any other essential commodity, such as cardboard packaging, who organise themselves as a cartel, making their product land-like and thus obtaining a share of the profits that would otherwise accrue to landowners. Yes, producers’ cartels make their unearned profits not at the expense of other producers and consumers, but at the expense of landowners. So they’re treated as criminal conspiracies, and only death will rescue the perpetrators from the prosecutors.

But landowners, whose unearned profits really do come at the expense of producers and consumers, are treated as pillars of society.

photo credit: chaosinjune

letter to the Monash Journal

Site Value

ANGE Siouclis is correct to suggest “why not trim excess expenditure and unwarranted perks and costs” at Monash Council (Your View, November 24).

But to say that we all should pay the same amount of rates is wrong. That’s what Margaret Thatcher tried to push through in England. People in the former Shire of Mulgrave which became, in turn, the City of Waverley and now the City of Monash, have always favoured site value rating because it is fair.

As site value rating is the best system because it doesn’t fine you for improving your property, our new councillors shouldn’t tamper with it unless there is a ratepayer vote on the matter.
Anon

Letter to the Age

Thursday June 26th

WHEN we hear that the rental vacancy rate is less than 1% (”$155-a-week Lalor ’shack’ highlights rental crisis”, The Age, 25/6), we need to remember that this figure includes only dwellings offered “to let”. If it included vacant lots and other unoccupied properties that are not on the rental market, the vacancy rate would be at least 10 times higher.

One obvious solution is a holding tax of several per cent per year on the values of all vacant sites, including those with buildings that have been vacant for more than a month. To avoid the tax, property owners would build on vacant lots and seek tenants for unoccupied buildings.

Gavin R. Putland, Dandenong.

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.

(more…)

Re. “Babcock bounces as Bear Stearns extracts more value” (March 25, item 17).

The Macquarie infrastructure model is dead, not because of any failure to “internalise management”, but because of a failure to tap the benefits of infrastructure in order to amortize the capital cost. The benefit of a new road, net of tolls, is manifested as an uplift in land values in locations serviced by the new road (or by other routes on which congestion is reduced by the new road). Hence, if the benefit exceeds the cost, the cost (net of tolls) can be defrayed by clawing back some fraction (less than 100%) of the uplift in land values. The rest of the uplift is a net windfall for the land owners — who therefore should enthusiastically support this financing method because it would finance projects that would not otherwise proceed, yielding windfalls that the owners would not otherwise get. But when a Public-Private Partnership builds a toll road, it doesn’t claw back any of the uplift in land values, but tries to finance the whole cost out of tolls. So the tolls are too high, patronage is too low, and the operators can’t pay their debts.

Gavin Putland