With property prices have dropped 23% in the UK over the last year and the UK verging on recession, what role do banks play in the quagmire? To think that Brown believes cutting property taxes will turn the UK property market around!
Desperation in the housing market is leading to varied responses. The latest the Age has promoted is the Container Home phenomenon. Miners earning $100,000 have been forced into them in Port Headland and other fast growing mining communities. Now a company is promoting shipping containers on the eastern seaboard as a means to solving the housing crisis.
Nice try. However, it requires the land to place them on. Whilst public lands could be used, why not free up the 119,623 unoccupied properties identified in the 2006 Census?
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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
(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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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.
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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Finally a breath of fresh air has been blown upon the housing affordability issue. The ACT government has acted upon its long history of innovative financing by proposing a system of leasing land. Income earners below $75,000 will be able to lease the land at 2% p.a of its’ unimproved value.
The immense benefits from such a move are summarised by Tom Skotnicki from the Canberra Times in this key article:
“A family with a household income below $75,000 could rent a $90,000 block for $35 a week, compared with the $165 a week that borrowing $90,000 for the land component would cost in a typical mortgage.”
With land accounting for the majority of all mortgages, paying just 21% of the comparative cost for the land component will help give low income households a fair go.
Better yet, this policy will ensure the people share in the higher value the community place on living in that neighbourhood. The yearly rental calculation will take into account this judgement.
In time we hope that this scheme will be expanded to include all households in the ACT. We must do all that we can to assist this positive development.
An editorial has just been placed on the leasehold system proposed by Canberra Times editor at large Jack Waterford.
Today’s report on the Melbourne 2030 urban growth boundary cries out for a comment from Prosper Australia members. Melbourne University academic Rob Moodie rolled out the usual suspects in recommending that dwellings per hectare improve on the urban fringe, that there be a smaller, more intense concentration of transport hubs and lastly, the latest bureaucratic decree, that all new developments have a set percentage of housing set aside for low income people.
What is needed is an analysis on council rating systems and how this has contributed to today’s problems. CIV rating penalises home building and encourages the waste of land, in effect subsidising the land banking speculators that have held ‘doughnut’ suburbs like Braybrook and Sunshine to ransom. That’s the real supply issue. If 20% of all new developments are restrained for low income earners, what will stop the developer upping the price for the other 80% to cover this profit shortfall?
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Last night saw SBS’s excellent Insight program tackle housing affordability under the title Out of Reach. Over 270 comments have been posted since the event, giving warrant to the excellent comparing host Jenny Brockie does each week.
As probably the fourth panel type forum seen on non-commercial TV over the last year, this one was the best. Julian Disney pushed for the kind of hard nosed reform that we prefer - wholesale tax reform. Though he was hesitant to go as far as we do, he did state that negative gearing be abolished and capital gains on property be captured.
Ross Gittens, economic commentator with Fairfax, even surprised by stating that Commonwealth Rent Assistance only leads to higher rents. In effect it is a subsidy for the landlords. To see ALP Minister for Housing Tanya Pliberseck agree was of interest. A cursory knowledge of economics and the law of rent should see her applying this to virtually every other ALP housing policy as well.
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Ever wanted to read between the lines of the newspaper? Arm yourself with the tools of modern warfare as Karl Fitzgerald takes you through the key understandings required to ‘follow the money’.
Interactive games and multimedia footage will complement the learning in an attempt to keep the sessions as upbeat and interactive as possible.
Ask yourself why we have it drilled into us that economics is ‘the dismal science’? If we spend our entire life chasing the ‘elusive dollar’ then it makes sense to understand the rules to that game.
The first session is the most important. If you miss another session that is understandable, but we will be building on the first session’s knowledgebase throughout the course.
Cost: Gold coin donation appreciated