In at least 18 major US cities, the trend to suburban living to escape the crowded squalor of inner areas is reversing.  Older buildings are being remade as homes for the affluent after generations as slums. The collapse in US property prices is accelerating the trend.

Bright young things have discovered the charm of grit and central living.  They are investing their housing dollars differently.

A striking example is Atlanta, Georgia where in 2000, 75.9 per cent of the poor lived in the suburbs, and now 84.5 per cent do.

This trend is already well underway in Australia.  Life in our inner suburbs is alive with young professionals who outbid the poor to renovate shabby buildings and enjoy long established services and transport networks.

The displacement of poorer citizens to the urban fringe has serious social consequences for both the US and Australia.

Their already precarious lives are darkened. Every adult must run a car to move around; children are trapped.  Employment is distant, adding an exhausting commute to the working day and exposing them to fuel price shocks.

The ‘burbs may be leafy, but those neat gardens camouflage many private hells of sacrifice and debt juggling.

What’s to be done?

The problem is our state governments are addicted to stamp duty on real estate sales, which traps people in their homes and puts a handbrake on labor mobility.  Homeowners can only take jobs within driving distance, limiting advancement, specialization and incomes.

The otherwise untaxed status of residential real estate investment skews individual decision making.  Most people’s mental processes give great weight to these tax benefits but not to the heavy opportunity cost of a large (after tax) mortgage.

The Land Tax concession for owner-occupiers – a very modest saving – elevates residential real estate as an asset class above all others.  Compounded with the natural instinct to own land, our calculation of cost and benefit is wildly skewed.

And the poor are the least equipped to properly assess the relative merit of their choices.

They prefer taxes on jobs like payroll tax and the superannuation guarantee, or taxes on business like company tax. Somehow it seems these taxes fall on others.

Their isolation to the outer suburbs is a path willingly taken.

Meanwhile, the inner suburbs are being revitalised with vigour and investment.  Here lies the future.