On Monday the Real Estate Institute of Victoria made public its submission to the Victorian Government on the framing of the state budget.
They are big-hearted enough to call for an end to the First Home Bonus – a ‘gift’ to buyers that merely inflates land prices by more than the bonus and enriches sellers. Professor Steve Keen famously lampooned this as the First Home Vendor’s Boost and obliged economists and policy makers to acknowledge its fatal flaws.
The REIV also dislikes Stamp Duty, as Prosper does. This vile impost heavily disadvantages homeowners forced to sell through job transfer, unemployment, illness or change to family circumstances like divorce. It confers a large and persistent advantage upon landowners who never sell. It is a handbrake on land sales, which impedes development and, by the way, reduces agent income.
The Australian Housing and Urban Research Institute (AHURI) recently calculated the consequences of removing Stamp Duty on Melbourne houses and replacing the lost revenue by ending the exemption from State Land Tax on owner-occupiers, as recommended by the Henry Review. This is an excellent piece of economic analysis and shows how this change would confer significant benefits on the vast majority of citizens.
But the REIV is having none of it. Their submission is explicit. They say:
“Broad-based land tax not an answer
“It is also important to highlight that the REIV opposes any move to replace stamp duty with a broad-based land tax on all residential property. Economists may suggest that, at an academic level, it would be more equitable but they have not adequately considered how the inequity of charging people land tax once they have already paid stamp duty on the initial purchase would be dealt with. Any existing property owner receiving a bill for land tax would face an increase in taxation for no reason other than reducing taxation on other purchasers.
“Any transitional plan to phase in land tax on new purchases and not charge it on existing owners would take a few decades to complete and could not be described as efficient.
In reality, transitional arrangements are simple and it is relatively easy to compensate those who recently paid Stamp Duty and elderly low-income homeowners. Plus no one would be trapped in inappropriate dwellings by Stamp Duty.
The REIV knows this. They also know Land Value Tax has profound social justice and economic efficiency benefits that far outweigh the cost of reform. And they hold these views even though they reduce the incomes of their members.
A cynic would say this shows the REIV members’ dream of becoming rentier landlords trumps their business profits. But such a calculus is unthinkable, just unthinkable.