Today we featured in the Guardian article by Van Badham: Meet the homeless protesters who are taking on tax breaks for the rich. It has people talking – 236 shares and 208 comments in just a few hours. Badham writes:
Word of this betrayal travelled through Melbourne’s homeless community, which now numbers an estimated 25,000 people. In a state that now has 35,000 people on a public housing waiting list that is often over a decade long, a recent report by economic think-tank Prosper revealed that water-usage statistics indicated that as many as 80,000 residential properties in greater Melbourne sit empty.
Complaints about housing affordability from those who are working, earning and sheltered are a national affliction that derives from the same disease as that dispossessing the Melbourne underclass. Those begrudging the actions of the homeless in taking up residence in properties that they can’t afford, should consider the insight from Prosper’s research.
Prosper economist Karl Fitzgerald explained to me that there are now more than 10 tax advantages for property investors, “with capital gains triple the possible rental incomes in many locations”. Reducing housing supply in a demand-driven market inflates the value of properties that can then be borrowed against and used to fund the acquisition of even more properties with their tax offset on the investment, perpetuating the cycle of inflated value and ongoing, massive tax concessions.
“Higher prices ensures money flows out of communities and concentrates in the deep-pockets of those enjoying the first-come, first-served economic system,” Fitzgerald explains. Inflated costs affect government acquisition, too; it’s for this reason, he says, that NSW’s much-vaunted new public housing policy will cost $1.1bn to deliver only 3,000 houses over 25 years, while first home buyers are taking out 40 year mortgages that can demand $200,000 per decade in extra interest.
Fitzgerald is no outlier in his opinion of the iniquity; economist Saul Eslake recently denounced negative gearing as a form of tax avoidance. In a world deservedly resentful of the revenue gouging exposed by the Panama Papers leak, it’s worth remembering that property-rich individuals in Australia can claim the tax concessions of negative gearing against their wages and salaries.
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Earlier in the week I screened our documentary Real Estate 4 Ransom to a packed room at the Bendigo Street vacancy. Last week I interviewed one of the organisers Kelly Whitworth for the Renegade Economists in the show entitled Everybody needs a home, nobody needs a property portfolio.
The protest is an embodiment of community, with a home lying dormant for months transformed within hours to useful housing for many homeless. Gardens were planted, food donated and shared, stories exchanged. Soon it became a living embodiment of just how empowering access to land becomes, and how quickly communities can form to look after each other. But instead, our economic system offers 23 advantages to property investors. Shouldn’t it be the other way round?
Tax breaks for property investors accentuate the rate of homelessness. NO matter how much they invest, they can’t create more land. That’s why we need ‘the switch’ away from stamp duties and towards Land Taxes. Then hoarding housing becomes uneconomic. As KPMG modelling this week revealed, if we did this, all citizens would be $1,600 better off per year, alongside creating 32,000 jobs. That’s as many people as Westpac employs, enabling growth. Join Prosper to support our work.