Prosper prepared the following opening statement to the Commonwealth Tax and Revenue Committee’s inquiry into housing supply and affordability:
Prosper Australia welcomes the focus of this enquiry into the role of taxation and supply on housing affordability. We are a very small non-government organisation with a focus on the way rents – that is the returns to natural resources and monopoly- influence our political-economy. We advocate for the abolition of taxes that penalise production, and the increased taxation of economic rents – including land value.
We tend to follow the intuition of the classical economists, now somewhat marginalised, that land markets are characterised by monopoly, as well as externalities – positive and negative – and prone to generating inequities in the absence of meaningful government intervention.
Our starting point is that land and housing does not operate like other goods and services that we encounter everyday.
Our contribution has focused on better understanding vacancy rates as a measure of housing capacity, and the rate of dwelling supply in greenfield precincts zoned for urban growth. We have also investigated beneficiary funding mechanisms for transport, land value uplift due to rezonings, and non-market housing options.
There is an issue of supply. The question is of what and by whom.
The first supply issue is unrelated to ‘housing as a service’ as measured by the price and availability of rental housing. It is the supply of cheap credit, generated by expansionary monetary policy, and its effect on asset prices. The skyrocketing value of homeownership in the context of negative net migration reflects this larger global trend.
The second issue is the supply of new dwellings by the private sector, that is to say, market priced houses and apartments built-to-order by our world-class housing and construction sector.
Will they keep building new supply when the market drops? No. Is housing production laggy? Yes.
We spent ten-pages in our submission evidencing this problem because it suggests that enhancing private sector supply response via buyer subsidies, tax expenditures, planning deregulation etc. is unlikely to produce the desired outcome.
There’s no adequate, consistent measure of potential “supply”, so when the industry says there’s a shortage it’s hard for civil society orgs like us to verify their claims. We would be less skeptical if the suggested solution -rezoning and planning deregulation- didn’t require new, valuable property rights to be issued with the inevitable rezoning windfall gains to existing landholders. Laudably, Victoria is following the ACT in taxing these windfalls, which should increase everyone’s confidence in demands for upzoning in that state.
As a result of the 2018 National Housing and Homelessness Agreement (NHHA) the ABS investigated indicators of ‘dwelling capacity’ – a way to measure the potential supply permitted by planning but not yet developed. These metrics would provide a valuable insight into where zoning is impeding a supply response and they should be continued and supported.
Other witnesses have pointed to the regrettable cessation of the Urban Development Program and the uneven landscape of state and local government land supply reporting. We echo their calls for consistent, independent metrics of available zoned supply.
Government can also provide affordable access to the use of land for homeownership, without providing subsidies for people to own a land asset. This can be done through investment in shared-equity models, like land trusts.
State’s can’t be left to subsidise social housing alone and at the same time kick their stamp duty habit. A revenue neutral transition to broad-based land taxes has benefits for efficient supply and allocation of housing, as well as being fairer.