Will Higher Handouts Help Uni Students?

Karl FitzgeraldCommentary1 Comment

Is marrying your housemate the way to survive uni? That’s the question Farrah Tomazin puts forward in today’s blockbuster edition of the Age as she discusses recomendations for higher Austudy payments. This will see a short term benefit for students being able to afford more food.

However, those versed in economics will understand that in the near future landlords will see that their tenants have a greater purchasing capacity. Rents on new leases will continue to climb. Just like the FHOG, any added purchasing power given through increases in Austudy is captured by those who already own land.

What is needed is a supply side solution to land and housing affordability. The minimal $1000 – $2000 in holding charges on land allow property to be withheld from the market because it makes economic sense. Consider a higher holding charge on land, in the name of a Site Rental. Then the 119,623 properties found vacant in the 2006 Census would be encouraged onto the market. Instead of owners being able to fat cat along and remain nonchalant about whether their asset is covering costs, now they would have to earn $5000 plus per annum to pay the Site Rental. The added supply of land, housing or rentable accommodation pushes down prices.

Alas the forces are against us at present. Adding 2+2, one may see that from a property investors perspective, the reduced supply enforces scarcity, pushing up the value of the property. Remember, once you own 8 properties, as Henry Kaye would tell you, they pay each other off quite quickly. Additionally, there is no real need to earn rental income of $12,000 when for the last decade a property has been appreciating by $30,000 plus p.a.

The advantages continue to swing in one direction when you consider that the owner can then call on this higher valuation to finance larger loans, to buy guess what – more land. Throw in the REIV spruiking a ‘record low vacancy rate’ (AKA marketed scarcity) and the Age and other newspapers with glossy supplements entitled ‘Hot Suburbs: Where to Buy Next’ and you wonder how future generations can get ahead.

Maybe the reality TV will be turned off when it is realised that the student’s hard earned taxes (paying for roads, schools, better police etc) also assist the property owner by making prime locations more valuable. Jammed onto our over-crowded public transport system, will it be recognised that the record immigration levels ensure that property owners will face greater demand for their property?

All of these bonuses for the property owner are created by the student, the working class, the immigrant – the general public itself. Did the land owner do anything to deserve these windfall gains? This is a question that threatens our very liberty.

When hearing that many students pay more than 50% of their income on rent, one would hope that the government’s economic advisers see through yet another handout for the privileged.

A Site Rental acts to recycle these higher prices, these economic rents, back into the public purse, ensuring that the public gets a share of the value it creates. Furthermore, this pushes down rents and funds the abolition of the 56 taxes small businesses despair at.

Then the fresh university graduate can start up his own business on a cheap lease with little compliance/ paperwork, allowing them to concentrate on being creative, attentive and flexible to their dreams. A more streamlined system is possible.

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One Comment on “Will Higher Handouts Help Uni Students?”

  1. Good article, touches on a lot of themes. The Age’s article about people marrying to get more money from the government will end up in government thinking how they can tinker with the system to stop the marrying and still provide more money to the students. As you’ve pointed out, that is not is what is needed. There is general stress throughout the whole economy because those who hold land take all that the market can bear. If the government gave us all more money then we’d all have more money to bid up the prices of land. So it doesn’t solve the problem. The solution, as you say, is collecting site rentals.

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