Last night’s Insight focused on the tragedy unfolding in the housing market and it’s effects on the rest of the economy. It was good to see that Housing Supply side issues got some time on air, but again the property lobby had large numbers in the crowd, no NGO’s got a guernsey, the omnipresent Ross Gittins took the softly softly line and outside of Steve Keen, there was not the sort of hard hitting critique needed.
The Real Estate lobby again pushed for more land supply. Result – cheap land for speculators to extort the market. Someone mentioned building high speed rail to Penrith and surrounding areas. Result – the added benefits are capitalised into higher land prices – benefiting whom? Those speculators with inside contacts. Debt was mentioned at 7 times the average wage – yes, but why? The high cost of land due to land speculation, inefficient government developer charges and the failure to capture the economic rent. Supply side was mentioned by 1 young academic and a few others, but no one dared to mention how.
Supply side? 119,623 vacant homes in Melbourne. Supply would be increased if the most efficient tax of all is implemented, the one students are taught in economics as the most effective way for government to raise revenue with the least distortions. It’s called Land Tax.
Let’s rename it as a Site Rental. No one likes a tax. We don’t like how it is presently administered, but we agree with the property lobby that it should be set at a flat rate. However, we differ in seeing that it should be set at a higher rate, funding the abolition of income and sales taxes.
Holding charges on land are barely 2%, whilst land values have increased at over 10% p.a for over a decade. The two are inter-related. Increase holding charges and speculation is diminished. Land banking becomes no longer profitable. Read more here and on our sister website
But what did other bloggers say?
Surfing through the SBS Insight comments page it was good to see the number of bloggers concerned about housing.
Check: Australian First Home Owner
HOUSING UNAFFORDABILITY and RENT STRESS are no accident. Both are the result of deliberate design of tax rulings that gives massive purchasing and debt repayment advantage to residential investors.
I have nothing against someone wanting to make a quid. But the reality is that price increases, driven by huge investor demand, have been at the cost of the younger generation’s aspirations of owning a home in which to raise their families.
Contrarian Investors Journal summed up the Myth of Australia’s Housing shortage
When it comes to solving Australia’s housing problem, there is an entrenched superstition that makes many believe that there is a housing ’shortage’ in Australia.
And the crew over at Global House Price Crash held up the torch for our buddy Steve Keen.
It was good to see that Gavin Putland’s critique of Negative Gearing got a mention in the comments.
Read Bailing out the Bubble’s Enabler’s by Dr Michael Hudson, Prof of Economics (and Chief Economic Policy Adviser for the recent Kucinich for President campaign) if you want to get serious about this topic. He will be interviewed today on the Renegade Economists. Join the podcast!