Rudd’s $500m subsidy for speculators

Karl FitzgeraldCommentaryLeave a Comment

Today’s big announcement promoted by the Rudd government:

The $512 million Housing Affordability Fund, promised before the last election, is expected to help 50,000 new home buyers in the next five years.

“What I am signalling loud and clear is that we want to tackle the housing affordability crisis for Australian families which has gotten out of control, and we need to start bringing it back under control.” said Mr Rudd.

Will the same sort of economic ‘oversight’ for the First Home Owners Grant be claimed as a defense to this policy handout? Basic economics teaches that when the land market receives a subsidy, land owners have the monopoly power to claim all of the benefits. Similar to the FHOG in effect, the Housing Affordability Fund will result in a subsidy for those who own land where infrastructure is required, typically in sprawl zones.

What is missing is a fairer method of infrastructure funding, one based on the tried and tested technique of Council bonds. Bonds are sold to fund the roads and sewerage infrastructure. Then the beneficiaries to the lifetime of new services pay something back to the Council over 20 years via Council Rates. The present upfront Developer Charges see one generation paying for the infrastructure services in one go. Reform that Rudd!

What is needed to address housing affordability is a genuine supply side solution to unravel the thousands of empty blocks of land withheld from the market by land bankers. Importantly, these are already in established urban communities, requiring less infrastructure and resulting in less travel pollution. Just keep an eye out for them near your local train station. We were shocked to see how many vacant blocks there were in Altona over the weekend. Have a look (above) Julia!

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