controversial but well said. My partner made the comment that under a land tax system there would be an incentive for the family to re-unite again as the aged parents get to this stage. Perhaps the huge back garden could be subdivided and the grannie flat built? The young family in the big house etc.

Hard decisions do need to be made but so many of our peers are eons behind in analysis or activism that these old time letter writers kick our asses on every occasion! Or the poor ole widow is rolled out into the spotlight by the think tanks.

Indeed, but it’s potentially much worse than the numbers suggest.

Anyone out there know any 50-70 year olds living as a couple or alone in a three to five bedroom house? They brought the kids up there, and now it’s too big for them. They might be still coping well there, or the cleaning and maintenance might be getting a bit much.

Either way they worry about their kids and or grandkids ever being able to afford a home. Their kids support the idea of them hanging on to the family home. As they get older they will even come and help keep the place going. After all, it has been the best investment of their lives, and will only become more valuable. Somehow these families don’t quite make the connection.

This speculative bubble extends far beyond just the overt negative gearing specuvestors. Everybody who takes into account their belief that prices will continue to rise in deciding to stay in a house that is bigger than they need has a speculative component to their descision.

Sure, there is sentimental value there – probably enormous sentimental value. The herb or flower garden they planted decades ago. The shade tree they had the foresight to plant in their twenties. But would they consider taking cuttings of their favourite plants with them when they downsized if they believed that prices might fall a long way over a long time, or even just not go skyrocketing to the moon forever? Of course many of them would.

I have a few sets of elderly relatives living in ridiculously large houses that they simply cannot cope with any more. Most people do. Why are they there still? – there are a whole range of factors, but all of them come down to two things – government tax incentives and speculative beliefs about the future direction of prices.

If they sell, then the income they receive from investing their windfall profits will be heavily taxed, and they will stop getting government assistance. Why would they sell and pay tax and lose benefits when they believe are making a huge tax free profit as they are?

It’s time for a comprehensive land tax without exceptions. It’s time that housing wealth was taken into account in calculating social security payments. It’s time to take the burden of taxation off the young and poor and distribute it more evenly.

The end of this madness is going to be ugly, but not as ugly as its continuation.