Why is there a national housing affordability crisis?
For starters, fifty per cent of the cost of a new home is government taxes.
All three levels of government – Federal, State and Local Government gouge new home buyers, through GST, Land Taxes and Infrastructure charges.
To add insult to injury, Sate governments are about to smash new and young home buyers with a further $30,000 – $50,000 per house in overbearing 7-Star energy ratings – overkill in the extreme.
There are two very simple policy settings governments can adjust today that allowed our parents and grandparents to afford a new home:
1. Release more land – it’s not as if Australia doesn’t have an abundance of land
2. Get rid of crippling taxes on new homes
Let’s look at modern Australian history.
Post World War II Australia opened its doors to an immigration boom.
The country flourished. Today as a nation we are better for it.
New migrants were able to buy a block of land and build a home for their family, and so could their children.
In days gone by, land was plentiful, housing was affordable.
Today, land is needlessly locked up for environmental reasons, suffocating supply so pushing up land prices. Ideology trumps practical needs.
Housing costs were so much cheaper.
Our forefathers did not have to pay GST or land tax or infrastructure charges on rooms for rent which is the case today.
Take Queensland, where I live.
Creeping Land tax is strangling home ownership.
Just about every homeowner in Queensland has been swept up in the Palaszczuk government’s creeping Land Tax.
If you’re not paying thousands of dollars in Land Tax each year in Queensland, you soon will be.
If you’re already paying Land Tax, you will be paying thousands more each year for the privilege of owning a home.
To explain, the Land Tax threshold was last changed in 2007, sixteen years ago, but has not been indexed since.
In 2007 you could own up to 10 properties in Queensland before paying Land Tax.
Since 2007, property prices have boomed, yet the Land Tax threshold has remained unchanged. Just one Queensland home in an average suburb attracts Land Tax in the many thousands of dollars each year.
A rental property owner will now pay up to 20% of rental income in Land Tax, so has no option but to pass on the tax to the renter, typically about $100 – $150/week extra rent.
The renter is usually a lower income earner. The State government’s Land Tax is effectively a Tax on the poorest in our community.
This is unacceptable.
The Queensland Premier, Annastacia Palaszczuk recently said, “My government is doing everything it can to put downward pressure on rents.”
However, when asked about indexing Land Tax to relieve rents, the State Treasurer’s office categorically said, “Queensland is leaving the land tax threshold unchanged.”
This is an unconscionable tax grab by the Queensland State government that hurts the poorest.
Rental homeowners either raise rents or sell their property, removing another rental home from rent supply.
In response to its self-inflicted rental crisis, and homelessness, the Queensland government is now spending $5billion on social and affordable housing.
Yet, Land tax raises only $2 billion per year.
So, raise $2billion and spend $5billion. ‘Yes Minister’ couldn’t be more ludicrous.
Doesn’t it make more sense to remove the punishment for owning homes in Queensland and instead to encourage more private and self-funded retiree investment in rental houses?
On another note, the Queensland Deputy Premier and State Planning Minister, Steven Miles has asked Queenslanders to rent out rooms and granny flats, to help with the State rental crisis.
However, renting a room or granny flat attracts Infrastructure Charges of $22,200 per room.
Why would anyone rent a room to be slugged $22,200 per room?
According to Queensland law, the rooms need to be properly certified as ‘rooming houses’ to comply.
If the house is not re-certified, and the house catches fire or someone is injured or killed on the property, insurance will not pay out because the house was not correctly certified for its use.
In other words, the Planning Minister is punishing home owners for doing exactly what he is asking them to do.
The Planning Minister has the authority and power to make these changes immediately, but won’t. Nobody knows why.
So instead of building $5 billion in social housing, governments could simply encourage homeowners to build more homes and rent more rooms by adjusting tax and policy settings
The housing and rental crisis are of the government’s own making.
By releasing more land, removing GST on building materials, indexing Land Tax in line with property and/or inflation and negating charges on rooms for rent will go a long way to making housing and rents more affordable.
Combined Federal, State and Local governments could take action, without having to spend billions of dollars in social housing.
Governments only need to get off the back of mum and dad homeowners – and their kids.