Here’s an informative letter from our Georgist friends in Australia. Do we share similar affordable housing circumstances and the same unimaginative solutions?
PROSPER AUSTRALIA NEWSLETTER
Wednesday, 30 September 2020
Dear Friends,
The Federal budget is set to be handed down next week and, as usual, we are concerned about the Treasurer pump-priming land markets.
As Prosper President, Catherine Cashmore, described in a recent interview with Martin North, the Australian property sector has taken on “too big to fail” characteristics in the minds of the public. “…[People] have been breastfed on the notion that the way to get wealthy, to secure your retirement, is by owning property.”
“Land tax and vacancy tax has now been waived by the Victorian state government, confirming what we’ve been taught –that the government will always bail out the property sector.”
“When you have an economy that is bent towards land speculation, then to get out of a financial crisis as quickly as possible you’re going to throw everything at the housing sector — unless you are going to reeducate the population that speculation on property is risky and not the way to secure your future.”
Australia has become dependent on high house prices to sustain new housing construction, which is why new supply hasn’t resolved affordability pressures for first home buyers or renters.
In her recent Henry George commemorative address, Professor Nicole Gurran stated:
“The concern is, from the construction industry perspective, that we’re not having a demand signal to produce the houses that we still need. [Yet,] we’ve got all of that unmet affordable housing need that the market was unable to meet in good times and isn’t able to meet in bad times.”
Now is the time to put aside ineffective market boosting policies like homebuyers grants and plug the 305,000 shortfall of affordable rentals by funding social housing construction.
Catherine also makes the point that the rumoured $10 bn ‘hard’ infrastructure spend — tunnels, bridges, airport trains etc. combined with fast-tracked development approvals — will ultimately feed into land prices. Throwing demand-side fiscal stimulus on top of rate cuts. Who benefits? Targeted assistance for owner-occupiers to ride out recession may be warranted, but we should not be bailing out speculators. [This] means further impetus for states to get their value capture regimes sorted out.
However, many economists want cash directed towards ‘soft” infrastructure — early childhood and aged caretakers, and the smashed-to-smithereens higher education sector. Along with a social housing spend, a soft infrastructure spend makes sense because the people employed in these sectors — women, young people, and casuals — have borne the brunt of the COVID shock.
Yours in hopes and dreams,
Emily & the Prosper Team.
More from the Annual Henry George Commemorative Address, Prof. Nicole Gurran, University of Sydney Sept 2020:
The issue that seemed to continually pre-occupy us was that we were somehow in the midst of overregulation and that’s causing the problem of unfair housing and unaffordable housing. An unregulated market would be able to self-correct.
We know the housing market doesn’t do that. It’s different to other types of markets because homes are different to other types of goods. Housing scholars blame the housing crisis on residential capitalism, the growing trend that we’ve had particularly in the past 30 or 40 years around dwellings as a repository and a generator of wealth – [that] house prices reflect potential wealth as opposed to a good associated with shelter.
The private sector can only produce in response to market signals in return for profit. As soon as the market flattens there’s not enough profit associated with housing development, so this assumption that if it weren’t for planning [regulations] we would have this endless and stable production of new housing just falls apart. New housing development is chasing profit. And when the profit signals fall away then we don’t have those drivers.
Comment:
To get out of a financial crisis when you have an economy that is bent towards land speculation, is the answer to throw everything at the housing sector? No, first it’s better to reeducate the population that “speculation on property is risky and not the way to secure your future.” Speculation, not planning regulations, drives up housing prices. A better response – dampen residential land price inflation by changing the property tax to a land value tax.
