Widespread speculative residential vacancies — Is the problem rooted in land supply? Is the solution a vacancy tax? Prosper Australia says focus on abating land speculation instead. Read on…
Changing the story of Residential Vacancies in Victoria
From Prosper Australia
4 April 2019
The Speculative Vacancies report began in 2007 as a photographic survey of vacant blocks in a single neighbourhood in the City if Maribyrnong. Volunteers cycled around the study area identifying and mapping vacant lots and houses. More recently, water usage has been used as a proxy measure for the number of vacancies in a given suburb. This methodology has been expanded to all of Melbourne.
Prosper’s Speculative Vacancy Rate is now a widely cited statistic to counter the claim that the primary driver of Australia’s affordability crisis is a lack of supply.
The context is skyrocketing home prices and rents, and an “official” vacancy rate of 1.4%.
The policy response consistently focused on supply constraints and boosting demand: the controversial Urban Growth Boundary, planning and construction bottlenecks, and cash incentives for first homebuyer.
Tens of thousands of hectares of land were rezoned on the urban fringe – without effect on land price inflation—in spite of concern over the social and environmental impacts of sprawl.
The message is clear: the housing shortage in Australia is overblown. Instead, the property market is failing.
Affordable housing providers, advocates for the homeless and housing activists widely cited “80,000 empty homes” to support their campaigns for far-reaching social and taxation reform.
In March 2018, the Victorian Government announced a 1% Residential Vacancy Tax, followed by the announcement of a federal “ghost house tax”. Prosper was invited to participate in the design of the Victorian tax. While less than perfect, these residential vacancy taxes are a political response to widespread public discomfort at young adults excluded from home ownership.
Genuine demand-side reform is now closer than ever.
Comments:
Supply side arguments are a common refrain: ‘Not enough buildable land… a constricted supply leads to higher lot prices… the urban growth boundary should be expanded.’ This perspective neglects the real driver of residential price inflation: land speculation. A vacancy tax may have the effect by putting a few more units onto the housing market, but it doesn’t get to the heart of the problem. A land tax does.
By the way – New York City is now attempting to address the problem of commercial vacancies in neighborhood shopping corridors. Council member Rosenthal (in March 2019) introduced legislation requiring property owners to notify the Department of Small Business Services when a storefront has remained vacant for more than 90 days. Additionally, the DSBS would maintain a database on each outlet’s monthly rent and occupancy status, among other data. New Yorkers are justly disturbed at the trend towards rising contract rents and the displacement of local small businesses. Luxury chain stores are replacing local shops in several of the city’s neighborhoods. Is this database strategy an idea that Oregon and Washington cities could adopt to help keep main streets alive?
