saul eslake - henry george dinner sep 2013 (slides)

7/30/2019 Saul Eslake - Henry George Dinner Sep 2013 (Slides)

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Saul EslakeMelbourne

2nd September 2013

Australian housing policy: Fifty years of failure

Address to the 122nd Annual Henry Georgecommemorative dinner

Note: the opinions expressed in this talk are solely the authors, and should not be attributed or imputed to any other organization withwhich he is connected or associated.


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Up until the past decade, the housing stock grew at afaster rate than the population

Sources: Australian Bureau of Statistics, Census results; authors calculations.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1947-

1954

1954-

1961

1961-

1966

1966-

1971

1971-

1976

1976-

1981

1981-

1986

1986-

1991

1991-

1996

1996-

2001

2001-

2006

2006-

2011

Occupied private dwellingsPopulation

% pa

Inter-censal periods

Inter-censal growth in population and the housing stock


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Home ownership rates rose substantially between 1947and 1961

Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.

Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B4.

50

55

60

65

70

75

1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

%

Census

Home ownership rates at Censuses


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The average number of people per dwelling increasedbetween 2006 and 2011 for the first time in 100 years

Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B3; Australian Bureau of Statistics, 2011 Census Quickstats and earlier Census reports.

2.50

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Number

Census

Average number of people per occupied private dwelling at Censuses


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Home ownership rates havent increased at all since 1961

Note: percentages are of occupied private dwellings excluding those for which tenure is not stated.

Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix B, Table B4; Tony Kryger, Home Ownership in Australia Data and Trends, Parliamentary LibraryResearch Paper No, 21 (February 2009), Table 1; Australian Bureau of Statistics, 2011 Census Quickstats.

50

55

60

65

70

75

1911 1921 1933 1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

%

Census

Home ownership rates at Censuses


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Despite substantially lower interest rates since 1991 homeownership rates have fallen in almost every age bracket

Sources: Judith Yates, Hal Kendig & Ben Phillips, Sustaining Fair Shares: the Australian Housing System and IntergenerationalSustainability, AHURI Final Report No. 2011 (February 2008); updated for 2011 Census Results by Judith Yates, communication toauthor.

25

61

7579

70

25

7881

67

7979

7364

47

0

10

20

30

40

50

60

70

80

90

15-24 25-34 35-44 45-54 55-64 65+ All

Age of household head

1961 1971 1981 1991 2001 2011

%

Home ownership rates by age of household head, 1961-2011


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be married or engaged

be under the age of 36

have saved up to $1500 in an approvedform (generally, with a financialinstitution whose major business waslending for housing) in three years

be buying a new, or newly-built home

valued at less than $14,000

and have not previously owned a home

The First Home Owner Grant was really just the first of the2000s explosion in status-based welfare

To get a grant under the 1960s Home SavingsGrant Scheme you had to :

have a family income of less than 155% ofaverage weekly earnings

and have not previously have owned ahome

To get a grant under the 1980s First HomeOwners Scheme you had to :

have saved up to $2500 in an acceptableform

have a family income of less than 155% ofaverage weekly earnings

and have not previously have owned ahome

To get a grant under the 1970s Home DepositAssistance Scheme you had to :

have not previously have owned a home

To get a grant under the 2000s First HomeOwners Grants Scheme you have to :


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Governments have spent at least $22bn on cash grants tofirst home buyers over the past fifty years

Note: expenditures shown are calculated as nominal values deflated by All Groups CPI.Sources: Advisory Council for Intergovernment Relations,Australian Housing Policy and Intergovernmental Relations, DiscussionPaper No. 14 (1982), Appendix G, Tables G5 & G6; Australian Government, Budget Paper No. 1, Budget Statements, 1983-84 through1994-95; Commonwealth Grants Commission, 2008 Update Report (Attachment D) and Report on GST Revenue Sharing Relativities,2010 ReviewVolume 2; CoAG Reform Council, National Affordable Housing Agreement: Performance Reports 2009-10 and 201011.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11

$bn in 2010-11 prices

Financial years ended 30 June

Expenditure on assistance to first home buyers


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Negative gearing became much more attractive afterthe 1999 decision to halve the rate of capital gains tax

Sources: Australian Taxation Office, Taxation Statistics 2010-11 (latest available); authors calculations.

Taxpayers with rental income

Taxpaying property investors

0

5

1015

20

25

94 9596 979899 0001 0203 0405 060708 0910 11

$bn


Interest paid by property investors

-10

-5

0

5

10

94959697 989900010203040506 0708091011

$bn


Net rental income

45

50

5560

65

70

94 9596 979899 0001 0203 0405 060708 0910 11

% of total


na

Loss-making landlords as pc of total

8

10

12

14

16

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

% of total taxpaying individuals



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10

0

5

10

15

20

85 86 87 88 89

% ch from year earlier

Sydney

Melbourne

Brisbane

Adelaide

The assertion that the abolition of negative gearing in themid-80s caused a landlords strike is an urban myth

Note: Shaded area denotes the period (from July 1985 until September 1987) in which negative gearing was not availablefor property investments. Sources: ABS; Real Estate Institute of Australia.

Rents

0

5

10

15

20

85 86 87 88 89

% ch from year earlier

Hobart

Darwin

PerthCanberra

Vacancy rates

0

1

2

3

4

5

85 86 87 88 89

% (moving annual median)

Melbourne

Brisbane

Sydney

Adelaide

0

1

23

4

5

6

85 86 87 88 89

% (moving annual median) Hobart

Perth

Canberra


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Negative gearing hasnt done anything to improve thesupply of rental housing compared with other countries

Sources: Real Estate Institute of Australia; US National Association of Realtors.

Rental vacancy rates

0

2

4

6

8

10

12

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

%

US

Australia


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Housing policies that would work

Abolish grants to and stamp duty exemptions for first home owners andnegative gearing for investors (in all assets)

Redirect funds thereby saved (or revenue no longer foregone) to programs that

increase housing supply, directly or indirectly Expand or replicate programs which actually work and are ultimately self-

funding, like Western Australias Keystart shared equity scheme

Replace State and Territory Government stamp duties on land transfers with a

more broadly-based land tax (with no-exemption for owner-occupiers) Take a more holistic view of urban infrastructure investment, recognizing

that investments in transport infrastructure can expand the supply of housing and fund such infrastructure in part by betterment levies on increases in landvalues

Reduce the extent to which infrastructure and services in new housing estatesare funded by upfront charges (and if necessary allow local authorities toincur more debt, and service it through rates)

Reduce the cost, complexity and regulatory uncertainty associated withbrownfields and infill developments in established areas


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Important Notes

This document has been prepared by Saul Eslake (the author), to accompany his talk to the 122nd Annual HenryGeorge Commemorative Dinner, organized by Prosper Australia and Earthsharing Australia (the organizers) on 2nd .No part of the document is to be reproduced, made available online, circulated or otherwise distributed withoutpermission of the author, or of the organizers of the event.

This document does not purport to constitute investment or business strategy advice. It should not be used orinterpreted as an invitation or offer to engage in any kind of financial or other transaction, nor relied upon in orderto undertake, or in the course of undertaking, any such transaction. No representations of any kind are made, norare to be inferred, about any securities or financial instruments whatsoever based on anything in or inferred fromthis document.

The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable.

The views expressed in this document are those of the author. Neither the author, nor any entity by which he isemployed, nor any body of which he is a member or with which he is in any other way associated or affiliated, norany of their affiliates or subsidiary or related entities however makes any representation as to their accuracy orcompleteness and the information should not be relied upon as such.

All views, opinions and estimates herein reflect the author's judgement on the date of this document and aresubject to change without notice. The author, each and every entity by which he is employed, and each and everybody or entity of which he is a member or with which he is otherwise associated, their affiliated and subsidiaryentities expressly disclaims any responsibility, and none of them shall be liable for any loss, damage, claim,liability, proceedings, cost or expense (Liability) arising directly or indirectly (and whether in tort (includingnegligence), contract, equity or otherwise) out of or in connection with the views, opinions and contents of and/orany omissions from this document except to the extent that a Liability is made non-excludable by legislation.

saul eslake - henry george dinner sep 2013 (slides)

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