NSW micro parties on housing

As well as the Labor Party, the Liberal-National Coalition and The Greens, there are numerous so-called 'micro parties' contesting the NSW State Election, particularly for seats in the Legislative Council (the State's upper house). A couple of these parties have agendas that relate to housing, so we'll wrap up our pre-election analysis by taking a look at them.

First: the Future Party.

The Future Party isn't standing any candidates for the lower house, and you won't find the party's name on the upper house ballot sheet either, but they are there as 'Group M'.

Housing policy is prominent in the Future Party's platform. They propose to increase the supply of housing by giving development a powerful spur: a broad-based land tax, accompanied by the abolition of stamp duty; and would push for reform of the tax treatment of housing at the Federal level too.

They also propose that this development should be achieved through higher densities and mixed land uses, with reduced planning controls in urban renewal sites, and the laying-on of mass transit and other infrastructure in greenfield sites. And they propose that some of this greenfield development take a very specific form: a new city. They've already got a name for it, too: Turing.

We say: well done to the Future Party, particularly on their excellent tax reform proposals. We tend to be dubious about proposals for increased density as an affordability measure, but are less so when they are accompanied by proposals for urban decentralisation, as the Future Party is also proposing. As for Turing: there is a long and honorable tradition of proposals for cities of tomorrow in housing policy, and a shortage of visionary politics in New South Wales, so good on the Future Party for putting it out there, even if Turing City appears likely to remain a hypothetical device.

The other micro party with a housing agenda is, of course, No Land Tax.

We've had lots to say about No Land Tax over the past few months here, so we'll keep it brief now.

No Land Tax's agenda is to make it easier for property owners to hoard property, to let speculation rip, and affordability can go to blazes.

It would be a terrible irony if this election, in which housing affordability has figured prominently – however imperfectly the major parties may have proposed to deal with the problem – were to have the result, because of the donkey vote and people being paid bonuses for votes, of delivering a seat in Parliament, or even a share in the balance of power in the upper house, to a party whose sole purpose is to make housing affordability worse.

Here's an idea for the future of NSW State Elections: get rid of how-to-votes, and bring on the Robson rotation!

NSW Coalition on housing and tenancy

Continuing our look at the housing policies of parties in the NSW State election, let's look now at the Coalition. The Coalition is, of course, two parties, but the National Party is not really putting forward a separate housing policy; it's the Liberals who are making commitments on housing for the Coalition.

These commitments include a fund for 'up to $1 billion' in new social housing and affordable housing, which the Coalition has made contingent on its proposed privatisation of State electricity assets. This fund is the subject of a Memorandum of Understanding between the Government, the NSW Council of Social Service, and Infrastructure Partnerships Australia.

We very briefly discussed this proposed fund when it was announced, and we welcomed its implicit acknowledgement that social housing and affordable housing needs more than the starvation ration it currently gets. (We also noted that there are ways other than asset sales to finance State Government programs). Since then, NCOSS has provided us with a copy of the MoU, and the Australian Services Union has distributed it widely too, so we can consider some more of the details.

The MoU refers specifically to 'a new dedicated fund to facilitate up to $1 billion in new social and affordable housing stock'. It also says that 'private finance will be involved to increase the scale and impact of the fund.'

We understand from NCOSS that the intention is to make possible some innovation in the development of social and affordable housing, so the sort of assistance to be provided by the fund is left a bit open in the MoU. For example, XYZ Housing Ltd might approach the fund with a development proposal that puts together land owned by XYZ and some finance from ABC Bank, and that needs a further loan from the fund to make it all happen. And another housing provider might pitch a proposal that needs money in the form of a grant, and another might have a projected that just needs a guarantee to get it going.

Being open to innovation and different ways of assisting is worthwhile, but there remains a question as to the size of the government's commitment. As a number of commenters have pointed out, it does say 'up to', implying the possibility of less.... Moreover, there's also the question of whether the 'up to $1 billion' refers to what the government will contribute, or the total of what all the parties to proposals will contribute (eg XYZ's land plus ABC's loan plus the loan from the fund). NCOSS says the government's own contribution should be 'up to $1 billion', such that the total value of housing produced would be rather more.

The MoU does get more specific in some respects: the fund is specifically for the provision of new stock, not the refurbishment of existing stock; and it is for 'social and affordable housing outcomes... not to improve commercial advantage.'

Separately, the Coalition has also promised $20 million for 'social housing community improvement', which will make grants of up to $50 000 for local projects. A bit of money can make great things happen on estates, so we like this commitment.

The Coalition is also proposing a public housing crime 'crackdown', through legislative and policy changes for 'one strike' evictions where serious offences have taken place, 'three strikes' for other breaches, the giving of confidential evidence in Tribunal proceedings, and probationary periods for long-term public housing tenancy agreements.

These proposals are a real worry. As we've discussed previously, the 'one strike' evictions would be achieved by removing the Tribunal's discretion in these proceedings, which is to remove an important safeguard against injustice. 'Three strikes' will only encourage neighbours and housing officers to frame interpersonal disputes as tenancy disputes, and rack the three strikes necessary for termination proceedings, with persons with mental illness and disability, and Aboriginal persons, the most vulnerable to badly motivated complaints. And the idea of 'confidential' evidence is anathema to the basic principle of justice that a person gets to know and test the case against them.

There's nothing to recommend the Coalition's 'crackdown' proposals. On the other hand, its proposal for social housing community improvement grants is welcome, and so is its acknowledgement of the need for substantial additional funds for new social and affordable housing stock.

NSW Labor on housing

We continue our look at parties' housing policies; this time, we're looking at NSW Labor's just-released '10 point plan to address the housing affordability crisis'.

Amongst other things, Labor has committed to boost social housing by making available $100 million in nil-interest loans to community housing providers. It has also proposed to elevate housing policy-making, by having a designated Minister for Housing, a Premier's Council for Affordable Housing, and 'comprehensive 10-year plan for affordable housing across New South Wales'.

The work of the Premier's Council for Affordable Housing will include:

• examining the prospect of shared equity schemes, to be delivered by community housing providers and targeted to 'key workers', such as police, teachers and nurses; 
• establishing 'Future Home Partnerships' between the NSW Land and Housing Corporation, NSW Urban Growth, community housing and local governments, to better get urban renewal for new housing going; and
• looking at housing design, including 'reinventing and reintroducing the Sydney Terrace House and the California Bungalow' as part of a medium-density urban form. 

We say: aside from the substantial proposals it makes, they are some very welcome aspects to the way Labor has approached its housing policy: it recognises that decent housing is a fundamental right; it reclaims some pride in the historic record of Labor Governments that built a lot of affordable housing (as public housing, much of it later sold to tenants); it calls the crisis in housing affordability what it is – a crisis; and it acknowledges that stress is felt across the tenures, including private rental.

Labor proposes to address the crisis on a number of fronts, which is generally the right approach to multi-faceted problem like unaffordable housing, but we don't think it has always addressed the right fronts. In particular, none of the 10 points in the policy is directed at speculation in housing. Using our tax system to discourage speculation through a broad-based land tax – or even Vendor Duty, as The Greens propose – would do more good for affordability than designing smaller houses and blocks.

Labor's $100 million boost to community housing is smaller than that indicated by the Coalition ('up to $1 billion', contingent on electricity privatisation) and much smaller than that proposed by The Greens ($4.5 billion, financed by borrowing and increased tax revenue). Looking at the modelling commissioned by Shelter NSW as to what it will cost to get some growth in the social housing sector in New South Wales, most scenarios would require a greater subsidy than that proposed now by Labor.

It is also disappointing that Labor's 10-point plan does not include any commitments to tenancy law reform. Aside from the acknowledgement of affordability problems in the sector, private rental remains something of a blind spot in Labor's policy.

But even if it doesn't have all the answers we'd like to see, it is significant that Labor has put forward a housing policy framed around the crisis in affordability, and that's welcome.

NSW Greens on housing and tenancy

With the NSW State election just over a week away, let's look at the parties' policies for housing and tenancy. We'll start with The Greens.

The Greens propose investing $4.5 billion in new social housing and affordable housing, as part of a $20 billion program for investment in new infrastructure. This program would be financed by borrowing and additional tax revenue, including from the reintroduction of Vendor Duty.

In its previous incarnation (2004-2006), Vendor Duty was a tax payable on sale of a property (excluding principal place of residence, family farms and new dwellings not previously occupied) where the value had increased by 12 per cent or more since the previous purchase. Vendor duty was levied at 2.25 per cent of the value at sale, with discounts for properties close to the 12 per cent threshold.

We say: the social housing sector has been on starvation rations for two decades, and badly needs a boost in funding to grow again, so The Greens' proposal for a $4.5 billion investment in the sector is very welcome indeed.

The State Government has a strong capacity for repaying debt, so the proposal to borrow to fund investment is generally sound.

And we don't mind Vendor Duty. It is a bit like stamp duty, except it is not payable by owner-occupiers; this addresses one of the problems with stamp duty, which is that it effectively fines owner-occupiers for moving house. However, if you want a stable revenue stream, as well as improved affordability through the continuous discouragement of speculative property hoarding, encouragement of land being put to its most productive allowable use, a broad-based land tax is best.

The Greens have stated their commitment to a range of housing principles, including affordability and security of tenure, and have put forward in the election campaign some specific proposals for tenancy law reform. In particular, The Greens propose to:

•     Limit excessive rent increases by allowing no more than one rent increase a year
•     Cap rent increases at no more than CPI (which is on average 2-3% per annum) and
•     Increase security of tenure through an end to "no grounds" evictions.

We say: absolutely, put an end to 'no-grounds' terminations by landlords. 'No grounds' termination notices give cover to terminations for bad reasons, such as retaliation or discrimination, and make all tenants insecure. The law should prescribe instead a set of reasonable grounds for termination. This wouldn't present a problem for most landlords, and would give all tenants more peace of mind and security.

As for rent increases: yes, rent increases should be limited to once per year. Under current New South Wales law, there is no limit as to the frequency of rent increases, unlike most other Australian States and Territories, which have managed to provide for reasonable limits. A limit as to frequency would not actually be a big deal for the majority of landlords who don't increase rents more than once or twice a year, but it would help deal with retaliatory rent increases (eg you ask for a minor repair, then comes a rent increase notice as a not-so-subtle way of telling you not to ask again) and give all tenants more peace of mind.

We understand the appeal of limiting rent increases to CPI, but wouldn't go as far as calling for a hard cap: we propose instead that where a proposed increase is above CPI, the landlord should bear the onus of proving that it is not excessive.

Overall: well done to The Greens on a sound set of proposals for housing and tenancy policy.

(We might add: well done to them too for getting their policies and principles generally into the public domain through their website. Other parties take note.)

No Land Tax paying to push how to vote cards

A Brown Couch reader alerts us to No Land Tax's latest campaign ploy: offering to pay people to push its how to vote cards on election day.

No Land Tax is paying pushers $330 for ten hours work on election day, with bonuses on offer if candidates get over certain proportions of the vote for a booth.

The pushers are being recruited through a website that does not include any campaign banners, logos or materials, and that only identifies No Land Tax in the 'authorised by' print at the bottom of the page.

Paying bonuses for votes is a real worry. In any case, it appears a lot of money is being spent trying to get No Land Tax elected. 

 * 

So why are the property owners behind No Land Tax spending so much money on their election campaign if, as they claim, they just pass on the cost of land tax to tenants, in the form of higher rents?

It's because they cannot really pass it on. That's why they campaign against it.

It's not just No Land Tax who claims that land tax gets passed on to others. The Real Estate Institute of NSW, which is also against land tax, says so too. As REI President Malcolm Gunning recently said:

"If you are wondering why your coffee has increased in price, or your restaurant bill is more expensive, don't point the finger at the owner," Mr Gunning said....

"Let there be no mistake, the people who pay land tax are not the landlord, are not the tenant, but are NSW consumers paying increased prices for their coffee and other consumables."

Let there be no mistake: this is bull.

The fact is that land tax comes out of the land owner's pocket. It really cannot be passed on to tenants and other consumers.

This is because land tax must be paid every year, regardless of whether the property is let or not. This encourages landlords to let the property (because they've got a land tax bill to pay) and to meet the market. If they try instead to hold out for a higher rent, that's so much longer the premises won't be let and rent not paid – and all the while the land tax liability accrues.

Contrast the Goods and Services Tax, which can be – and is – passed on to consumers. This is because GST must be paid only when a sale is finally made. This means vendors can hold out for a higher price that passes on the cost of the tax – the GST takes no skin off their nose while they hold out.

Note that both No Land Tax and the REI support extending the GST. So much for their concern about consumers and what they pay for coffee or meals – or housing.

No Land Tax and the REI claim they are passing land tax onto you precisely because they cannot really pass it onto you.

They say they pass it on in order to get you angry about land tax – angry enough to harangue your MP about it and to support their own campaigns to abolish it. These campaigns are waged for their own vested interests – not yours.

We suggest you get angry instead about their attempts to dupe you, and that you tell your MP and other candidates that you support taking action against housing speculation. Tell them that you support a reformed land tax.       

No Land Tax to ride donkey vote?

No Land Tax has nabbed first position on the ballot sheet – and thus the prospect of picking up the donkey vote – for the upper house in the NSW State election. This is fitting, as the party is devoted to free rides for land owners.

Considering that it faked photos of party members on its website, No Land Tax has also done well to find a candidate for every lower house seat.

Mind you, about 70 per cent of No Land Tax candidates don't actually live in the electorates they are contesting.

Nearly all of them comes from Sydney – and many come from a few big property families.
 
For example, James Ruben is Party President and number 4 on No Land Tax's upper house ticket; his mother, Susanne Gervay, is standing for No Land Tax in the seat of Vaucluse, and no fewer than four other members of the Ruben-Gervay families are candidates for No Land Tax. No fewer than five members of the Cacciotti family are standing for election for No Land Tax, in seats as far afield from their ancestral home in Balmain as Cootamundra. Similarly, the Lopreiato family is fielding no fewer than five candidates, the Di Cosmo family no fewer than four, the Arduca family no fewer than three, and the Marra family no fewer than three.

Going by surnames, it appears that about 40 per cent of No Land Tax candidates are related to at least one other No Land Tax candidate.

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Let's look at some more land tax numbers – this time from No Land Tax's campaign website.

We've previously discussed Land Tax's claims about the basic economic effects of land tax (they're wrong – land tax promotes productive investment and economic growth) and housing affordability (they're wrong – land tax makes housing more affordable). This time we'll look at their claims about land tax revenues.

No Land Tax says:

Every year Land Tax goes up.
Next year it will increase by 4.7%.
Over the next 4 years it will increase by a whopping 20%.

These figures are... quite correct (they're consistent with the forward estimates in the NSW State Budget papers). What's missing is the context.

As the Budget papers also show, total State taxes next year will increase by 5.6 per cent, and over the next four years will increase by a 'whopping' 23 per cent.

So on present settings, land tax payers will be getting off more lightly over the next four years, relative to other taxpayers.

We say, of course, that land tax should be doing more of the lifting, not less – particularly through reforms that broaden the base to include land used for owner-occupation and primary industry, and change the rate structure. These reforms would also discourage speculation and make housing more affordable and secure.

No Land Tax, on the other hand, say that property owners should be relieved of paying even a small bit of the value that accrues, unearned, to them – and that everyone else should pay more GST instead.

You really would be a donkey if you voted for that.

NSW Coalition promises social housing fund

The NSW State Coalition Government has announced that if re-elected it will create a new fund for the development of new social housing and affordable housing.

 
Premier Baird and FACS Minister Upton indicate that 'up to $1 billion' would be made available through the fund, which the Government has linked to its electricity privatisation program. The NSW Council of Social Service and Infrastructure Partnerships Australia have entered into a Memorandum of Understanding with the State Government in relation to the fund.

The Coalition Government's interest in increasing funding for social housing and affordable housing is welcome. It acknowledges that present funding levels for social housing in New South Wales are too low to meet the needs of the community. As we said in our submission on the State Government's social housing discussion paper, what it calls the 'present funding envelope' is a starvation ration that cannot sustain present operations, much less grow the sector in line with community need.

It also acknowledges that social and affordable housing is 'infrastructure'; that is, something that helps the community function productively. Social and affordable housing can give people a bit of stability and hence the opportunity to get into education, training and work; and can put workers in places where they are needed.

The link to electricity privatisation is controversial. As we've discussed previously, State Governments need to get their money from somewhere. They can get money by negotiating grants from the Federal Government; from their own power of taxation; from selling things like electricity assets; from borrowing (which is really another sort of sale – that is, the sale of a promise to pay back more, which is something State Government's are in a powerful position to promise, because they can tax).

The NSW State Government can use any of these means of getting more money to better fund social and affordable housing. Parties opposed to the sale of electricity assets can and should commit to more funding for social housing and affordable housing.

Two ways of making housing affordability worse

In the space of one week, we've heard two housing policy suggestions – one from each side of politics – that would make affordability problems worse.

NSW State Opposition Leader Luke Foley has suggested changing the rules regarding stamp duty, so that first home buyers could pay the duty in installments over some years.

When you think about how stamp duty actually works, this isn't a good idea.

Under the law, it is the buyer of a property who liable to pay stamp duty. However, because of the prospect of this cost, prospective buyers will tend to keep back some of the money they might otherwise put to buying the property (ie 'I could go as far as $x, but I know I'll have to pay stamp duty of $y, so I'll just go to $x-y"). This means that while the buyer actually pays it, the burden of stamp duty falls on vendors. It also means that some would-be transactions end up not taking place at all.

There's good and bad to this; on balance, more bad than good (it is a bit of a break on speculation, but it is also a break on people transacting for good reasons like household change and workplace change, because each time they move they get hit with a cost).

The problem with Mr Foley's suggestion is what it does to the thinking of prospective first home buyers. Instead of limiting themselves to '$x-y', they can bid further (to '$x')... and hope that increased wages or some other future gain will pay those stamp duty installments when they become due further down the track.

The result: first home buyers are worse off. They pay more to the vendors, and the burden of stamp duty currently borne by vendors gets shifted to buyers.

This isn't the reform that first home buyers, or anyone else affected by stamp duty, needs. It would be better to abolish it altogether and, so that all those dollars ('$y') previously held for stamp duty don't just go straight into higher house prices, broaden the base of land tax.

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The other way housing affordability could be worsened is to allow people to access their super funds for money for housing, as suggested by the Federal Treasurer, Joe Hockey, last week.

Just a moment's thought is enough to see what the effect of this would be: just so much more money to throw – or, more precisely, to lever up and throw – at housing. There's no improvement in affordability: just higher prices, additional encouragement to speculators, and a further shift of wealth from young households to older households.

To be fair, the Treasurer has merely said that he is 'prepared to look at' the idea, it being something that gets pitched to him from time to time by various interests – most recently, the Real Estate Institute of Australia. But as a Treasurer who has declared himself to be most concerned about 'intergenerational theft', he should be knocking it straight back.

'One strike' evictions will lead to injustice

The NSW State Coalition Government has announced today that if re-elected it will introduce legislation for immediate 'one strike' evictions for public housing tenants who have committed a serious criminal offence.

The change would mean that the NSW Civil and Administrative Tribunal (NCAT) would be required to make orders for the immediate termination of a tenancy where the premises have been used for certain sorts of serious offences.

Currently, the Tribunal is able to decline to make such an order, considering the circumstances of the case and whether termination is justified. Under the Government's proposal, the Tribunal would lose this ability.

If the Tribunal were to lose this ability, we would lose an important safeguard against injustice.

That's because termination proceedings can affect innocent persons. Under residential tenancies law, tenants are vicariously liable for the conduct of household members and guests – so termination proceedings can be brought where an offence is committed by a household member or visitor, and the tenant has had nothing to do with it. Indeed, a tenant may have no knowledge of that an offence has been committed, and they can still be held responsible for it.

Under the Government's proposed change, they'd lose their tenancy immediately, regardless of their state of knowledge or involvement, no matter how unjust that would be.

Other innocent persons may be affected. Even where it is the tenant that has committed an offence, they may have a partner or children who are innocent of the offence and who need housing. Under the Government's proposed changes, they would be evicted immediately too.

To see the injustice that would result from these changes, please read what happened to Sarah Corrie.

Ms Corrie's tenancy was terminated after she let her casual boyfriend stay a few nights at her house, whereupon he did a few $10-$20 marijuana deals from the premises, over a period of two weeks. Ms Corrie was not involved in the drug deals, was not charged, and co-operated with police (they even sent a letter of support for her to the Tribunal). Ms Corrie had never previously had a problem with her tenancy, and she's the sort of person who anyone would say should be assisted by social housing: an Aboriginal woman, a survivor of domestic violence, a single mother with four kids.

Her tenancy was terminated because, at that time, the Tribunal thought it had no ability to decline the order. It was following a decision made in another case by the District Court that held – wrongly – that the Tribunal could not decline termination in cases concerning drug offences. That decision was soon overturned by the Court of Appeal, but in the meantime Ms Corrie's case had been decided. And when you read it, you can see the Tribunal Member struggling with the injustice of it. As the Member said: 'If I had a discretion whether or not to terminate the residential tenancy agreement, I would exercise that discretion in favour of the tenant and I would refuse to make an order of termination.' But the Tribunal thought that, as a matter of law, it could not refuse, and made the order to evict Ms Corrie and her children.

The Corrie case shows an appalling lack of judgment by the housing officers who brought the proceedings, and the dangers of restricting the Tribunal's ability to properly check proceedings and decline orders where justice requires.

The Government should let the Tribunal do its job, not tie its hands.

No Land Tax – no real people

On the topic of land tax (the fairest tax on earth)...

After work the other day we were reading The Onion – America's Finest News Source – and saw the following article.

It wasn't the text that caught our eye, but the picture. Where do we know that face from... why, it's our old friend 'Rebecca Schembri' from No Land Tax!

Who knew that Rebecca, as well as being a property owner and anti-land tax campaigner, was also the author of satirical articles in online newspapers?

But she's not only that – Rebecca is a doctor too!

It turns out all of No Land Tax's spokespersons have hidden depths. You may remember Stephen Perri, Randwick property 'investor' –

– but you probably don't know Stephen Perri, Brazilian football fanatic!

We had a crack at No Land Tax's Thomas Lee for suggesting that everyone should pay more GST so he could be relieved of paying land tax.

But we see now there's more to Thomas than flinty-hearted greed. This businessman's hobbies include playing guitar –

 – tennis –

– and tai chi!

Here's to a long and healthy life, Thomas –

 – oh, that doesn't look good. Thomas, are you okay – oh no! THOMAS!

Last but not least there's Gordon Brown of Balmain, who pays more land tax than he gets in rent.

 No, face this way, Gordon.

That's better. Gordon also has hobbies –

– but Gordon appears to spend most of his time confused and scared by the world around him.

Financial matters especially seem to baffle him –

– but we already knew that.

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No Land Tax's images for 'Rebecca Schembri', 'Stephen Perri', 'Thomas Lee' and 'Gordon Brown' are fakes – just stock photos of actors. We don't know if the names are fake too – a quick google search turns up no people so-named in the suburbs they are represented to live in (except there was a Gordon Brown in Balmain, a few years ago at least). It may be that No Land Tax has invented these purported members entirely.

As regards both what it has to say about land tax, and the way it presents its campaign as a grassroots movement, No Land Tax is full of it.

'No Land Tax' does not know land tax: part 2

We discussed the other day the merits of a broad-based land tax, and how the 'No Land Tax' (NLT) campaign gets things wrong. Today we'll consider a few more claims made by NLT, specifically in relation to the effect of land tax on housing – both rental and owner-occupied – and how these claims too are wrong: completely, upside-down-and-back-to-front, wrong.

Rental housing 

NLT claims that 'Land Tax raises rents – making it harder for families and small businesses to make ends meet'. 

Wrong. Land tax does not increase the rents tenants pay; assuming normal market forces are at work, landlords cannot pass land tax on to tenants in the form of higher rents. In fact, if there was no land tax, rents would probably be higher .

 

Here's why. Think of landlords as vendors of a service (shelter). The ability of a vendor to pass on the cost of a tax liability to a consumer depends on the vendor being able to withhold the service from the market, and hold out for a higher price that covers the cost. Their ability to hold out depends on how that tax liability applies. 

 

If the vendor is liable to pay the tax only if and when they've made a sale to the consumer, this tends to allow the vendor to hold out for the higher price. This is how a sales tax, or the GST, applies, so a vendor can generally pass on these taxes. 

 

But with land tax, it's different. 

 

The liability to pay land tax cannot be put off until the vendor has found a consumer willing to pay the vendor's price. Instead, land tax is due every year, regardless of whether the property is let or what price it is let for. This tends to restrain the vendor from holding out for the higher price, and instead encourage them to come to meet the market.

 

(An aside: this assumes, as we said, that normal market forces are at work. We know that during a tenancy, the operation of market forces is inhibited by the high cost to tenants of moving, so landlords may be able to extract a higher rent than they would achieve on the market. This problem should be dealt with by the Residential Tenancies Act's provisions about excessive rent increases. We encourage tenants to use these provisions, especially where the landlord claims that the increase is the result of land tax. These provisions are underused, and should be reformed to make them fairer and more useable by tenants.)  

To reinforce the point about land tax and rents, let's look at the issue the other way. Say NLT had their way and there was no land tax. Would landlords pass on this saving to tenants? No – they've gotten the rent that the market will bear and there's no force operating on them to reduce it. On the contrary, if there was no land tax, we might expect more landlords to do the lazy thing and have their properties sit empty. The result would be a withdrawal of supply from the rental market and hence an increase in tenants' rents.   

 

Owner-occupied housing 

NLT claims that 'Land Tax hurts first homebuyers by making new housing more expensive to build'.

Wrong again. In fact, land tax, properly applied, reduces the price of land and makes new housing more affordable.

That's because land tax discourages land owners from holding land in idle speculation, and instead encourages them to put land to its most valuable use, or sell it. Land tax, therefore, helps bring land to the market.

The problem is that our present system of land tax exempts land used for owner-occupied housing and primary production, so speculative holding still takes place under these uses.

For example, a land owner might own a big block of land that would do nicely for some new houses. If the owner has their own house on the big block, or puts a few cows on it (or bees!), there's no land tax payable, and the owner can sit back and watch the value of the block go up as the demand for housing rises. If, on the other hand, land tax did apply, the owner would be spurred to get on with doing the subdivision and selling the lots to would-be home builders.

As we say, NLT's claims about land tax and housing are completely wrong. Properly applied, land tax helps make housing – rental and owner-occupied – more affordable. The thing to do is to reform our present system of land tax to fully realise its beneficial potential, particularly by broadening the base. 

'No Land Tax' do not know land tax

The Tenants' Union is for land tax. The great problem is that New South Wales (like other Australian States and Territories) doesn't do it right. In particular, more than 60 per cent of the tax base (that is, land used for owner-occupied housing, and land under primary production) is exempt from the tax! The key thing to do is broaden the base, so that all the benefits of this sound manner of taxation can be enjoyed by the State and citizens alike.

We've just come across another outfit, 'No Land Tax' (hereafter NLT), who are aggrieved that there is any land tax at all.

NLT claims to represent 'mum and dad investors saving for their retirement – and working to improve the lives of their families'. In fact, 'mums and dads' would do better with a broad-based land tax that taxed the unearned gains of landowners, and reduced the tax burden on earnings from work and savings.

We're going to try to talk them around. NLT presents some its members* – presumably the most personable and endearing of the bunch – with their own personal messages about land tax. We'll try to set them straight.

Here's Gordon Brown, of Balmain:

Gordon says: 'Some of us are paying more in Land Tax than we are receiving in rent'.

Gordon, land tax is giving you a hint: you are not using that land of yours as productively as you could. Maybe you've let the building on it get run down; maybe it's ripe for multi-unit redevelopment, or a change to some other more valuable use. Think about doing something more with your land, Gordon – or sell it to someone who will.

Here's Stephen Perri, of Randwick:

Stephen says: 'Property investors are being forced out of NSW into lower Land Tax States like Queensland and Victoria. Less investment means fewer jobs, and that's bad for NSW'.

Stephen, c'mon. Over the last year or two, property 'investment' – more accurately, speculation – in New South Wales has boomed. In particular, residential landlords have been borrowing more than ever, and their share of all borrowing for housing has never been higher. This has inflated house prices and priced out many would-be purchasers – including some would-be speculators, who have gone to other States for lower-priced gambling opportunities. 

Land tax generally discourages speculation, but our system exempts too much land for this discouragement to work as well as it should.

As for jobs – land tax encourages job creation.

 

Simply owning land does not create jobs – not a single one. A person who owns a block of land and does nothing with it creates nothing: no jobs, no valuable goods and services. 

 

It is when land is put to use that things get created; that is, when the owner puts a house on the block, and creates the service of shelter; or puts up a factory or office, and creates valuable widgets or widget-servicing. Land tax encourages owners to put land to use, because the landowner needs to get some money to pay the tax. So, land tax fosters jobs.  

 

Now let's turn it around. Say land tax is removed. The owner might still put their land to use in the creation valuable goods and services from which they might profit... but there's always a risk that an enterprise won't succeed. So why not just do the easy thing and withhold the land from use, and just leave it sitting idle? As long as other people keep working and need land for shelter, business etc, the value of the idle land will rise... and if the owner owns heaps of land, they can withhold heaps from use, and push its value even higher – at the expense of workers and enterprise. So no land tax would kill jobs. 

 

Here's Thomas Lee, of Eastwood:

Thomas says: 'It's inevitable that the GST will be increased. And when that happens, Land Tax must be abolished.'

So Thomas wants everyone to pay more GST, so that he doesn't have to pay tax on unearned increases in the value of his land. Enough said.

Finally, here's Rebecca Schembri, of Mosman:

Rebecca says: 'The NSW state election will be held on 28 March 2015 – and the outcome will be close. The votes of 150 000 Land Tax payers and our families could decide the outcome'.

Rebecca, you'd do better by campaigning for broadening the tax base, rather than eliminating it. With a broad-based land tax, we could get rid other taxes that really do hurt people: payroll tax, which really is a tax on jobs, and stamp duty, which for most families is effectively a fine for moving house. We could also start to think about shifting some of the tax burden on the earned rewards of labour and enterprise onto the unearned rewards of increasing land values.

It's not too late, NLT: get to really know land tax, ditch your present misconceived campaign, and support reforms to broaden the base!

* UPDATE – 23 January 2015: for more about NLT's 'Gordon', 'Stephen, 'Thomas' and 'Rebecca', see this blog post.

New Ministers

We referred yesterday to the new State Coalition Government's Minister for Citizenship and Communities, Victor Dominello. It would be remiss of us if we didn't properly congratulate him and his colleagues newly appointed to ministerial portfolios relating to renting.

Congratulations to the new Minister for Fair Trading, Anthony Roberts –

(Minister for Fair Trading, Anthony Roberts MLA)

– and the Minister for Housing...

...

... actually, there is no Minister for Housing. For the first time in 70 years, there is no Minister for Housing in the NSW State Government. Congratulations instead to Minister for Finance and Services, Greg Pearce –

(Minister for Finance and Services, Greg Pearce MLC)

– and Minister for Family and Community Services, Pru Goward.

(Minister for Family and Community Services, Pru Goward MLA)

Ministers Pearce and Goward share responsibilities previously allocated to Housing Ministers, including administration of the Housing Act 2001.

This new division of ministerial responsibilities is an interesting development, and we'll have to see how it works in practice. As noted by the Brown Couch after the federal election, the Commonwealth Government has also lost its Housing Minister. We were disappointed with that decision, because the Commonwealth had only just restored the portfolio after years of abeyance under the Howard Government, and a wide-ranging federal housing portfolio had the potential to direct policy to outcomes like improved affordability and security, rather keeping the great housing Ponzi scheme going.

The situation is a little different at the level of State Government, because unlike the Commonwealth Government it is directly involved in housing provision through the public housing bureaucracy. Despite successive Housing Ministers taking office with a commitment to being 'a minister for housing, not just public housing', each has been fatally attracted to the administration of public housing, including individual allocation and tenancy management decisions.

Maybe the new arrangement will break the curse. Still, its a curious thing for the Commonwealth Government, which does not directly administer a social housing system, to have a Minister for Social Housing, and for the NSW State Government, which does have a social housing system, not to have a Housing Minister at all.

*

It would be remiss of us too if we did not acknowledge at least a few of those on the opposite side of politics who exited the parliament at the recent election.

In particular, the former Fair Trading Minister, Virginia Judge, who lost her seat in the Legislative Assembly, deserves credit for her role in producing the new Residential Tenancies Act 2010. After an over-long review of our renting laws (under three previous Ministers), it was Ms Judge who finally got out of it a new – and significantly improved – Act.

Secondly, we also acknowledge the efforts of Paul Pearce, previously MLA for Coogee. Mr Pearce was never a Minister for Fair Trading or Housing – more's the pity, because he was always a voice in the parliament for tenants and marginal renters. He leaves with our thanks and best wishes.