Solutions offered

I’ve heard it said, unfairly, that political blogging is solely about making empty but vicious criticisms of the people who have to make hard decisions, offering nothing positive or constructive in return. I mean, it’s mostly about that, but not today.

Because I’ve got some solutions to the housing unaffordability crisis. Since letting the market completely off the leash (compounded by badly-targeted government handouts) has condemned most of the generations from here on in to permanent renter status, how about we make up for it by giving tenants some more protections?

I suggest:

  • Giving renters more security – make it more difficult for landlords to kick tenants out when they feel like it;

  • Giving renters more rights to make changes to their homes – fixtures, etc; and
  • Capping rent increases at CPI.

I’d also advocate taxing landlords’ income – ie, capital gains – at the same rate as ordinary taxpayers. Half is not even close to fair.

Limiting rent increases is particularly critical, not only because increasing them ahead of CPI is unjust, but because it gives the government back some ability to control the boom/bust cycle. At the moment, investors are immune from the supposedly cooling effect of interest rate rises because they simply pass them on to tenants. But if they couldn’t… then there’d actually be a way to slow down the overheating market. And, frankly, it’s absurd for tenants to find their basic housing costs increasing faster than the CPI. It drives the poor further into poverty, and keeps those who might have been able to make the leap into home ownership on an eternal treadmill, where it keeps getting further and further out of reach.

Now, landlords being tricky buggers, they’d probably just try kicking their tenants out at the end of each lease and starting anew with a fresh lot at a higher rate – so you’d have to enable tenants to register their current rent on a property, and make it unlawful for a landlord to increase the rate beyond that, even for subsequent tenants.


These clipart people are thrilled that finally they’ll have a chance to buy their own home and they’re going to vote for whatever party implements these awesome ideas.

These sorts of measures would, of course, have the effect of making investment properties much less enticing – which would, in turn, decrease the pressure that’s been pushing prices up so hard. Many landlords (in particular, the ones who were planning on screwing over their tenants the hardest) would sell up and leave the market, enabling those homes to be bought by people who actually want to live in them. Houses would still appreciate – they’re always going to be worth a few years’ income, and there’ll still be competition as the population grows – but at a vastly more reasonable rate. Homeowners wouldn’t be significantly negatively affected – on the downside, their properties wouldn’t be “worth” increasingly ludicrous amounts of money they’ll never actually see, but on the plus side their rates would be lower and their kids would eventually move out of home.


These clipart homeowners are particularly happy at the idea of their kids finally moving out.

Landlords and special interest groups like real estate agents would cry foul, of course. They’ve jumped on the property treadmill and expect it to take them to richtown, and screw the people who’ve missed out and will continue to miss out. But is housing an investment engine to help the wealthy get wealthier – or a means of housing people? I’d argue, strongly, that governments should be looking at the more basic rights of the people increasingly left behind, and consider the social implications of generations who’ll never have a realistic prospect of owning their own property, and the effect that will have on community problems like crime. You take away hope and see what the consequences are.

Obviously it’d be a tough political fight – the people who’d be negatively affected are also the ones with the most money and power – but isn’t it better than the alternative?


Pop quiz for politicians: did you know that there are more renters than landlords, and that many of them live in marginal electorates? It’s true! Can you spell “opportunity”? (It’s easy, it’s right there in the previous sentence.)

The status quo is not the answer.

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90 responses to “Solutions offered

  1. Northern Exposure

    Jeremy, I thought we’d established that house prices arent that high and are only unoffordable because we buy nike sneakers and starbucks, while riding solid gold robot elephants in Puhket, on credit.
    You and your facts… Roon everything!

    In the immortal words of Dr Horrible, “We must upset the status quo, because…the status is not…quo.”

    I think that if they start protecting tenants more adequately, then it will give the buybuybuy mob some ammo in claiming that rules for house ownership are fine now that tenants are looked after. However those are fine suggestions, very fine indeed.

    Another would be to discourage negative gearing for pre-existing houses. The people who want to get into flipping houses would be forced to start buying land and building, which would make more new homes, more jobs, more wealth.
    Negative gearing is supposed to mirror the start up business loans, to cover any loss from risk in the beginning, however homes aren’t widgets. People will always want to buy homes. Negative gearing was supposed to get new houses built, but it lost its way. Instead of new homes being built its being used to exploit homes that are already built. No make sense.

    Also, don’t know if you saw the numbers this morning from some economic group, but 5 of the top 10 cities that are the most expensive in the world to live in, are countries that have negative gearing, and Sydney, Melbourne and Adelaide(!) are in the top five, ahead of London, New York and San Francisco.

    Vancouver is the most expensive.

  2. Just do what they do in Preston:
    1. build a shed in the backyard;
    2. fill it with students or an immigrant family.

    It makes purchasing a house much more affordable.

  3. We don’t have room for a shed, DB.

    Unless they’re REALLY tiny immigrants.

  4. Jeremy
    Your points have some serious problems.

    * giving them more security – make it more difficult for landlords to kick tenants out when they feel like it;

    The idea that tenants should have greater security of tenure has some merit but what if those tenants have violated their lease? for instance if they have failed to pay the rent on time or have upset their neighbours by having repeated loud parties? O they haev done serious damage to the property? You have to have a balance here between the competing interests. But more importantly you must be joking if you think that any land lord likes having to ‘kick out ” any tenant because it is quite a hassle to then have to vet new ones and re let the property. No land lord gives a good tenant notice capriciously as you seem to think they do.

    * giving them more rights to make changes to their homes – fixtures, etc; and

    This is stupid with a capital STUPID. The problem is two fold firstly many tenants are like you, crap at DIY so they are likely to do substandard work which may fail making the property owner liable to civil damages (as someone in the lawyering game you should appreciate this) But also what if in the course of putting up say a shelf in the bathroom the tenant drill a hole in a water pipe causing a leak that does thousands of dollars worth of damage who would be expected to make good the damage? The landlord or the tenant?
    Many landlords are reasonable people who can be persuaded to allow some changes to the property but why should they allow any changes that may require expensive repairs when the tenants leave?
    Finally there is the issue of ownership of those fittings under current law the moment that you attach something to the house or unit it becomes the property of the landlord so the tenant who fixes his plasma to the bed room wall is literally giving it to his landlord…..

  5. Northern Exposure

    Congo Pygmies. Brilliant with a trowel (Skilled Labour Migrants) and fit comfortably in behind the lawnmower.

  6. “The idea that tenants should have greater security of tenure has some merit “

    Glad we agree. That’s exactly what I’m proposing!

    “This is stupid with a capital STUPID. The problem is two fold firstly many tenants are like you, crap at DIY”

    I beg your pardon? When’ve you been around to my place to see my DIY? Iain, have you been skulking around our house again?

    Secondly, obviously tenants shouldn’t be allowed to destroy the place – but they should, if they’re going to be doomed to rent for decades at a time, be able to get competent upgrades done.

    It’s an interesting situation at the moment – a tenant might be prepared to pay for, say, air conditioning – but they’d be stupid to do it in a rental property, as the landlord would then charge them extra rent because the property is now air conditioned!

  7. Iain, no-one has suggested that a tennant who doesn’t pay their rent should still have rights to the property, so that point is moot.

    Further, it would be STUPIDly easy to have a clause saying that all improvements must be done in a manner agreed by both the tennant and the landlord – say, by a licensed technician in the given field, by a person agreed upon by both parties. Problem solved.

  8. Northern Exposure

    Landlords essentially hold all the cards, there is a huge disparity of power. Landlords who don’t like the terms they agreed to 10 months earlier just increase the rent, force those people out and get new ones in, who are infinitely happy to have a roof over their heads, regardless of ownership.

    But the issue in the post, Iain, is making landlordlyness seem like an unfavourable effort/reward investment. Making the house an unreal tournament arena with nail guns and spakfilla would definately put some people off, as well as making it damn near impossible to kick people out of the house.

    Seriously, who came up with the idea of a trickle down house market?

  9. Jeremy

    I beg your pardon? When’ve you been around to my place to see my DIY? Iain, have you been skulking around our house again?

    Of course not ! But I do recall that your inability to build or repair a fence is the subject of internet legend because you wrote about it yourself years ago and you have admitted to me in correspondence that you are not that good at making things.

    Secondly, obviously tenants shouldn’t be allowed to destroy the place

    Well there we go another thing that we agree on!

    – but they should, if they’re going to be doomed to rent for decades at a time, be able to get competent upgrades done.

    And I think that you will find that many landlords are quite amenable to that , if they are asked and if the “upgrades” do not detract from the value or attractiveness of the property other future tenants for instance why should a landlord be obliged to accept some tenants deciding to paint the rooms in hideous colours? I have lived in several houses where the land lord was fine with us repainting the inside of the rooms

    It’s an interesting situation at the moment – a tenant might be prepared to pay for, say, air conditioning – but they’d be stupid to do it in a rental property, as the landlord would then charge them extra rent because the property is now air conditioned!

    I doubt that this is likely But as I said before if something is fixed to the fabric of the building it becomes the property of the landlord so its more likely that a tenant won’t have air-conditioning fitted because he would be giving that equipment to the landlord.
    Anyway as a Greenie why are you championing air-conditioning?

  10. Rent controls!

    Are you serious. This is a thoroughly discredited measure:

    Economists such as Paul Krugman have cited rent regulation as poor economics which, despite its good intentions, leads to the creation of less housing, raises prices, and increases urban blight.

    I can understand arguments in favour of ending negative gearing, or abolishing the CGT discount, not that I agree with them. This one I do not understand at all.

    The surest route to disaster is to let some meddling leftists impose their own concept of ‘justice’ on the market. These witless fools have grandiose ideas about how to seize the property and money of other people and absolutely no idea about the creation of the very wealth they would piss against the wall.

  11. “Of course not ! But I do recall that your inability to build or repair a fence is the subject of internet legend because you wrote about it yourself years ago and you have admitted to me in correspondence that you are not that good at making things.”

    I have? Where?

    The fence thing was a silly post about a haphazard five minutes of sticking things into a fallen-down fence to make it hold for a few minutes, which the Spin Starts Here idiots made a big deal out of because, well, that’s the kind of people they were. (Hi Jamie! Hi Caroline!)

    “And I think that you will find that many landlords are quite amenable to that , if they are asked and if the “upgrades” do not detract from the value or attractiveness of the property other future tenants for instance why should a landlord be obliged to accept some tenants deciding to paint the rooms in hideous colours?”

    I think you’re missing my point. It’s about increasing tenants’ rights at the expense of landlords. The purposes are twofold:
    1. to give long-term tenants locked out of the housing market some kind of security in their homes; and
    2. to discourage investors from flooding the market as they are at the moment.

    I’m perfectly happy with landlords saying “screw this, it’s not worth it!” They’re more than welcome to leave the market and leave it to actual homeowners. It’d be much better for the country if they did.

    “if something is fixed to the fabric of the building it becomes the property of the landlord so its more likely that a tenant won’t have air-conditioning fitted because he would be giving that equipment to the landlord.”

    Ah, but if the rules about ownership of such fixtures were changed…

    “Anyway as a Greenie why are you championing air-conditioning?”

    (a) it was an example, and
    (b) you know perfectly well my support for the Greens is based on their progressive economic policies, not their environmental ones.

  12. “This is a thoroughly discredited measure:”

    Wow, SB! You found a quote from some economist that you didn’t source!

    Well, I withdraw my suggestion then. CASE CLOSED.

  13. Keri

    Further, it would be STUPIDly easy to have a clause saying that all improvements must be done in a manner agreed by both the tenant and the landlord – say, by a licensed technician in the given field, by a person agreed upon by both parties. Problem solved.

    I think that you will find that even now most landlords are reasonable about such things You just have to ask when I was a landlord I did lots of things to improve the rental for my tenants put up shelves , fitted picture hooks ect The problem is not that tenants may get a qualified tradesman to do work but they may try to do incompetent DIY. Now if you do it and you own the place then its on your head legally and financially but in rental it is very easy to do damage that may exceed the value of your rental bond…

  14. “The surest route to disaster is to let some meddling leftists impose their own concept of ‘justice’ on the market.”

    Given that housing prices in Melbourne are going up by more than $700 a day, I think we’re already at “disaster” with the current policies, SB.

  15. Jeremy here is Krugman on rent control. The quote was from Wikipedia.

    Keri, what we have is a functioning market in housing. There is absolutely no chance of improving it by rent controls.

  16. “Keri, what we have is a functioning market in housing. There is absolutely no chance of improving it by rent controls.”

    No, what we have is a hyper-inflated market driven by governmental controls such as Capital Gains slashes, negative gearing etc. It’s exactly thing thing you anti-leftists are supposed to hate. Aren’t you all for the free market? This is NOT a free market.

    I don’t particularly think rent control is a solution, but recinding the Capital Gains decrease, tighter controls or an abolition of Capital Gains tax – which is shown to push housing affordability out of reach for the average person looking to enter the market are.

    I wouldn’t mind if we were looking at true increases in a free market, but we’re not, are we?

  17. “Keri, what we have is a functioning market in housing. There is absolutely no chance of improving it by rent controls.”

    SB, are you saying that economists think the present Melbourne or Sydney property markets are a “functioning market”?

    “I don’t particularly think rent control is a solution”

    Why? I’m trying to grasp why landlords should be permitted to gouge renters with rent increases ahead of CPI.

  18. “The problem is not that tenants may get a qualified tradesman to do work but they may try to do incompetent DIY”

    Did you read what I wrote, Iain? I JUST SAID that you would have a qualified person agreed by both parties do it. No DIY.

    Many landlords are NOT reasonable. Reasonable Landlords are not the topic of discussion here.

  19. You’re right. Tenants have few rights and many are really suffering in this economy from shortages and relentless rent hikes.

    You can be chucked out regardless of your lease and if you don’t want to pay an increase, there’s always someone willing to.

    I’ve been lucky to rent (three different houses) in the same street for 20 years, but during that time my rent has gone from $350 to $600 and my salary hasn’t kept pace.

    Something needs to change, and fast.

  20. Ha! Krugman’s article that SB links to claims that tenants being run through the ringer by landlords “doesn’t happen in uncontrolled housing markets”. Next time you’re out here, Paul, I’ve a housing market I’d like to show you.

  21. But you hate Krugman’s guts, SB.

  22. Sign….people who own stuff don’t have to be scared of people who don’t own stuff. It’s that simple. If you don’t like the rental conditions then you have the freedom to move out once the lease has expired. You also don’t have to sign up to a lease you do not agree with.

    Never been a problem for me.

  23. Why should a renter have any more rights??

    They are already protected – if they want to get away from the evil landlords – they can buy a house!!!

  24. “They are already protected – if they want to get away from the evil landlords – they can buy a house!!!”

    That’s quite a spectacular bit of point-missing. Cemil, did you read the post? The whole point is that they CAN’T buy a house, because they’re being constantly outbid by investors. And why can investors outbid them? Because they already own a house, and they’ve got a huge amount of equity to rely on – and they can confidently ignore the threat of any interest rate increases, because (unlike homeowners) they can just pass them on to someone else, their tenants.

    Discouraging investors from the housing market is vital to enabling people without houses to buy houses again.

  25. decision makers don’t read blogs, their world is very insulated… unless the blogger is airing dirty laundry

  26. ygo I was trying to demonstrate that their is a consensus that rent control is counter-productive. Unlike AGW, the science is in on this issue. Only indolent narcissists are smug enough that their brilliant little ideas will produce a better outcome than the market, notwithstanding that rent control has been counterproductive wherever it has been implemented.

    I’m actually surprised that the cry hasn’t gone out for the abolition of property rights, rather than to eliminate them one at a time as is proposed with the rent control suggestion.

    Discouraging investors from the housing market will result in less housing, which will drive up prices and rent.

  27. Not at all. People will still buy and build properties – rent controls don’t affect homeowners at all. The point is in pushing the balance back away from landlords and back towards people owning their own homes.

    How are landlords buying and renting out older properties (at the expense, by definition, of homebuyers) adding to the supply of housing?

  28. “I’ve heard it said, unfairly, that political blogging is solely about making empty but vicious criticisms of the people who have to make hard decisions, offering nothing positive or constructive in return.”

    I’ll do my job and the politicians (public servants etc etc) should do there’s, when they stuff up I will complain, I will express my opinion, after all when I stuff up my customers etc are not happy, why should they be? Those who reckon that you can’t criticise without offering a solution are WRONG, I can and I will! Just watch…/rant off

    But I’m going to offer a partial solution – get rid of negative gearing.

  29. Northern Exposure

    Investors aren’t building houses SB, they’re buying pre-existing houses.

    Are there any govt grants to encourage people to buy land and build houses? Or renovate dilapadated ones?

  30. Northern Exposure

    Yes, kill negative gearing in the arse for pre-existing homes and let it be done for newly built homes.

  31. Jeremy, I am a pragmatist. Rent control doesn’t work. The last time we tried abolishing negative gearing, it didn’t work either.

    In NSW the answer lies at least partly with the corrupt government which controls the supply of land for housing through zoning and provision of infrastructure.

  32. Sorry, in what way doesn’t it “work”? Most of the problems “economists” have with it are ideological – THE FREE MARKET SOLVES ALL – because they don’t see a problem with people being forced to rent indefinitely, or have solutions that have worked in various jurisdictions.

    Just because an “economist” disagrees with something doesn’t make it bad.

  33. Northern Exposure

    SB, what do you think will get more houses on to the market at affordable prices then?

  34. In NSW the answer lies at least partly with the corrupt government which controls the supply of land for housing through zoning and provision of infrastructure.

    So what is the reason for excessively high rents in other parts of the country?

  35. Northern Exposure

    In Darwin it’s because the new houses built are crap and expensive and the land isn’t being released, and when it is it’s not being developed. So much interstate money pouring in at the moment.

  36. Jeremy here is what Krugman, who is the most recent Nobel Prize winner in economics and a leftist to boot, says:

    “The analysis of rent control is among the best-understood issues in all of economics, and – among economists, anyway – one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that “a ceiling on rents reduces the quality and quantity of housing.” Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Desperate renters have nowhere to go… The absence of new apartment construction… Bitter relations between tenants and landlords… All predictable. The pathologies of a rent-controlled housing market are right out of the textbook.”

    This question is as settled as any in economics. you are way out in La-La Land on this one.

  37. Confessions it just might be supply and demand. You could look at releasing more land and providing the necessary infrastructure to make it attractive. You could also look at developing regional centres. One of the factors driving up prices is that people prefer to live in a few large cities, presumable because they are attractive in terms of jobs and lifestyle.

  38. Northern Exposure

    Yet without rent control, we already have that rental market.

  39. “This question is as settled as any in economics. “

    I thought you were sceptical of field consensus, SB.

    Anyway, what economists think is “bad” is not necessarily “bad” for people’s actual living standards.

    And “supply and demand” – the problem at the moment is that there’s plenty of demand for housing – it’s just that the investors can outbid homeowners and then rent to them instead. Investors buying old homes and renting them out aren’t creating anything – they’re taking something away.

  40. Ergo, the problem is supply. To address that make it easier to build residential accommodation. Open up more land. Add the infrastructure. Make regional areas more attractive to live in.

  41. We should be doing that, I agree.

    But the other problem is that of the houses we DO have, too many of them are being bought by people who already have their own houses. Landlords are supplanting potential HOMEOWNERS and then renting those houses back to them. That’s a problem that isn’t solved by expanding supply.

  42. If there is enough supply, then this would not be an issue. Stopping people investing in residential property is not the answer, and has absolutely no chance of being implemented.

  43. Northern Exposure

    Build more homes, more homes on the market, houses for reasonable sale arent as rare as rocking horse poo, prices go down. Sounds excellent.

    Only problem in the mean time is that the people with money wont build and the people without money…dont have money to build. Hence the brainstorm of ideas as to how to get that to happen SB.

  44. Part of the problem without rent controls is that landlords are making plenty simply buying up existing houses and renting them out – so why bother taking a risk building a new area?

    Supply isn’t the only problem, SB. Of all the people living in houses in Melbourne, the problem is that too many of them are stuck renting to others. Increasing the supply won’t address that; it’ll just give the landlords more houses to beat homebuyers to.

  45. Northern Exposure

    You want people to invest in homes, just not homes that already exist.

    SB // 28 January, 2010 at 12:14 pm

    If there is enough supply, then this would not be an issue. Stopping people investing in residential property is not the answer, and has absolutely no chance of being implemented.

    But there isn’t enough supply because investors don’t invest in building new homes! They subtract from supply, not increase it!

  46. lax lending requirements are the reason for the housing bubble, its as plain as a bulgarian pinup

  47. That WAS part of it, but it’s not now.

    The ludicrous amount of equity fueling investors’ expansion is the problem now.

    Combined with a lack of infrastructure to new suburbs.

  48. If you eliminate investors from the market, less residences will be built. this will force rents up even higher.

    You are assuming that instead of rents going up, more people will buy residences to live in, and rental demand will go down. I don’t see any basis for this assumption. In fact when negative gearing was last abolished (decreasing investor participation in the market) rents went up.

  49. Northern Exposure

    THEY DONT BUILD NOW

  50. “If you eliminate investors from the market, less residences will be built. this will force rents up even higher.”

    No-one’s proposing “eliminating” investors. But discouraging them – there are FAR TOO MANY of them in the market now. They’re in the EXISTING housing market, not building new homes, because they can make a crapload out of forcing potential homeowners to rent EXISTING homes.

    The status quo ISN’T WORKING. And there’s no reason to think the investors wouldn’t continue to price out homebuyers even if the supply increased.

  51. SB: Jeremy’s point is valid. Property investors buy in established suburbs with established facilities rather than in the unproven outer suburbs with limited facilities.

    And it’s disingenuous to paint the argument as removing investors altogether. The argument isn’t to have *no* investors, but to limit or remove government incentives that skew the acquisition of housing towards the investment end of the spectrum.

  52. Northern Exposure

    Thats true Jeremy, but it would still be better if there were more houses, then prices and rent would go dwn because people would have a better chance at a fair deal.

  53. I agree there need to be more houses, but that in itself won’t solve the investor vs homeowner problem. People will only build houses where people want to live in them – the problem is, do those people live in them as owners or renters?

    The present pro-landlord system answers that question quite clearly and, I’d say, destructively.

  54. Are you shouting at me NE? You sound like someone who thinks a stapler is a sex toy! That’d make you shout alright.

    “They don’t build now” is both of questionable veracity and irrelevant. Buying adds to demand which causes more houses to be built.

    The difference between eliminating directly and using more indirect means to discourage is trivial, nudge.

    The status quo may well be working.
    People have housing, and it seems all manner of electronic gadgets, fancy cars and a reasonable lifestyle.

  55. “The status quo may well be working.”

    Have you not listened to anything we’ve said to you?

    It’s NOT. Those without houses now are being increasingly permanently locked out of home ownership. That’s NOT a good long-term situation.

  56. SB: You’ve said on a few occaisions now that the last time negative gearing was abolished rents increased. But I can’t see where you’ve said when this period was.

  57. Northern Exposure

    If nobody is buying new houses…who is building them?

    The realator who walks?

  58. Confessions, Keating tried it and repealed the law a couple of years later after rents skyrocketed. Some people, not unnaturally, think that the repeal indicates the policy was a failure. The counter view is here.

    Jeremy it could be that people prefer to spend their money on new cars, PS3s and flat screens. I can’t afford any of those, but I can make my mortgage payment.

  59. “Keating tried it “

    When? I don’t think he did. The link says 1985 but it says he “moved” to stop negative gearing. My recollection was that he withdrew the proposal before it was actually legislated. Do you have a link to what change he ACTUALLY enacted?

    “rents skyrocketed”

    Well, rents are skyrocketing now WITH negative gearing, so that’s not much of an argument.

    And your link indicates that the line that they “skyrocketed” is a shameless political furphy – they did increase in Sydney and Perth, but for other reasons; they didn’t increase elsewhere. And if investors left the market, then what was the effect on house prices? Did they fall, enabling renters to BUY?

    “Jeremy it could be that people prefer to spend their money on new cars, PS3s and flat screens.”

    Um, no, because the house prices are so far ahead of people’s incomes now that they can forsake ALL those things and still not have a hope of home ownership.

    “I can make my mortgage payment.”

    You couldn’t if you were on an average income and had bought an average house in Sydney or Melbourne this year. Let me guess, you bought your house a number of years ago now?

  60. Ps3 – XboX – they’re cheap when compared to drinking in bars..

    People just show how out of touch they are when they talk about young people wasting money on games consoles, they really are cheap entertainment if one enjoys gaming.

  61. I don’t have a flat TV, I have a new car and a few consoles and I can easily manage my mortgage? Why? Because I was fortunate enough to buy before housing got ridiculously expensive, ie because I’m older than the young people trying to enter the market!

    It’s not about youngsters wasting their money, it’s about houses costing three to four times as much as they did fifteen years ago.

  62. SB: it would seem from that article there is still doubt as to whether abolishing negative gearing actually did cause rents to rise. If Howard and co were repeatedly telling everyone it was the case, I’m even more sceptical.

    Reduced supply of public housing is another contrtibuting factor as well.

  63. confessions,

    I like this line:

    “Be that as it may, it seems clear that when today’s politicians tell their porkies about why the abolition of negative gearing was reversed, what they’re really saying is: if someone as tough as Keating got beaten by the real-estate agents, why would you expect a wimp like me to take them on?”

  64. Negative gearing deductions were denied (i.e. quarantined for use only against rental income) from July 1985 for two years> See here:

    In 1985, the Federal Government introduced legislative changes that effectively abolished negative gearing for real estate investors.[24] While in force, the legislation was not retrospective and so only affected real estate bought after 17 July 1985.[25] However, due to various pressures, the government subsequently made this `anti-negative gearing’ legislation ineffective as from 1 July 1987.

    Confessions, my recollection from that time was that people really believed negative gearing caused increase rent, and that is why it was withdrawn. I doubt Rudd will try it now.

  65. I meant the quaranting of negative gearing of deductions was withdrawn.

  66. Northern Exposure

    Any MP would be electorally suicidal to threaten negative gearing. People make too much money from it, and everyone, even the people who can’t get into the bloody house market in the first place, want the same opportunity. They shouldn’t get rid of it completely, just apply it to new houses to reward people for growing the housing market, and the govt should build more flats and homes to accomodate those poor buggers living in their cars and going to work in them.

  67. phyllis.stein

    Excuse the following anecdote, but I thinks it illustrates some of the problems. I purchased a house in Preston as an investment property and because I feel strongly about tenancy issues, rented it (cheaply) to a woman with 3 pets, and offered her a 3X3X3 lease. 6 months into her lease she “renovated” without permission, demolishing structural walls and the kitchen cupboards. She then stopped paying rent, because, as she told the VCAT hearing, I was making enough on capital gains.
    2 VCAT hearings determined her long lease entitled her to enormous latitude, and, despite her being by then more than 4 months in arrears, they declined to evict.
    VCAT often doesn’t do the job, the legislative pendulum swings one way then the other. It is difficult to reconcile the emotions and behaviours, obligations and rights, and sense of ownership of tenants and landlords.

  68. SB: that Senate report simply substantiates the broader point of Jeremy’s post that there are many factors affecting housing cost.

  69. Northern Exposure

    That’s definately true. You make what you thought was a binding agreement, someone goes and breaks it and you’re stuck because the current opinion of the day is to help just land lords or just tenants. I don’t think most landlords are malicious slumlords, determined to keep their tenants in squalor, or who want to bleed them dry.

    But thats not the issue. The issue is discouraging people from getting into the game in the first place. That house you bought as an investment is a house a family could have bought to live in. Good on you for being one of the brave, the proud, the few…reasonable landlords.

  70. Confessions, I cited the report as authority for the fact that negative gearing had been abolished by Keating (he asked me for a reference on this point), rather than as authority for my views. This whole area is complex and highly debatable.

    In the end it is just another discussion where I support market forces and others think things would be made better by their meddling in the market.

  71. There are plenty of vacant areas close to the city that have lain unused or decades.

    Developers speculate and that is the problem.

    A “Use it or lose it” type of legislation for this problem is what is needed. If you’re not going to develop it after a certain amount of time, the government compulsority acquires it and develops it for QUALITY public housing, that can then be purchased by the tenant down the track if they desire. (By the way, wasn’t Monckton the one who came up with that last idea in Thatcher’s Bwitain?)

  72. Northern Exposure

    In th NT at the moment, the govt is being demonised by redneck radio stations and the CLP for putting too many Use It or Lose It conditions on tenders for land releases. Whats the point of selling it if the buyer doesn’t develop it?

  73. The solution is simple. The biggest owner of land (the government) should sell quarter acre blocks for $1 to anyone who wants to build a house on it.

    That would reduce the price of land, and in turn, houses dramatically.

  74. Northern Exposure

    You mean like the Salisbury North Town Council did in SA a couple years ago? Does sound like a pretty good idea.

  75. I can’t see how that would help in the big cities.

  76. Northern Exposure

    Adelaide is a big city.

  77. SB:
    In the end it is just another discussion where I support market forces and others think things would be made better by their meddling in the market.

    Actually the reverse is true. By arguing the government should continue to give tax breaks to housing investors it is you who is supporting meddling in the market.

  78. thevoiceofreason

    We need more people to build more shit because we have more people, the population growth ponzie scheme.

    There is of course a few basic things we dont have enough of housing, food & water.

    Immigrants to Europe clean your house, immigrants to Australia buy your house.

  79. Confessions:

    Actually the reverse is true. By arguing the government should continue to give tax breaks to housing investors it is you who is supporting meddling in the market.

    No. The basic rule is that you can have a deduction for expenses (including interest costs) of an investment or other income producing activity even if the return is less than the expense. The attack on negative gearing involves quarantining that part of the deduction which exceeds the income. The quarantined deduction may be later used against income of the same type, or to reduce a capital gain from sale of the investment.

    For example if I borrow money to buy shares or invest in a business, I can claim a deduction for all of the interest expense, even that part which exceeds he income in any particular year. The rules to abolish negative gearing for residential property investments are an exception to this general rule.

  80. SB: Have you not been following the discussion or reading the various links that have been put up? By providing tax incentives to investors, the government is altering what may be the ‘natural’ state of the housing market by encouraging investors almost to the exclusion of ordinary home-owners. As has already been pointed out, this is contributing to inflated housing prices particularly in established suburbs.

  81. Confessions, negative gearing is not a tax incentive. Negative gearing is a basic design feature of our tax system. That is, if you incur expenditure in earning income, you can deduct that expenditure.

    Put simply, if you make a loss, you can have a deduction. If you earn income you are assessable on it. Attacks on negative gearing seek to distort that general rule.

    Why not admit that you want to distort the tax system to advantage one group of people over others?

  82. Actually you are right SB, my apologies. I’m getting confused with something else.

  83. That house you bought as an investment is a house a family could have bought to live in.
    This raises the issue of affordable single person rental housing, of which there is an insufficiency. We have smaller households, not smaller housing.

  84. Northern Exposure

    Why not admit that you want to distort the tax system to advantage one group of people over others?

    I want to distort the tax system to advantage one group of people over others, like my hero Reagan. The only difference is the group of people is poor people.

  85. Northern Exposure

    When you said house in your original post I just assumed you meant a house.

  86. thevoiceofreason

    There is no welfare but corporate welfare.

  87. Apparently, there’s been a change in legislation recently which makes it easier for foreign investors to purchase Australian real estate. Given the excess of cheap credit floating around the world, this is highly likely to worsen the high cost of housing in Australia.

  88. “Apparently, there’s been a change in legislation recently which makes it easier for foreign investors to purchase Australian real estate”

    I saw that, and it’s a handy distraction away from all the Australian investors who are REALLY pricing ordinary homebuyers out. Let’s blame the chinese!

    They also didn’t cite which rules were apparently relaxed.

  89. Pingback: Landlords continue to outbid homebuyers « An Onymous Lefty

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