Further evidence they’re a good idea

Andrew Bolt and his readers strongly dislike rent controls:

And why should investors have controls over their incomes that don’t apply to most other forms of investment?

Because they’re swamping the housing market and making it impossible for younger Australians to ever have a hope of buying their own homes? Because they’re not building new rental properties, they’re using the equity they have from already being in the market to poach the homes that young Australians want to buy and then renting them back to them indefinitely? Because the housing market being filled with investors is a national disaster?

By all means, offer incentives for people to build. But the current system, which massively skews the battle for existing homes in favour of investors and against home buyers and renters, is a generation’s worth of social catastrophe in the making.

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24 responses to “Further evidence they’re a good idea

  1. Splatterbottom

    Here we have yet another spurt from the inexhaustible fount of leftist stupidity. Rent controls are just another form of tax. Worse, they are counter-productive. The good thing is that they have zero chance of being implemented here. We need more housing, not less.

    The problem with the left is that they do not understand economics. They overestimate the ability of governments to solve problems and they are completely oblivious to the unintended consequences of their juvenile Santa Claus approach to economic matters.

    One day a leftist might actually come up with a way of increasing the wealth of society instead of pissing it against the wall. Don’t hold your breath.

  2. Wisdom Like Silence

    They aren’t building more houses.

    What the hell is your point SB?

  3. Splatterbottom

    Rent controls lead to less housing being constructed since they artificially reduce the earning potential of housing. They also lead to housing being poorly maintained as owners have less to spend on it.

  4. Why should rent be permitted to increase ahead of CPI just because investors have inflated the price of housing?

    Give investors who build new houses tax incentives to do so, by all means – but there should be no benefit for outbidding homebuyers for existing homes.

  5. Splatterbottom

    Owners and renters together change the price of housing by agreement. If rents are high, this results in more housing being supplied, and vice-versa. Most economists think that rent controls are stupid.

  6. Wisdom Like Silence

    …Why are they buying investment properties if they can’t pay for maintenance without skying the rents?

    Why arent people being encouraged to build new houses to live in, instead of rent?

    Why cant rent control be used for housing over a certain age since being built?

  7. Wisdom Like Silence

    SB, your point would be a good one if that is what they were doing, high rents, people building more houses to get in on the action.

    But that isn’t what’s happening, all that is occuring is new construction being suppressed by those people who would normally be building them because more houses equals less incentive for people to pay high rent.

    Ergo, investors dont want to build more houses because atm they can just outbid anyone of those new young families, and then rent it.

  8. Splatterbottom

    First, it is immoral. The government has no right to set prices for freely traded goods and services.

    Second it fucks up the market, which is the most efficient allocator of goods and services.

  9. Wisdom Like Silence

    IF THAT WAS TRUE WE WOULDNT BE IN THIS MESS

  10. Splatterbottom

    What mess? People have homes to live in. All you really want is redistribute some income.

    If anything, the government should make the market work more efficiently, by freeing up more land for residential development. In NSW the state government has asked local councils to zone for more residences or the government will do it for them.

    It will be interesting to see what NZ does in its May budget. Their Treasurer has been making noises about adjusting the rental property tax regime.

  11. More conservative confusion from Splatter,

    “They overestimate the ability of governments to solve problems …..”

    “If anything, the government should make the market work more efficiently……”

  12. Wisdom Like Silence

    The mess where a single bedroom apartment 20km out of a CBD is $300 a week and I wont be able to buy a house unless I win the lotto.

  13. Splatterbottom

    nawagadj, I don’t see the inconsistency. I didn’t say that the government had no role to play, merely that some overestimate what is achievable by governments. The government has a clear role in establishing the conditions for a market to work efficiently.

  14. nawagadj: well said, I noticed that too.

    Is it just me or has SB become even more incoherent and spittle-flecked since assuming a new screen name?

  15. Splatterbottom

    Confessions, you obviously don’t need a name change to release your inner coprophage!

    How is what I said incoherent, or even inconsistent?

  16. Suggesting that Govts aren’t always the answer and then suggesting more Govt action as an answer, might strike most as more than a little inconsistent.

    But this is precisely the kind of inconsistency that we expect from political conservatives. They have deluded themsleves into thinking that the free market is some kind of value-free law of nature, and that advocating for it is wholly unrelated to the activity of Govt. In reality, they are just demanding a very specific form of Govt intervention, and more of it.

    It’s a symptom of the broader ‘small govt’ rhetoric of conservties, which they have repeatedly shown that while in govt they are no fans of putting into practice.

    It’s all a question of whether you prefer direct (rent control) or indirect means (the ‘market’). At the moment it’s hard to argue that the indirect means is being all that effective.

  17. I don’t like rent controls, because in other countries they lead to even lower home ownership, but something has to be done about the current market. It’s too skewed at the moment towards investors.

  18. Splatterbottom

    Keri, rent controls are not an option for the increasingly embattled Rudd government. There is no way that even in a moment of socialist daydreaming he would try that on. Besides, rent controls don’t really work as intended.

    A major factor in housing demand is the willingness of people to spend a large part of their income living close to major cities. This has to do with the facilities and jobs those cities provide. Maybe accommodation would be cheaper if we had alternatives other than living in the urban sprawl of the major cities.

    Or maybe most people have enough to afford food, accommodation, an iPhone, a big TV and a car. The question is whether there really is a crisis in cost of accommodation?

    If the argument that the current tax regime for residential property encourages investors is correct then there should actually be more rental properties available than would otherwise be the case, and rents should be lower. Ending negative gearing may not help, unless it is preserved for new construction. The way I see it tax changes will not have the desired result for renters, although a few more of them may be able to afford to buy.

    Planning for regional growth hasn’t really seemed to work. Maybe there should be more encouragement for industry to relocate. The problem with that is that we are a service economy, and the people we service live in the major cities. No one wants to move because we are trying to crawl up one anothers’ arses servicing each other, mainly in the big cities.

    So, I don’t know if there is a problem and how large it is. And I can’t see that rent controls, regional planning or tax changes making much difference.

  19. “The question is whether there really is a crisis in cost of accommodation?”

    Are you for real? The housing price in Melbourne has been increasing $700 a day. Is my income increasing that fast? Hell no. First Home Buyers are being priced out of the market, and moving outward is not an option if you work in the city and the services such as train lines don’t go that far.

    Disagree with rent control all you like, but any economist looking at this market will tell you the only people winning in this sort of market are investors and those who inherit houses without mortgages. That isn’t an even market, or the sign of a market functioning properly. And we have the slash to Capital Gains Tax and the First Home Sellers Grant to thank for that.

  20. “Control the population, not the rents”
    So Bolt’s solution is mass deportation and/or ghettoes?

  21. astonishingblue

    Australia has actually tried rent controls, including in Canberra in the late 1970s. The results were not impressive though.

    Why not argue for means-tested subsidies for those most in need of assistance? Better than rent controls.

    I’ve posted a longer response here for anyone interested in why rent controls are not the best solution.

  22. We don’t need rent control.
    We only need an end to Negative Gearing.

    Simple, really.

    Cheers

  23. baldrickjones

    I agree with Marek, to a point – if an investor builds a property that they then rent out – go for it and give it negative gearing rights. For existing properties? Get stuffed. A good friend is $1.5M in debt with 4 rental properties and the ONLY thing keeping his neck above water is the negative gearing tax breaks. He’s have to sell if they dried up – and 4 families could buy those houses.

    Kill off FHOG – it just makes it worse. If you can’t save a deposit you can’t afford a mortgage.

    Capital gains discount – mmmmm half and half really. I’m not convinced that it’s that much of a factor.

    Rent controls? Not a huge fan. People should be able to charge what the market is asking for a product or service. Just because the market is so in favour of the landlord at the moment isn’t a reason to “bring in da gubment”. Address points above and I think the balance would swing back without the cries (somewhat justifiably) of “socialist!!!!”.

  24. usesomesanity

    Increased interest rates of 5% higher for investors of established properties with this increase used to fund (discount interest for) FHB would force investors to devolpe new houses and make home more affordable for people who wish to live in them which should be the aim surely.

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