3 May 2010 – Christopher Joye is probably one of the most influential housing analysts in the country. So when he starts to strongly applaud the Henry Tax Review’s highlighting of zoning and building code requirements as key barriers to creating enough housing to meet demand – joining the clamour coming from the developer lobby and an inquiry announced by the Productivity Commission, all along similar lines – it’s time for the sustainable property industry and planners need to get into the heart of this debate. Or lose it.
Are planning and zoning questions of productivity like any other economic activty? Can economic rationalists and price signals take major roles in the shaping of our cities and how we live? Even down to the quality of buidling we permit? The answer from some quarters seems to be yes to all these questions.
Here is the start of Joye’s article posted today on the Business Spectator website. It even invokes Robert Menzies’ ode to the importance of a home.
It is Australia’s largest investible asset-class, and the most significant store of household wealth. So what does the Henry Review and the government’s response mean for both owner-occupiers and families that own rental properties? In the short-term, next to nothing, since the government has emphatically ruled out implementing “at any stage” all of the relevant Review recommendations:
- Including the family home in means tests (R. 88c);
- Abolishing stamp duties and replacing them with a land tax (R. 52 & 53); and
- Cutting the CGT discount and applying a discount to negative gearing deductions (R. 14 & 17c).
While many of the Review’s suggestions make theoretical sense, and would be unlikely to have any materially adverse impact on long-term housing market dynamics, they are either politically unpalatable or operationally too complex (such as, measuring unencumbered land values is a notoriously difficult exercise given that we do not observe market prices for the land that forms the basis of most homes).
The Review’s most enduring contributions will, therefore, be to further advancing our understanding of the unique role housing plays in the community, and highlighting reasons why the cost of securing shelter has tended to grow over time.
Here the Review pointedly reinforces all of the findings of the 2003 Prime Minister’s Home Ownership Task Force report, which I co-authored with academic economists from Harvard, Cambridge, and NYU, and adds further weight to the arguments I’ve made more recently about why the provision of established or new ‘housing services’, which is economic jargon for putting a roof over folks’ heads, is intrinsically a “productive” economic activity.
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