As a housing and rental affordability crisis pushes people onto the street, a new report shows up to 20 per cent of investor-owned property in Melbourne is sitting empty. And it’s a problem that extends nationally, report creator Prosper Australia says.
According to Prosper’s report, in Melbourne last year 82,724 properties – or 4.8 per cent of total housing stock – were left empty. This figure represents up to 18.9 per cent of investor-owned property left vacant.
This is in stark contrast to the advertised vacancy rate (currently 3.0 per cent), which according to Prosper Australia project director Karl Fitzgerald, doesn’t take into account “properties held empty by speculative investors chasing capital gains”, but only those advertised for rent.
Using data from the city’s water utilities, the report determined properties using less than 50 litres a day averaged over a 12-month period were vacant (the average per person use is 160L a day). Using a more conservative measure of zero litres a day, 24,872 dwellings were found to be “demonstrably unoccupied”.
In comparison, in 2014, 22,773 people in Victoria experienced homelessness, according to statistics from Homelessness Australia.
It’s a problem that’s only increasing, too. The report found that properties using under 50L of water a day had increased by 22 per cent since the last report, based on 2013 data. Properties using zero litres had increased by 70 per cent.
What’s the problem?
According to Fitzgerald, housing is one of Australia’s least efficiently used resources.
The report levels blame at government incentives that allow and promote investors to “lay a significant proportion of prime urban land to waste” – namely low holding charges combined with a generous capital gains tax discount and negative gearing concessions.
The enormous amount investors can make in capital gains pales in comparison to what they can get out of rent or have to spend on holding charges, Fitzgerald says, lessening the attraction to rent out a premise.
Fitzgerald told The Fifth Estate many investors choose not to take on risks associated with renting properties. The problem is also being exacerbated by foreign investment, where there is a trend to leave property empty because of cultural preferences for unused homes. However, the report could not indicate which properties were owned by foreign investors.
Fitzgerald also says there’s a problem of large investors buying up swathes of properties in prime areas to create artificial scarcity and push up land values.
“The incentives for property speculators to hold prime locations empty is an affront to anyone locked out of housing,” Mr Fitzgerald said.
“The findings prove we do not have a housing supply crisis; we are literally locked out.”
Fitzgerald says there is clear evidence land is being “hoarded” for profit. The suburbs with the highest vacancies are typically those that are the most desirable, or those with infrastructure upgrades occurring, with investors going in like “moths to a flame” to benefit from increased capital gains, all the while forcing people further out from the most liveable areas.
This year the top vacancies were in popular inner city areas – the top three being Carlton, Melbourne CBD and Abbotsford. This is significantly different, though, to last year’s report, which found Docklands – commonly known as a ghost town – had a huge number of vacant properties. Based on the water data, this number has fallen dramatically from 27 per cent to 8.5 per cent. The reasons, Fitzgerald says, are not immediately clear.
Fitzgerald says the report throws up questions around government and industry mantra regarding a “housing supply crisis”, and labels government inaction on housing affordability as “indefensible”.
“We have more than enough housing,” he says. “The challenge is to address the disconnect between supply and occupancy. When there are three times as many empty houses as there are homeless people, we know the policy focus is just wrong.”
What to do?
Prosper is pushing for the tax system to be overhauled to fix what it calls a problem that has distorted the Australian dream of owning a house into a vehicle for financial speculation.
Fitzgerald says the best and fairest way to address the issue is to replace stamp duty with a greater holding charge on land. Whereas stamp duty was tantamount to a penalty for moving, a greater land tax could be spread out over the lifetime of property ownership and would “encourage the best and highest value use” of a property. Such a tax, he says, is progressive (unlike the Property Council’s push for stamp duty to be replaced with an increased GST). The wealthiest would pay more because their land values would be higher.
It does not address, however, poorer property owners with homes in areas that become gentrified, with the threat of a rising land tax making living in their homes unaffordable.
Fitzgerald also wants the government to fund the Australian Bureau of Statistics to be able to research the problem nationwide and provide a finer-grain analysis.
“This report only covers the Greater Melbourne region and is the only report of its kind in Australia. This key economic data simply must be collected by government and we call on PM Malcolm Turnbull to fund the ABS to officially measure speculative vacancies.”
The Fifth Estate is awaiting feedback from industry analysts on the report findings and suggested solutions.
- Read the full report.