Submission to the House of Representatives Standing Committee on Tax and Revenue’s inquiry into Housing Affordability and Supply

Cameron Murray
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Cameron Murray: The University of Sydney

No prsy4, OSF Preprints from Center for Open Science

Abstract: • There are more, bigger, better, dwellings per capita in Australia in 2021 compared to any point in history. • Multiple government inquiries at all levels over the past two decades have ostensibly sought to find the cause of house prices hidden in the pages of local zoning laws. • Dwellings are assets and are priced based on financial market conditions. • Density (dwellings per unit of land) and the rate of supply (new dwellings per period of time) are conceptually different but often confused in housing supply discussions. • This submission argues that market housing supply has exceeded household demand. State planning systems have flexibly accommodated new supply while regulating the location of different types of dwellings. • Compared to household incomes and rents, the cost of buying a home (measured by mortgage payments) in 2021 is historically cheap. This is due to lower interest rates and is why intercensal homeownership is expected to rise in 2021. However, asset price adjustments will mean that this situation will not persist. • Taxes on property are efficient and fair and do not add to housing costs but rather subtract from property values. • Affordable housing is cheap housing. Cheaper housing means lower rents and prices. Any “affordability” policy that reduces market prices will remove billions in landlord revenues each year, transferring that value to tenants, and trillions in housing asset values, with that value transferred to future buyers. • Fostering parallel non-market housing systems, just as public healthcare provides a non-market medical system, can be an effective way to improve housing affordability. • There are no local, international, or historical examples of planning reforms leading to cheaper housing. Indeed, a Productivity Commission review concluded “given the small size of net additions to housing in any year relative to the size of the stock, improvements to land release or planning approval procedures, while desirable, could not have greatly alleviated the price pressures of the past few years.” (p154)

Date: 2021-09-08
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DOI: 10.31219/osf.io/prsy4

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