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The Forum > Article Comments > Anything but affordable housing > Comments

Anything but affordable housing : Comments

By Gavin Putland, published 1/7/2008

The National Rental Affordability Scheme is mostly corporate welfare.

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grputland said:
"...Unfortunately they also combine a disadvantage of buying, namely ownership of a depreciating building, with a disadvantage of renting, namely the need to pay increasing rent on an appreciating piece of land (without being compensated by elimination of taxation and speculation)."

I'm not sure this is the case - certainly not with the community land trust models I've heard of in the US.

As I understand it the land rent should not be going up (although it may be indexed) - that's the whole point of the community land trust being a not-for-profit community organisation.

Similarly the value of the house should not be depreciating - when the owner of the house decides to sell up then they get a modest return on their investment which is determined by whatever indexation-plus formula is build into the CLT.

The idea is to take out the inflationary aspect of the rising cost of the land so that a comparably affordable unit of housing is available and the relative worth of the initial 'subsidy' is preserved.

Similar rules apply for limited equity cooperatives and deed restricted mortgages.

Happy to email you a paper on this ...
Posted by Chris T, Wednesday, 23 July 2008 4:50:47 PM
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Dear Chris T,

If you'd like to send me a paper, my contact details are at http://zero-tax.blogspot.com/2008/06/contact-me.html (the email addresses must be retyped because they're encoded to confuse spambots).

In the mean time, I make the following general observations.

If the land rent payable to a community land trust (CLT) is indexed so that it doesn't keep pace with the market value of the land, then the part of the market value that isn't paid to the CLT accrues (in kind) to the occupant.

If the occupant can sell the "house" for more than he/she paid for it, the implication is that some of the land price has become mixed with the "house" price. This is possible only if the buyer expects to pay less than the full rental value of the land over the life of the land lease -- as under the aforesaid indexing arrangement.

If the land rent is reassessed on each sale of the house, so that the outgoing occupant cannot sell the full capitalized value of his/her rent subsidy, then people will be reluctant to move out of the community -- unless the CLT moves out with them, acquiring the land that departing members want to live on.
Posted by grputland, Friday, 25 July 2008 12:32:08 PM
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The fundamental point that is not stated often enough is that land speculation and landlordism is essentially about one section of society taking unfair advantage of another.

Col Rouge's curious unashamed boast (#117450, 2 Jul 08), that he and his daughter are now looking to buy cheap properties that others, unable to cope with high mortgage repayments, have been forced to sell, is one illustration of this.

In another discussion "Housing affordability squeezed by speculators" at http://forum.onlineopinion.com.au/thread.asp?article=6697#103886 I quoted from an article by Noel Whitakker “Why Investing in Real Estate is so special” printed in Brisbane's Courier Mail on 23-Jun-06. Even though Whitakker is an enthusiastic proponent of the property sector, his article demonstrates my point almost better than I could have myself. He wrote:

"An obvious but often overlooked quality of real estate is
that … you can live in it and avoid paying rent. If you already
have a place of your own, you can rent your second home out and
it will produce income as well as capital gain."

Two paragraphs later he wrote:

"The next big benefit of owning your own home is that you control
it which provides security for you and your family. You become
free of the worry of a landlord returning from overseas and
wanting to move back into his own house or being evicted because
the owner suddenly decides to sell the house to raise money. You
have control of your own future."

Thus one group in the community (landlords) who enjoy security for themselves are able to profit by denying that security to others.

I think Whitakker has made an excellent case for altering the laws to make it as hard as possible for anybody to thus be able to take unfair advantage of anyone else. A good start would be to abolish the negative gearing rort.

---
Other articles of possible interest are:

"Property analysts again confirm immigration used to inflate housing prices" 3-Aug-08 http://candobetter.org/node/710

"Brisbane's housing unaffordability crisis spun by ABC to promote property lobby interests" 23-June-08 http://candobetter.org/node/610

"Rent gouging threatens Brisbane inner city retail community" 8-Mar-08 http://candobetter.org/node/360
Posted by daggett, Thursday, 7 August 2008 1:55:32 AM
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