Daggett, I don't see how you can argue "unearned profits earned by property speculators" have come from the pockets of today's renters. Property speculators have made profits by selling properties to others who have genuinely created their own wealth.
I also doubt that many first home buyers (who haven't had a chance to create much wealth anyway) are handing over very much to property speculators, though I don't doubt it does occur.
Further, I wonder if property speculators as a whole *do* make all that much of a profit in the long run - considering how much of the money used to buy the properties is borrowed and must be eventually paid back. But as long as there is an impression that big profits can be made, this drives up demand, and hence prices. I assume you have some familiarity with the work of Robert Shiller and his book "Irrational Exuberance" (http://en.wikipedia.org/wiki/Irrational_Exuberance_%28book%29).
Government policies that can help damp this impression are surely worth investigating.

Daggert, your examples may well hold true for the SA market (I dont have the time to investigate fully), but the SA market has responded in similar ways to other markets that HAVENT had the huge public schemes. So that to me says that the closure of this system had very little impact at all in real terms.

How property speculators profits are being sourced comes back to what you define as a speculator. A large number of housing investors hold their asset for extended periods of time and fully expect it to become positvely geared. This to me is not speculation, its long-term investment. Given the quoted rises in rented properties vs owner-occupied, I'd suggest that the "speculators" profits are coming out of the pockets of other "speculators" (or at least accumulators). If owner-occupancy was on the rise, then I'd accept your argument.

Wiz, I do understand what you are getting at, but 25 years ago our population was much lower AND much more widespread. There has been vast immigration AND vast migration to the cities since then, and this all drives up demand. People can either choose to live in NY-style small apartments so that they are close to work, beach etc, or choose to live further out (or not live in the city at all). The only way to get new developments is in more intensive housing, or in mor distant developments. You appear to indicate that neither of these is desirable. If this is the case, then no amount of tax-law manipulating is going to change the problem. There will still be high demand for the popular suburbs, that will continue to grow as a larger number of people earn above average wages and cn afford to live there (notice that while percentages might stay the same, it is the base number that affects land values, as the land in its current state can only hold the same number of people).

*Note, Yabby, ALL levels of South Australian society, not just the 'poor'*

Daggett, perhaps you should take the trouble to read the history of the
SA housing trust, why it was set up, what it achieved and how.

http://www.housingtrust.sa.gov.au/resources/SAHT_Chronological_History.pdf

A private property market existed long before the trust was set up. The trust
also built and sold properties, which once again joined the private market,
well before Menzies mattered much. The market that you hate so much,
has been there all along.

By 1951 the trust had completed 10’000 homes, today it has around 50’000
homes on its books.

So a private property market is nothing new. What is new is that with modern
day finance, anyone can buy a home, unlike those days, when banking was
regulated and finance extremely difficult to obtain.

The trust had access to Govt land, Govt finance and paid no sales tax. Of
course its not going to make a loss! I have yet to establish how much interest
they paid, on the hundreds of millions of $ that they borrowed. I note that they
repaid a lot of this money, by selling into the private property market, which
you hate so much.

Many families and their progeny, would be making handsome profits from the
houses that they bought from the trust. What were then farm paddocks, due to
population growth have become established suburbs, with a location value,
as has happened in all capital cities.

It seems that they had similar problems as Homeswest homes. They were
built to a pretty low price, so mainly el cheapo tiny weatherboard homes,
badly insulated. A lot of these homes are now being dozed and rebuilt in
double brick, depending on the location of the land and its value.

Thankfully I had the choice to build the home that I had dreamt of, with
solid foundations and double brick. It will last for 100s of years, like
those mentioned by Smithy on another thread.

The housing trust applied a maximum rental value of 8% of the building
cost. Today’s house renters would pay similar amounts.

Hi Mr Smith, cacofonix, daggett, Bronco Lane and others:

Direct action re housing costs – a letter to Treasury (architects of current mess)

Draft letter at http://zzalanz.googlepages.com/firsthomeowner

You probably know why investors acquire most properties in Australia. Consider:

A property buyer generates say $300000 loan interest on a $250000 loan

INVESTOR can claim all $300000 loan interest as Loan Interest Deduction

HOME-OWNER/BUYER can claim $0 Loan Interest deduction

$300000 versus $0 deduction – where is the equity in that?

BASIS OF ARGUMENT:
Investors can claim a deduction on Loan Interest.
Home-owners cannot claim Loan Interest deduction.
Tax advantage to investors in the common market of property.
Investors will acquire more properties due to this anti-competitive tax ruling.
Responsibility of Treasury to “remove impediments to competition in product”.

Allowing investors and not home-buyers to claim Loan Interest deductions on
income tax is INDIRECT DISCRIMINATION AGAINST HOME-OWNERS/BUYERS.

OPEN LETTER - To Treasury: Dear Sir/Madam:

“I would like to lodge a complaint to Treasury concerning the discriminatory
effect of a tax deduction that I feel is negatively impacting the next
generation of Australians as well as current home-owners/buyers.

The tax deduction that appears as an “impediment to competition in product”
and demonstrates a complete lack of “horizontal equity” at all between
investors and consumers when it comes to purchasing a “product” called
residential property is:
Item 20Q – Loan Interest Deduction (Supplementary Taxation for Individuals)

I believe that Item 20Q, being an “impediment to competition in
product” has an “indirect discrimination” effect on the ability of potential
/ actual home-owners to buy a product called residential property.

I would like to ask someone in Treasury to answer these two questions:
1. Why is Item 20Q not considered to be an “impediment to competition in
product” (the product in this case being residential property), given
residential property is purchased by consumer/home-buyer and investor alike
whilst only one category of “product” buyer, ie. an investor, is given
access to Loan Interest deduction?
2. Why is Item 20Q (available only to investors) not in effect “indirect
discrimination” against home-owners/buyers?

Remainder can be found at http://zzalanz.googlepages.com/firsthomeowner

Yabby,

The HTSA was not strictly socialised housing, but it was run ultimately for the Government on on a non-profit basis in order to spare SA from having private developers monopolise the supply of housing. For decades, South Australians did not need to support unproductive layers associated with the private property market, or at least not nearly to the extent that the rest of the country did, so their manufacturing economy thrived.

You seemed to imply that they actually did make losses by having to sell off the farm. I would like to see the evidence of that. If you are right, then it would indicate that the HTSA was not entirely cost-free to the taxpayer. Nevertheless the cost would have had to have been vastly less than what it would have cost if they had let property speculators run the show.

I have lived in South Australia and in my experience the quality of housing supplied was very good.

Country Gal,

Obviously there can be costs which cut into the profits of land speculators at time when property prices are not skyrocketing. However, most of the costs incurred that you described are essentially for non-productive economic activities.

Whether the money ultimately goes into the pockets of speculators, real estate agents, banks or mortgage brokers, they are paid for ultimately by renters and homebuyers and could have largely been avoided if we had not privatised our housing market.

Daggett, the HTSA was set up to solve social inequality in housing, but you have
to relate to conditions of the time, in 1936. There were no banks lending money
like today, no investors renting out houses like today, much of Australia’s wealth
was still being controlled from Britain. Finance was the key, not land.

There was a critical shortage of housing in SA and it was the job of the HTSA to solve it.
They were provided with money and land by the Govt and did exactly
that, providing mainly rental and some purchase homes to thousands. They landed
up importing lots of prefab homes from Europe, to try to solve their problems of
not enough houses and not enough labour to build them.

AFAIK their debt to Govt eventually ran up to 370 million $ and that was repaid
by selling off real estate to the commercial market. Their focus was always to
provide housing for the less privileged, as it remains today.

Homeswest in WA provide a similar role still today, as the HTSA did then and does
now. People on lower incomes can apply to rent homes, buy homes, they will be
assisted within various schemes, to achieve their goals. Keystart loans in WA are
proved to families with an income below 70k$, AFAIK. Rental assistance is
provided, to those who need help.

It seems to me that your understanding of history is a little distorted. It was not
property developers that were a problem, but a lack of banks prepared to lend
workers money to build houses.

Even in the 1970s, before bank deregulation, I remember dressing up in my
Sunday best, to present my budget to the Commonwealth Development bank.
I was knocked back within a few days, they predicted that I would soon go
broke.