Mr Putland (or Gavin?),

Thanks for the link to "Little people vs. littler people" at http://grputland.blogspot.com/2006/01/little-people-vs-littler-people.html It shows that these issues are not black and white. I always wince when the question of loss of property values is raised as a valid reason to oppose overdevelopment.

Nevertheless, having said that, I still believe that "NIMBY" struggles such as that being waged by the West End Community association (http://www.weca.org.au) are worthy of our wholehearted support.

Certainly Brisbane Lord Mayor Campbell Newman's mad plan to have height restrictions lifted to 30 storeys must be opposed. This will do nothing but create a horrific unsustainable high rise slum. In a matter of decades these buildings will be unusable beyond 6 levels as the cheap power that enables lifts and air conditioning, etc, to work won't be available. In well under century they will start falling down, and it may well prove impossible to safely demolish them.

In spite of the superficially plausible argument that high rise saves, space preventing urban sprawl, they almost certainly end up doing at least as much damage to our environment anyway. As Canadian Brishen Hoff wrote:

"How is it “environmentally positive” to concentrate people into highrise apartment complexes where it takes massive energy inputs to treat their drinking water and sewage, run their elevators, maintain their multi-storey parking garages, power their artificial indoor fitness club environments, and bring them food and resources from distances that grow in proportion to their population size, giving them no hope of growing their own food to survive the new end-of-cheap-energy era?" ("How green is 'smart growth', really?" at http://candobetter.org/node/625).

I think some high-density housing as suggest by kristo above may have a place as long as fossil fuel energy is not required for the buildings to operate. That means that they should not be higher than three storeys at the very most. They should all be located close to arable land so that all the residents have the ability to grow their own food. I recall that some traditional villages in Italy have been built in this way.

grputland

Thank you for answering my question. The differential treatment of commercial and small investors was what most concerned me about your idea. The scenario I considered was one where small investors were forced out of the used housing market at great financial loss. But instead of the properties being bought by owner occupiers, they would be bought by commercial entities which would be allowed to negatively gear. This would lead to a corporate housing industry getting a leg up at the expense of small investors, which is something that I would not like to see. I guess that I have a bias against solutions which take rights from the little guys, but leave them with the big guys.

I hold the view that the little guys could solve the housing crisis but for having their hands tied. With less restriction, I believe that the large profits derived by a few from mass immigration at the expense of all Australians would dry up. I suspect that without a profit motive, the immigration rate would then be substantially reduced.

daggett

In Brisbane, a restriction was placed on how close you could build to the fence line. The restriction coincidentally blocked that most effective medium density solution, the terrace house. Was the restriction made to protect the public, or was it made to kill the competition?
(I am more optimistic about the ability of technology to deliver energy more cheaply than today.)

BN raises the highly important question of ensuring the correct incentive structures and asks, quite correctly, what can be done to make housing more affordable.

The price of housing comes from primarily from four sources.

- The market cost of building material, labour etc which, iirc, has been almost constant in real terms over the last fifty years.

- Extra taxes placed on goods and services related to housing.

- The location of the house (i.e., the site value) which is a natural monopoly in each and every instance.

- The demand for housing in general and location in particular.

Altering the fourth contributing factor, for example by reducing our total population, can have negative impact on economies of scale and net productivity. So I'll discount that one, albeit only partially (it is obviously possible to have too many people and not enough houses).

A more practical solution is a reduction in the taxes applied to housing and by this I mean the building of new properties or improving existing property (such as most rates). At the same time, I would likewise recommend an equal increase in the 'taxes' applied to unimproved site value (as, for example, a rating system).

There is an regrettable uneconomic incentive for people to hoard land, thus reducing supply and increasing price. It is very unsustainable, as the "sub-prime" crash and the UKs current housing woes clearly indicate.

By creating incentives to build high quality houses and maximise the use of space, affordable housing in useful locations becomes a reality.

Gavin

To my mind the most interesting evidence to the Senate Inquiry was the stuff from and about not-for-profit community houising associations and the models of community housing being developed overseas. For instance the evidence in the University of West Sydney submission (and the subsequent paper) looking at Community Land Trusts, limited equity cooperatives and deed limited mortgages.

Have you looked at these models of affordable housing in perpetuity - and what is your opinion?

... and what do you think of the ACT scheme where you can own the house but rent the land from the state for the first ten years or more...

It seems to me what all these models have in common is seperating the cost of housing (that is, the bricks and mortar) from the cost of the land - which is the inflationary aspect of housing affordability.

Interested to hear your views.

Oops -- apologies to Chris T for taking so long to reply.

Some background to the ACT Land Rent Act 2008 can be found on my employer's website at http://www.prosper.org.au/2008/05/12/canberras-policy-vision/ (and the links therein). My critique of the Act (or the Bill, as it then was) is at http://www.prosper.org.au/2008/07/23/insights-on-canberras-land-rent-bill/ .

To answer the rest of Chris T's question, I offer some views on land rent schemes in general.

If you were starting a country from scratch, you would privatize almost everything except the land. The government would own the land, charge rent for it, and finance public expenditure out of the rent, so that there'd be NO NEED FOR TAXES.

Access to land would be affordable because nobody would have to compete with speculators.

Anyone holding a land lease would obviously need to use the land productively in order to cover the rent. Hence they would need to invest in buildings and other improvements. The return on such investment would not be diminished by taxation, or by the need to purchase the land at speculatively inflated prices (at which the interest would exceed the rent). To facilitate construction, prospective leaseholders would be able to obtain lease durations comparable with the expected service lives of the proposed buildings.

Economic growth would be rapid and inflationary pressures minimal, because there would be no speculators tying up prime locations needed for productive purposes, and no taxes to distort price signals; rather, the recipient of one particular undistorted price, namely the rent of land, would just happen to be the government.

[Continued.]

[Continued.]

But of course we're not starting the country from scratch. We have allowed the rent of land to fall into private hands, so that governments are funded not by rents, but by distortionary taxes. Against that background, schemes allowing people to buy houses while renting the land under them -- e.g. where the land is still owned by the government (as in Canberra) or has been acquired by a community land trust -- do not get rid of taxes. Neither do they get rid of speculation, except among particular people (as in Canberra) or in particular locations (as with community land trusts). Such schemes allow participants to rent land for less than one would pay in interest on the purchase price. 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).

Community land trusts have a further advantage: If the trust covers a sufficiently large territory, it will be able to capture uplifts in land values caused by infrastructure within that territory, and therefore will find it profitable to provide and maintain such infrastructure. So the territory will be well serviced.

In short, land rent schemes and community land trusts have their advantages, but they are not satisfactory substitutes for financing government entirely out of land rents.