Proposals by the Coalition and the Labour party to make housing affordable will do the reverse because they provide more money to bid up the price of homes.

The reasons why, and why economic advisors cannot understand their wrongheaded thinking is explained in my paper: “Affordable Housing Policy: Not identifiable from orthodox economic analysis”, available at http://ssrn.com/abstract=1027864.

The cost of home ownership can be halved by eliminating the cost of land.

The cost of land can be eliminated by making suburbs self-financing economies.

Suburbs can be made self-financing by creating a duplex ownership system to separate the ownership of buildings from the ownership of the sites by creating a Community Land Bank (CLB).

The CLB owns all the land in a suburb and only issues its shares to home owners and tenants. In this way all residents increase their wealth by sharing in the ownership of all public and non residential sites in the suburbs and as well obtain ownership of all depreciated commercial buildings.

A CLB attracts commercial investors because they do not have to invest money in buying land. By these means, a CLB creates eight ways to transfer wealth to citizens without government taxes or welfare to democratise the wealth of cities with sustainable affordable housing.

There are five reasons why economists cannot identify this policy option because they: (i) Consider the nature of property rights as a given rather than as a policy variable; (ii) Neglect variations in asset values; (iii) Neglect how infrastructure investment creates private profits; (iv) Do not identify Surplus Profits; (v) Fail to recognize how surplus profits and windfall gains can cross subsidize housing and commercial investors by using “duplex” property rights that separate the value of buildings from site values.

Shann – I may not be reading what you are saying correctly but as I understand it you want people to only own the house but not the land.

This creates a number of problems first being what are the limited rights of those who own the house but not the land? What can they do develop their house? And who pays?

It looks like there will be a minefield of potential legal problems.

Your idea seems to be half way between buying your house out right and renting!

Will it be similar rules as to that of strata title?

It seems like you want to complicate things! If you want/can afford to buy a house, well buy it otherwise rent a house!

It will also make it a lot harder to get a loan to buy the house or an investment property or buy a business seeing that you don’t have any hard assets to borrow against

Dear EasyTimes
Thanks for your thoughts. But you have indeed misunderstood the proposal.

Both home owners and renters obtain equity in the land occupied by their dwelling on the basis of one share for each square meter occupied and in addition a pro-rata share of all other non residential land in the suburb. So all voters increase their wealth!

The security for home lenders is a strata title as you suggested so both home buyers and businesses can obtain finance in the traditional way and obtain extra equity from owning shares in the whole suburb!

Everyone wins from financial synergy that is created by a more efficient and fairer system of property rights.

Shann - “Both home owners and renters obtain equity in the land occupied by their dwelling on the basis of one share for each square meter occupied and in addition a pro-rata share of all other non residential land in the suburb.”

So do you need to pay for this equity or is it just given to you?

Do you need to pay some form of rent of rates?

Do you have any right to expand your house for example put in a pool or add an extra storey to your house? Who pays?

How would you go about implementing this? Would we all be forced into selling our land to a CLB for some sort of fixed price?

Hi Easytimes
New home owners are given their shares. Tenants are also given their shares and also ownership of their dwellings at the rate the owner writes off their investment cost for tax purposes. So investors can make the same profit but obtain a higher rate of return as they do not need to increase their investment cost to acquire land.

In garden suburbs residents may need to pay a rent/rate but in industrial suburbs residents could receive a community dividend from their shares.

Owners can build a pool and additional extensions and capture the market added value back when they sell their strata title as they can now.

No money is required to convert the existing system as people could exchange their existing property rights for the more valuable duplex property rights.

It would be best to start off using the self-financing ability of the duplex tenure system to develop new areas on the outskirts of towns or the redevelopment run down inner city areas.

You can obtain more details from my article at http://ssrn.com/abstract=1027864

“The cost of home ownership can be halved by eliminating the cost of land.”

I thought about your idea but I have to say I don’t think it will work when it comes to driving down the cost of housing because of one fundamental thing when it comes to people buying a home.

Location!

People will pay what they can afford or even a bit more. Over a short period of time I believe that the cost of the houses even with out the land being included will go back up to almost where they were before.

Your idea might work in small rural towns where there is not much difference in prices for different locations and the quality of the building is the determining factor of the cost but I doubt it will work in big cities because people will always pay a premium for the right location.

When you buy a house in a big city I think most of what you are buying is the location. Bricks, mortar and labor would only be a small percentage of the total cost of the estate.

I think it is next too impossible to drive down “location value” and I believe that is what most people are paying the big dollars for.

Also thanks for posting the link to your paper I did not read all of it but the parts I did read had some interesting ideas and concepts.