In The Saturday Paper

All these things have increased housing demand, as have the grab bag of government subsidies for homebuyers: first home owner grants, stamp duty concessions, mortgage deposit guarantee schemes and shared equity schemes.

Saul Eslake sardonically calls them “builders’ and land developers’ profit margin expansion grants”, and notes that once again John Howard’s fingerprints are on them.

“Almost 60 years of history – since Menzies introduced the first home owners’ grant scheme at the instigation of the Young Liberals’ then president, John Howard – shows that anything that allows Australians to pay more for housing than they otherwise would have has resulted in more expensive housing, not in more people owning houses.

“Suppose a first homebuyer can afford to spend $500,000. And then the state government comes along and says, ‘Well, you won’t have to pay $50,000 on stamp duty’, then the homebuyer thinks, ‘Well, okay, I can now afford to spend $550,000.’ Probably buying the same house, because there’ll be someone else with the same stamp duty exemption competing for it.”

In Australia, the Parliamentary Budget Office estimates the cost of tax breaks for the owners of multiple properties – including in particular negative gearing and capital gains tax rebates – will be more than $165 billion over the next decade. That’s almost half a million dollars for each of the 377,000 new dwellings the NSW government aims to build in the state under the National Housing Accord – deployable as a subsidy or used to build mass public housing outright with no net cost.

Ending these wealth-entrenching tax breaks would have other immense benefits as well. In particular, it would disincentivise housing-as-investment, thereby cooling the market and making purchase more possible for the young. At the same time, it would redirect massive investment funds towards industries that actually create goods.

Further, by reducing the incentive to land-bank, it would likely decrease vacancy rates. Of Australia’s roughly 10 million homes, 10 per cent were empty on the last census night. Prosper Australia estimates almost half of these vacant homes were “speculative vacancies”, deliberately kept empty or derelict.