Stamp duty — it’s stopping you buying a homeMarch 7, 2017
While Premier Gladys Berejiklian publicly wrings her hands about housing affordability in Sydney, she knows quite well that the high costs of buying and renting are substantially due to her own desperate addiction to three revenue streams.
The first of these is profit from the State Government’s Land Commission. The Land Commission is responsible for releasing land for development. When it was created in the 1970s it was required by law to “make residential land available at the lowest price practicable”. Accordingly, the Commission regularly released land on the outskirts of Sydney so that a young couple could always build an affordable house there, and pressure was taken off prices closer to the city centre.
The law now requires something quite different of the Land Commission (now called ‘Landcom’). It is now obliged to operate as a business and maximise net worth for the State Government. Naturally, therefore, Landcom restricts the release of land to drive up the price. As a result, young couples are denied this opportunity to get into the housing market, increasing pressure on prices in more established areas.
The state government doesn’t care. It wants to tell people how and where to live (‘medium density good, urban sprawl bad’), and to bank Landcom’s profits ($161 million last year). This is exacerbated by the policy of charging developers for the costs of infrastructure, such as sewers and local roads, instead of recouping these costs through council rates over the long term. So even if land is released, few want to develop it.
If it was serious about addressing housing affordability, the government would abolish not only Landcom but also the broader evils of zoning and planning rules. There is no reason land currently zoned by council bureaucrats as “agricultural”, “commercial” or “residential” shouldn’t be used for whatever the landowner wants. If a farmer sees value in selling to a developer, why should the government stop it? Not to mention the petty rules and delays councils are permitted to impose.
The second revenue stream to which the Premier is addicted, and which hurts housing affordability, is stamp duty. To buy a Sydney house at the median price of $850,000, you need an additional $33,000 in stamp duty. Every time you raise the bid by $10,000 at an auction, you must pay an extra $450 in stamp duty.
Stamp duty is a cruel hurdle for those wanting to own their own home. It also discourages existing homeowners from moving, prompting people to remain in houses that are too big, too small, or too far from their current job, leading to horrendous commuting times.
Stamp duty may contribute more to frustration and family tension than any other tax but, because it rakes in a whopping $8 billion dollars for the Premier, she won’t be letting go of it any time soon.
The third revenue stream that hurts housing affordability is land tax. If you are renting, a big chunk of your rent is land tax. It bumps up your rent by an average of $58 a week if you are renting a house in Marrickville, and $106 a week if you rent in Ryde.
Average land tax rates are rising, causing rents in Sydney to rise by 4.6 per cent a year over the past decade. These rising rents have soaked up funds that households could have saved for a deposit on a house. But land tax rakes in more than $3 billion each year, so the State Government won’t be letting go of it anytime soon either.
The Premier could fix housing unaffordability by winding back the big spending nanny state. But don’t hold your breath waiting for that.
David Leyonhjelm is a Senator for the Liberal Democrats
Originally published in the Daily Telegraph on the 7th March 2017.