Save articles for later
Add articles to your saved list and come back to them any time.
The Allan government’s first tax announcement – expanding the levy on vacant land beyond Melbourne to regional Victoria and to residential blocks in the city sitting idle for at least five years – makes good policy sense.
The timing, however, is curious. More on this later.
Victorian Treasurer Tim Pallas speaking to Housing All Australians founder and director Robert Pradolin at the Property Council of Australia breakfast on Tuesday.Credit: Gus McCubbing
The vacant residential land tax extension certainly won’t solve Victoria’s financial problems. Set at 1 per cent of the capital improved value of taxable land, it is likely to raise just $35 or $36 million a year. That’s equivalent to about 0.04 per cent of the government’s annual revenue. Peanuts in other words.
But that’s not the point. In addition to collecting revenue to pay for services (as the eminent American legal scholar Oliver Wendell Holmes Jr. put it, “taxation is the price we pay for civilisation”), the other big purpose of taxation is to change behaviour.
This can be done either through carrots such as rebates or exemptions, or sticks, such as levies, taxes or charges. Hence, the vacant residential land tax.
In this case, the government is using a tax stick in an attempt to force landowners to either develop their blocks (thereby avoiding the added tax impost), or to sell their properties to someone who will.
As Treasurer Tim Pallas put it on Tuesday: “We would much prefer not to get $1 out of tax that seeks to change behaviour. We’d prefer behaviour to change so that we can get people into homes.”
Discouraging land banking presents good public policy, particularly during a housing affordability crisis. It is not an efficient use of a fixed resource such as land, if, for example, a foreign billionaire sits on a vacant asset merely because Victoria represents a safe place to park some loose change.
The government now needs to maximise every square centimetre of land available for housing, particularly with the state’s population expected to grow to 10.3 million by 2051. Incidentally, Pallas has also instructed every government agency holding land to justify exactly why it is not putting it into the marketplace.
These sorts of measures won’t solve the state’s housing woes, but they might still have a positive impact. Which brings us to the timing. The announcement came just two weeks after Daniel Andrews’ housing affordability statement, the 48th premier’s last big policy hurrah. The question is, why did he not include this and other measures?
Daniel Andrews released his landmark housing policy last month with representatives from the property sector.Credit: Elke Meitzel
Andrews’ aspiration to tackle housing affordability by building 80,000 houses a year for the next decade was all very well. As The Age has previously reported, seven out of every 10 of those new houses will be needed just to soak up expected population growth.
Andrews’ housing statement shirked the tough decisions. It was mostly carrot, with little stick. It was, in fact, devoid of tough policy changes needed to achieve his target, such as scrapping or replacing the state’s ineffectual first home owner grant, or the introduction of mandatory inclusionary zoning forcing developers to deliver affordable homes. Indeed, on the day it was all smiles following the government’s “grand bargain with our property industry friends”.
Andrews deserves credit for placing the problem of housing affordability high on the political agenda. But his so-called “Affordability Partnership” lacked genuine policy detail, making up for this deficiency with some headline-grabbing announcements such as a relatively modest Airbnb levy and a promise to demolish and rebuild Melbourne’s 44 public housing towers over the next three decades.
To a significant extent, it was as much as anything about Andrews’ political legacy as it was about taking genuinely tough policy decisions. Andrews set up the policy problem, but he rushed out a highly incomplete solution.
Pallas’ seemingly low-key announcement before a business breakfast audience on Tuesday morning represents just an incremental first step towards a genuine solution. It is a good one, but if the newly minted Allan government is serious about tackling housing affordability, the real policy work must now begin in earnest.
Get the day’s breaking news, entertainment ideas and a long read to enjoy. Sign up to receive our Evening Edition newsletter here.
Most Viewed in Politics
From our partners
Source: Read Full Article
