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Comment by ropable

2 days ago

In Australia we've treated the family home as an investment, a primary mechanism for wealth creation (rather than an essential for life) for far too long. I fully agree that supply is the #1 driver for housing affordability, but like many things it's mult-factorial. Tax incentives, market forces, town planning, land use regulation, etc. all play their role.

I'm hopeful that successive governments over here show the courage of their convictions and enact enough change that my kids have a chance of getting into their own places, same as I did.

Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses? It's all very well saying "That's what the market wants" when that's also all the market supplies. How do we bootstrap the idea of smaller, denser, affordable, more-diverse housing options?

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ropable

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rgmerk  2 days ago

YIMBYs would argue (and in my view rightly) that if you allow townhouses and apartments to be built, the market will build them where there is a demand.

  • a2tech  2 days ago

    The only problem is that in the US, if you let apartments and townhouses to be built, homeowners will get muscled out by large builder concerns and single family homes will be converted into dense housing--which sounds great, until you realize there's no way those housing concerns will SELL those units--they're going to be rented forever. There's no incentive to actually sell those to people and every reason to keep them as rentable apartments forever.

    So you have attractive locations being completely dominated by rentable corporate owned housing and the net outcome is that people are completely boxed out of home ownership. There's no way pricing comes down because they do this in areas where people are willing to pay top dollar to live.

    I live near Ann Arbor and we're seeing it play out right now--more dense housing in the inner core is being allowed (as current thinking says should be done) and whats happening is that smaller old-timey landlords and homeowners are being pushed out and their homes and apartment buildings are being replaced with brand new high dollar rentals. Not condos (although there are some of those as well, but fewer), rentals. And the rental prices are going up! Normal people get pushed further and further from the attractive areas to live, and pressure from these people moving out pushes up rent in the surrounding areas.

ebbi  2 days ago

It's the same in New Zealand - property is the primary mechanism for wealth creation, and you have boomers with 10+ properties that they use for rental income for their retirement.

The issue is exacerbated by the tax structures not incentivizing investments in other assets - e.g. in NZ if you invest over $50k in offshore equities, there is an annual FIF tax that must be paid, even for unrealized gains.

  • jorisboris  2 days ago

    “Show me the incentive and I’ll show you the outcome” Presumably most politicians own one (or more) houses

    The fact that there is a housing crisis in most of the western world seems to prove this

jmyeet  2 days ago

> In Australia we've treated the family home as an investment

That's true of most of the Western world, unfortunately.

> a primary mechanism for wealth creation

I don't disagree but this needs to be correctly framed publicly as simply stealing from the next generation because that's what it is.

> Tax incentives

For anyone unfamiliar, Australia has a system called negative gearing. In the mid-2010s the then Labor party proposed scrapping it and lost the election. It really is the third rail of Australian politics. This is a shame because it needs to be scrapped.

It allows you to deduct losses on property against your ordinary income. So if you have a mortgage payment of $3000/month but only earn $2000/month in rent then your income is reduced by $1000/month. That's waht drives a lot of small investors to essentially speculate on property.

The US actually has a better system than this, which is that if you earn over a certain income level, you cannot deduct passive losses (like the above situation) against ordinary income. That would be better but still not enough.

So many upper income Australians essentially end up just hoarding property. They'll call it "investment properties" but really it's speculation. Historically, property was treated as an income producing asset, not a speculative capitals gains asset.

Oh and capital gains on non-primary residences should be like 70%. If you want to stop rampant speculation, that's how you do it.

> Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses?

Perth like every Australian city is an urban planning disaster. It's just endless sprawl up and down the coast and inland to the hills. A generation or two ago it was a quarter acre block. Those days are long gone unless you're wealthy or you're 50km+ from the city (less if you go east).

So it's a car-dependent soulless hellhole. I say this as someone who knows Perth well. So even now if you build higher-density housing along transit routes, as they're doing, you still need a car (or 4) to go anywhere but work. And high land values make infrastructure projects incredibly expensive. Like imagine trying to build the Perth to Mandurah train line now instead of 30+ years ago when it was actually built. I guess they could utilize the Freeway they already had but what about the fremantle or Midland lines?

What you should do as you build out is reserve space for future infrastructure. AFAIK no Australian city, especially Perth, has never done. So Guildford Road or Great Eastern Highway should really be a freeway. Same with Albany Highway.

In 2024 Western Australia did really relax ADU (granny flat) development rules. The rules used to be really strict. Now you can basically always build one with normal building approval if you meet the minimum lot size requirements (generally 450sqm, sometimes as low as 350sqm, depending on the council).

Single family home zoning is really cancer to any decently sized city.

Anyway, the truth is, I'm not sure it can be fixed now. Big infrastructure projects are prohibitively expensive even with tools like eminent domain. We need to look at why it's so expensive to build apartments.

I think the only thing you can do now is for the government to become a significant suplier of housing to increase supply and stabilize rents.

  • ropable  2 days ago

    Good points, thoughtfully made. As a resident of Perth, I (largely) endorse that description.

    So much of the wealth of our middle- and upper-class is dependent on property ownership and rent-seeking, it's depressing. That population essentially needs to vote against their own self-interest to help improve housing affordability, so it's hard to see that ever happening. The best I could foresee is a government forecasting a stepped reduction of relevant tax benefits over time (e.g. in three years negative gearing gets reduced by half, then half again the following year, etc.) and then future governments honouring that commitment. As you pointed out though, it's a surefire way for any Australian political party to shoot themselves in the face.

    I sometimes wonder how strong the demand needs to get for more-affordable housing before the market responds enough to matter. State and local govt could likely have a role in unlocking infill developments and increasing the allowed densities, but I'm not plugged into the planning system. I also strongly agree that state government should be more proactive as a housing supplier (in conjunction with private industry).

    • bombcar  2 days ago

      Lots of the issues would be "solved" by adequate supply of new dwelling units (which is a way of driving the prices down). There's really no other way of solving the "X people lived here, now 1.4X do, but dwelling units have only increased 1.2 times."

      In the past this effect was localized and when housing prices went insane, it was usually in a city, or a region, not a whole country. And high prices would encourage development in the cheaper areas, and people would move "out there".