In the frenzy to own the political solution to Sydney’s housing affordability crisis there’s a real risk that we’re losing sight of cause and effect.
Whether it’s calculated leaks or just media speculation there’s a cacophony of theories about what Scott Morrison has planned for his May 9 budget, while in NSW there seems to be only one track playing on high rotation.
On the Federal front, negative gearing is in the frame again, as is capital gains tax; the States have their stamp duty windfall plus a host of hidden charges and levies, and Local Government has its hand out for Section 94 payments and other extras that might be included in Voluntary Planning Agreements.
We’ve always taken a more nuanced view about negative gearing; that across the board removal would produce a raft of unintended consequences, undermining slow or recovering markets and impacting every house owner.
That does not mean however that negative gearing and capital gains tax should be treated like sacred cows. There is clear evidence that an effective and appropriate tax break for investors is being abused and therefore some tweaking is required. Applying limits on accessing these arrangements based on volume or property location does not seem an unreasonable measure to restore integrity.
But while we’re on the subject of abuse of tax why not spread the net wider and examine how housing has become the magic pudding for all three levels of government.
Federal, State and Local Government have been feeding on this gift that keeps on giving for years, to the point where their dependency is distorting good policy making. The great hypocrisy is that while each of these layers of government holds out supply as the instant antidote to housing affordability it is government charges and inefficiencies that contribute most to the costs and constraints on actually delivering supply.
The Housing Industry Association has been the most consistent body over the years in highlighting the impact of government charges on housing costs. While it may have been written in 2011, the HIA-commissioned report by the Centre for International Economics on taxation of the housing sector presented some startling figures.
According to the report, housing contributes between $36 billion and $40 billion in taxation revenue each year to Federal, State and local governments equating to around 12 per cent of all revenue collected. GST makes up the biggest share of the tax take but there is also stamp duty and other hidden taxes and levies that top up the booty. To put it into figures that are easier to identify with, the total tax on new housing was calculated at $268,000 in Sydney, $184,000 in Melbourne and $191,000 in Brisbane.
More recently the Australian Bureau of Statistics has reported the taxation revenue derived from property for the 2014/2015 year at $15 billion (Commonwealth); $29 billion (States) and $16 billion (Local). That’s $60 billion that the three levels of government in Australia reaped from various property related taxes or an increase of $20 billion in four years.
The focus on negative gearing has had the unfortunate effect of painting investors as the bad guys in the housing affordability debate. Look at the numbers and the culprits look suspiciously like those who are now promising salvation.