Taxing empty homes: a step towards affordable housing, but much more can be done



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Vacant and unlit ‘ghost’ apartments are a source of public outrage in major cities around the world.
leniners/flickr, CC BY-NC

Hal Pawson, UNSW

Vacant housing rates are rising in our major cities. Across Australia on census night, 11.2% of housing was recorded as unoccupied – a total of 1,089,165 dwellings. With housing affordability stress also intensifying, the moment for a push on empty property taxes looks to have arrived.

The 2016 Census showed empty property numbers up by 19% in Melbourne and 15% in Sydney over the past five years alone. Considering that thousands of people sleep rough – almost 7,000 on census night in 2011, more than 400 per night in Sydney in 2017 – and that hundreds of thousands face overcrowded homes or unaffordable rents, these seem like cruel and immoral revelations.

Public awareness of unused homes has been growing in Australia and globally. In London, Vancouver and elsewhere – just as in Sydney and Melbourne – the night-time spectacle of dark spaces in newly built “luxury towers” has triggered outrage.

This has struck a chord with the public not only because of its connotations of obscene wealth inequality and waste, but also because of the contended link to foreign ownership.

Early movers on vacancy tax

Against this backdrop, the Victorian state government has felt sufficiently emboldened to legislate an empty homes tax. Federally, the shadow treasurer, Chris Bowen, recently backed a standard vacant dwelling tax across all the nation’s major cities.

Similar measures have come into force in Vancouver and Paris. And Ontario’s provincial government recently granted Toronto new powers to tax empty properties
.

Both Vancouver (above) and Melbourne now have a 1% capital value charge on homes left vacant.
Tim Welbourn/flickr, CC BY-NC

Emulating Vancouver, Victoria’s tax is a 1% capital value charge on homes vacant for at least six months in a year. Curiously, though, it applies only in Melbourne’s inner and middle suburbs. And there are exceptions – if the property is a grossly under-used second home you pay only if you’re a foreigner.

Also, as in Vancouver, tax liability relies on self-reporting, which is seemingly a loophole. This might be less problematic if all owners were required to confirm their properties were occupied for at least six months of the past year. But that would be administratively cumbersome.

This highlights a broader “practicability challenge” for empty property taxes. For example, how do you define acceptable reasons for a property being empty?

In principle, such a tax should probably be limited to habitable dwellings. So, if you own a speculative vacancy, what do you do? Remove the kitchen sink to declare it unliveable?

How can we be sure a home is empty?

Lack of reliable data on empty homes is a major problem in Australia. Census figures are useful mainly because they indicate trends over time, but they substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes).

Using Victorian water records, Prosper Australia estimates about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes.

Applying a similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies. Australia-wide, the Prosper Australia findings imply around 300,000 speculative vacancies – 3% of all housing. That’s equivalent to two years’ house building at current rates.

According to University of Queensland real estate economics expert Cameron Murray, a national tax that entirely eliminated this glut might moderate the price of housing by 1-2%. Therefore, although worthwhile, dealing with this element of our inefficient use of land and property would provide only a small easing of Australia’s broader affordability problem.

Making better use of a scarce resource

Taxing long-term empty properties is consistent with making more efficient use of our housing stock – a scarce resource. A big-picture implication is that tackling Australia’s housing stress shouldn’t be seen as purely about boosting new housing supply – as commonly portrayed by governments.

It should also be about making more efficient and equitable use of existing housing and housing-designated land.

Penalising empty dwellings is fine if it can be practicably achieved. That’s especially if the revenue is used to enhance the trivial amount of public funding going into building affordable rental housing in most of our states and territories.

But empty homes represent just a small element of our increasingly inefficient and wasteful use of housing and the increasingly unequal distribution of our national wealth.

One aspect of this is the under-utilisation of occupied housing. Australian Bureau of Statistics survey data show that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-08 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.

Our tax system does nothing to discourage this increasingly wasteful use of housing. It’s arguably encouraged by the “tax on mobility” constituted by stamp duty and the exemption of the family home from the pension assets test.

A parallel issue is the speculative land banks owned by developers. The volume of development approvals far exceeds the amount of actual building. In the past year in Sydney, for example, 56,000 development approvals were granted – but only 38,000 homes were built.

In many cases, getting an approval is just part of land speculation. The owner then hoards the site until “market conditions are right” for on-selling as approved for development at a fat profit.

Properly addressing these issues calls for something much more ambitious than an empty property tax. The federal government should be encouraging all states and territories to follow the ACT’s lead by phasing in a broad-based land tax to replace stamp duty.

Such a tax will provide a stronger financial incentive to make effective use of land and property. The Grattan Institute estimates this switch would also “add up to A$9 billion annually to gross domestic product”. How much longer can we afford to ignore this obvious policy innovation?


The ConversationAcknowledgements: Thanks to Laurence Troy for statistics and Julie Street for background research.

Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW

This article was originally published on The Conversation. Read the original article.

Taxing sugary drinks would boost productivity, not just health



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Taxing sugary drinks to tackle obesity would lead to a stronger economy, new research shows.
from www.shutterstock.com

Lennert Veerman, Cancer Council NSW

Many studies have looked at the potential benefits of a sugar tax in
terms of the longer, healthier lives and reduced health expenditure associated with tackling obesity.

But our new study goes one step further. It predicts that higher taxes on sugar-sweetened drinks will benefit the wider economy through increased economic productivity, by having more, healthier people in paid and unpaid work.

Obesity delivers a double whammy

A total of 63% Australian adults and one in four children are overweight or obese, making this both a health and an economic problem.

Obesity increases the risk of diseases including cancer, diabetes, heart disease and stroke. Obesity has also been estimated to cost Australia about A$8.6 billion a year or more. Not only does obesity drive up health-care costs, by causing illness and premature death, it also reduces people’s ability to work and contribute to the economy.

Added sugar contributes energy to the diet, but no useful nutrients. Increasingly, health experts suggest we should be treating sugar, and in particular sugar in soft drinks, as we do tobacco or alcohol, by taxing it to reduce consumption and so reduce obesity rates.

Taxing sugar is not a new concept. In the 1700s, Scottish economist Adam Smith wrote in An Inquiry into the Nature and Causes of the Wealth of Nations:

Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.

Smith’s proposal to tax sugar was not aimed at improving health, as it is today. Now organisations like the World Health Organisation, the Australian Medical Association and many non-governmental organisations are advocating a tax on drinks with added sugar, as part of wider efforts to tackle obesity.

What we did and what we found

Until our study, few worldwide had looked at the wider economic effects of taxing sugary drinks.

We modelled the Australian adult population as it was in 2010, in terms of consumption of sugar-sweetened drinks, body mass, obesity-related diseases, death rates, and the amount of paid or unpaid work people were likely to do.

We compared a scenario in which the prices of sugared drinks went up by 20%, compared to business-as-usual, and estimated what difference this would make for the number of obese people, the number of years lived, and for overall economic production.


Further reading: Dietary guidelines don’t work. Here’s how to fix them


We used data from the 2011-12 Australian Health Survey and found that obese people aged 15-64 had a lower chance of being in a paid job, compared to people whose weight was normal. We assumed this was related to illness.

Of people in work, obese workers needed more sick leave, but only about an hour a year.

We also looked at unpaid work (like cooking, cleaning and caring, and volunteer work). We included gains due to more people surviving for longer due to lower body weight. We assumed that if work was not done as unpaid work, somebody would have to be hired to do it (so there would be a replacement cost).

Our results show that a 20% sugar tax would mean about 400,000 fewer people would be obese. Three-quarters of these would be in the workforce, so that about 300,000 fewer employed people would be obese.


Further reading: Australian sugary drinks tax could prevent thousands of heart attacks and strokes and save 1,600 lives


Over the lifetime of the adult population of Australia in 2010, this would add about A$750 million to the formal, paid economy, due to more, healthier people producing more goods and services.

The gains in unpaid work were even larger at A$1.17 billion. Fewer obese people means more healthy people, who have a greater likelihood to do unpaid work, in the household or as volunteers.

These indirect economic benefits from increased employment in the workforce and from greater participation in unpaid work were larger than the savings in health care costs, which we estimated at about A$425 million over the lifetime of the adult population.

In all, the tax could deliver over A$2 billion in economic benefits in indirect economic benefits plus health care savings. And that does not even include the value of the gains in people’s quality of life and how long they lived.


Further reading: Fat nation: the rise and fall of obesity on the political agenda


The exact size of the benefits depend on assumptions about what people would drink (and eat) if they drink fewer sugared drinks. In this study, we used Australian evidence that found an increase only for diet drinks, which contain virtually no energy.

Other evidence finds a sugar tax reduces the consumption of sugar and energy-rich foods, but may also lead to people eating fewer fruit and vegetables and more salt. This would reduce the health benefit, and that study suggests it would be even better to tax all sugar instead of only sugared drinks.

Nevertheless, the available evidence shows health benefits of increased taxation of sugared drinks.

What’s happening overseas?

Studies in other countries have predicted similar effects of a sugar tax on the proportion of obese people. For example, a 20% tax is expected to reduce the number of obese people by about 1.3% in the UK and 2-4% in South Africa.

And an increasing number of countries, including the UK, France, Denmark, Finland, Hungary and recently Estonia and Saudi Arabia, have already announced or have implemented a tax on drinks with added sugar.

If Australia introduces a 20% tax on sugar-sweetened drinks, as many health advocates and economists have called for, that would not only improve health, our results predict it would also promote economic growth.


The ConversationThe author of this article will be available for a live Q&A today 1-2pm. Please post your questions in the comments below.

Lennert Veerman, Senior health economist, Cancer Council NSW

This article was originally published on The Conversation. Read the original article.

Plinky Prompt: Describe Your Favorite Place to Drive


Vintage Car

I love driving about the place, discovering new places and enjoying the journey. I love to travel and exploring the countryside. With that said, I obviously enjoy most trips and it is therefore difficult to pick a favorite place to drive.

One of the trips I do like to take on a regular basis is up the Pacific Highway to Coffs Harbour here in Australia. It’s about a 4 hour run from here – so not too taxing.

It’s just a nice little break visiting a few wild spots along the way, picking up a few things at roadside fresh produce stalls, etc.

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