ACT Liberals' housing affordability 'policy' - smoke, mirrors, and 'quick fixes' that will only backfire

And they ignore the underlying problem...

The Liberals have put out a release bemoaning the housing affordability situation in Canberra.

..."broken planning system" - says whom? Catherine Carter? The planning system has gone through a mountain of work with countless hundreds of hours of inputs from industry experts and community volunteers alike. It is most of the way there, notwithstanding the DV306 shemozzle.

Then they say:

the solutions to the ACT’s housing affordability problems should include a genuine land bank, which would have a pool of land ready to release, infrastructure improvements, taxation reform, streamlining the planning system and improving competition in the market.

Illustration: Matt Golding
http://news.domain.com.au/domain/first-home-buyers
/firsttimers-priced-out-20111210-1ooxm.html 

There are no specifics in this piece, except some vague remarks about things the Government is already doing, and the reference to "taxation reform". Is this code for the first home stamp duty reduction they've talked about previously?

The problem with this sort of proposal is that it reads OK in the media, and the target people think they are in front, but every time it has been done 'the market' just absorbs it, and prices go up by at least that much for everyone. So the target buyers are actually no better off, and everyone else is actually worse off. And it makes it very hard for existing owners to sell existing homes. Happened under John Howard's First Home Buyers Grant and it happened under Kevin Rudd.

I have said for some years that the biggest issue in the ACT is that we have a sole supplier of new land (even if they then sell it on to a 3rd party), and their price setting method actually drives up the market artificially.

As I understand it (and I've raised this multiple times with LDA, ACTPLA and EDD and never been contradicted), the LDA gets a valuer in to advise on prices for new releases. Adviser says the market is rising and therefore recommends an increase of x% for the next release. Substantial undersupply (still) means people in the market have to cop the prices on offer if they want to get out of their rentals. Adviser gets to say next time - the market is rising so increase the next lots by x%. And so it keeps going. But it is a monopolist supply market that is distorting the price, then cashing in on it.

Now after considerable pressure from groups like GCC and many others, the Government cranked up their land release program - late to get going but going nonetheless.

But there remains a substantial undersupply, and it remains a seller's market, with the seller (in the first instance) always being the ACT Government. Perhaps people have forgotten the front page splashes of hundreds and hundreds of angry "working families" leaving LDA ballots empty handed? Don't believe that the underlying problem has gone away - they've just got better at concealing it. There have for a few years now been pre-ballots, so only a subset of those on the waiting lists got invited to the actual ballot. This way there was only every a handful of disappointed people afterwards collected in one media-friendly location. It worked a treat. The bad media disappeared completely.

Until such time as there is a substantial selection of vacant land for sale and "on the shelf" in multiple areas (not a single suburb or two), it remains a seller's market open to manipulation (whether deliberate or otherwise).

And it doesn't matter what the Government has attempted to do through the housing affordability initiatives, it has all been undermined and then some by this artificial driving up of prices to levels that put our increases ridiculously on par with increases in Sydney and Melbourne. It is absurd for a town where the only real land supply constrain is the artificial one called the NSW border.

I'm not economics expert, but my personal thought for some time (note not necessarily Greens policy) has been that the way to ease back the overheated market without causing a price crash that would harm existing homeowners, would be to self-impose a moratorium on increases in new land prices until such time as the Government has sufficiently got back on top of the land supply shortfall that there is stock on the shelf - for immediate purchase and construction commencement - not this can't-start-for-two-years nonsense we have now.