The world according to GRP — Sunday, January 20, 2008:
Housing as a capacity constraint
The Treasury's response to the alleged labour shortages in Queensland and Western Australia ("Reforms to extend boom", Weekend Australian, Jan.19) understates the significance of housing affordability.
Workers who move to Qld and WA not only fill job vacancies but also drive up rents and prices of housing. Moreover, as the additional workers will themselves create jobs, the movement of workers will ultimately stop because housing has become too expensive, not because the jobs have been taken. The so-called "skill shortage" that is pushing up wages in Qld and WA is largely a shortage of housing that workers can rent or buy on current wages.
If school curricula are harmonized between States, making workers more willing to move, or if trade qualifications are made portable between States, making workers more able to move, the housing-imposed limit on migration will simply be reached sooner. And while conveyancing stamp duty certainly impedes mobility of workers between States, its ultimate significance is its effect on housing affordability within States.
If Qld and WA want to make themselves more attractive to workers, the onus is on them to making housing more affordable within their borders. This they could do by making stamp duty payable by the vendor and proportional to the increase in the assessed value of the site (excluding buildings) since the property was last transferred.
If stamp duty were reformed in this way, each transfer of title would no longer create a tax liability, but would merely realize an already accumulated liability. Moreover, the tax could no longer cause or increase a capital loss. So the housing supply lines would flow more freely, making housing more abundant and therefore more affordable.
Copyright © Gavin R. Putland except as otherwise attributed. Posted at The world according to GRP under the title Housing as a capacity constraint. You may republish this item verbatim on your website or blog provided that you include this notice (with hyperlinks).
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