The first tranche of 2021 census data, released last week, revealed almost one in 10 Australian houses were vacant on census night — that’s more than one million homes.
Multiple media outlets have raised alarm about this as if it were new, but it’s actually a persistent problem. The 2016 census found 950,712 vacant properties, which then represented a slightly higher 11% of total private dwellings.
This time around, some vacancies may have been explained by lockdowns keeping owners or Airbnb guests away from holiday homes. But our persistently high vacancy rate also suggests a large proportion of dust-gathering investment properties.
Owners of vacant properties are forgoing a potentially lucrative source of passive income. Yet for many, it appears eye-watering capital gains render finding suitable tenants and maintaining a liveable property not worth the extra effort. Others are keeping their options open in case they’d like to quickly sell.
This vast housing inequality looks particularly cruel from the perspective of the homeless. The 2016 census found more than 116,000 Australians were homeless (we’ll get the updated figure in 2023, but it’s unlikely to have fallen much). So Australia has approximately nine vacant houses for every homeless person — more than enough to end homelessness if merely a fraction was put to use.
Yet in last week’s coverage, few examined the tailor-made policy response — vacant property taxes.
Rent out or pay up
Victoria has already imposed such a tax. The Andrews government introduced it in 2017, taking 1% of capital improved value (CIV) from properties left unoccupied for six months in 16 high-demand Melbourne areas. It was waived during lockdowns, when owners may have struggled to secure tenants, but resumes operation this year. The Victorian government also charges an additional 2% land tax surcharge for absentee owners.
The idea is sound, but Victoria’s iteration is too small to have the desired effect of prodding owners to rent or sell. Home vacancies kept rising in the three years after the tax was introduced. As the Grattan Institute’s John Daley and Brendan Coates wrote: “How much will these investors care? They are already leaving 2% of the value of the property on the table each year by not renting it out.”
Vancouver, which also introduced an empty home tax of 1% CIV in 2017, has since increased its rate to 3% CIV. It’s time Spring Street did the same. A city report found Vancouver’s tax has now decreased vacancy rates by roughly a quarter.
Relying on owners to self-report also increases the risk of evasion, even when rule-breakers risk a fine. Looking at water usage data, as housing research centre Prosper Australia do, would give a more accurate picture.
Victoria must urgently fix these holes in its well-intentioned policy if it is to put underutilised housing to better use.
Albanese could lead
While traditionally a city-based tax, the new federal government could also lead on housing vacancy by pioneering a national approach. Indeed, federal Labor committed to doing so in 2017, but has since gone quiet about whether it still intends to pursue the policy.
If it was to pursue it, it could use the federal government’s vacancy tax for foreign owners as a starting point. Again, this fee is too low to be effective (only $5500 per year for homes under $1 million), but it gives the Australian Tax Office something to work from if fees were raised and eligibility expanded. As Victoria does, location-based carveouts could be made for holiday homes in regional areas.
Real estate economist Cameron Murray estimated a national vacancy tax could lower the price of housing by 1%-2%, as well as bring thousands more properties into the rental market. These aren’t groundbreaking results, but it’s a low-hanging policy option that would modestly contribute to a fairer system.
Related efforts include switching from stamp duty to land taxes as the ACT and NSW are doing (which will help encourage retirees to downsize so empty rooms are utilised), raising property taxes on multiple properties regardless of whether they’re empty.
Anthony Albanese, having dumped his best housing reforms in negative gearing and capital gains tax, shouldn’t abandon demand-side efforts and focus solely on supply. Building more homes, especially public ones, is vital, but pulling idle investors out of the market remains imperative too.
With so much dire need unmet, there is no room for wasted space.
Good article, I know the owners of several properties that are vacant for these sorts of reasons, and it’s obvious that other properties in our suburb were once family homes, were sold and are now long term vacant (and not well maintained). There are also long term vacant housing blocks in this (well located) suburb where the street was otherwise built out thirty years ago.
Then there are the overloaded and transitory share houses nearby (couple of drug related shootings and stabbings recently) – doesn’t do much for community spirit and getting to know your neighbours.
Vacant property taxes are expensive and difficult to apply. In Victoria its made easier by the separate water metering to determine if a residence is occupied, but its messy. Separate metering isn’t as prevalent elsewhere.
But aside from the enforceability, no amount of bandaiding addresses the problem that as a society we want someone else to pay. Do we as a society want housing to be a form of shelter? Or do we want it to be a financial asset? We have chosen the latter for decades. Its the lazy path to wealth for a society that doesn’t want to undertake real collective effort in productivity, investment and tradables that constitute a sophisticated economy. We haven’t for 35 years.
If we want shelter to be ‘affordable’, it has to be cheaper. Not ‘affordable’. Cheaper. Which means all housing stock. None of this is complicated to do or mysterious. We simply don’t want to pay the price. So we pretend to care.
Sounds like a very good idea, if it can be done effectively. Another issue to examine is that of Air B&B. There are roughly 350,000 listed, according to The Conversation. And I can hear the righteous squawks from investment owners about these being their properties, and their right to use as they wish. No. No, such a right should not exist as long as working families have to live in tents and caravans in the middle of winter. Labor, please have some courage on this matter.
There are several houses in our short street that are empty – a vacant property tax makes a lot of sense to me. Not only does it assist in freeing up more places to rent it also means the houses are more likely to be cared for, more neighbours to help each other out, or simply to say hi to as you walk down the street. Empty houses and apartments are bad for the housing crisis and bad for local neighbourhoods. Empty streets in our case means unkempt houses slowly declining, weeds sprouting in gardens, fewer neighbours to meet and greet, to go to in an emergency or to look out for.
Housing is a human right. We need to get our priorities straight.
So why do some commentators still try to tell is that the rise in house prices is due to a house shortage,
When the politicians and the ABC and others stop playing politics and ask the real question, WHO OWNS the HOUSES
only then will we get an answers to problem. I suggest they are being used as an international hedge and a place to hide money. there was a push by Labor in opposition and the ABC for an asset register to display true owner, this needs to be revisited else you will never solve the problem.