Stamp duty reform the solution to ageing in place

Domain.com – 3 November 2015

By Steven Rowley

http://www.domain.com.au/news/stamp-duty-reform-the-solution-to-ageing-in-place-20151102-gkooy5/

Research released by the Australian Population Research Institute on Monday blamed the number of older households ageing in place for the inability of younger families to buy homes with backyards.

Families currently have little choice. Either they relocate somewhere further out of the city with a housing option that offers internal space and a backyard, or they choose to live in an apartment. Given the vast majority of apartments are not developed with families in mind, that is not much of a choice.

Younger families are making the choice between being pushed further out, or foregoing a backyard. Photo: Paul Rovere

For households with no children, single or couple, the apartment is an option and growing numbers are choosing amenity over space, but for individuals who themselves grew up with a large backyard it is difficult to want anything else for your children.

But who can blame the older households for holding on to their homes? Particularly when you get slugged for tens of thousands of dollars in stamp duty if you move and when the housing alternatives available to the older generations are limited.

Until stamp duty is reformed and a greater diversity of housing is available in areas where ageing households actually want to live, older households will continue to age in place until they have no other option. This may be due to health reasons.

Steven Rowley argues for stamp duty to be replaced by a broader-based land tax. Photo: Supplied

While households on high incomes continue to have a choice of housing options across Australian markets, those households on low to moderate incomes, extending to households well above median incomes in some cities, have very few options.

The housing market needs to deliver a variety of housing options for our broad range of household types, and this will require policy intervention to house those on low to moderate incomes.

Instead of the current stamp duty model, we should look at replacing stamp duty with a broad-based land tax. This would lower upfront housing costs by thousands of dollars and would improve mobility as households would not have to pay stamp duty every time they moved.

A land tax would require all households that bought a house to pay an annual sum in tax instead of stamp duty. The tax would effectively be spread across the time spent living in the home rather than paid upfront in one big hit, improving affordability and accessibility. The housing industry is broadly supportive of this reform.

Given the lack of housing options in our major cities, families are being forced out of many of the inner areas. This is not a problem if the employment opportunities exist, but it is hardly ideal if access to work becomes difficult and expensive.

Housing in areas with high quality amenities, often in inner city locations, remain those most in demand because of the lifestyle offered by such suburbs. Consequently demand is high and prices reflect this demand. Infill redevelopment in these areas will not deliver a supply of affordable detached or even attached housing unless there is some form of intervention.

Without intervention and reform to stamp duty, we will see the current patterns of household location continue. Children will stay at home for longer and families will be forced further away from areas of high amenity.

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