So Labor wants to free up land for housing. It’ll help. It’s standard economics. Increasing the supply of land will help meet the unmet demand for land.
But it’ll also do something else – it’ll cut the price.
That’s where Kevin Rudd and standard economics part company.
He wants to “increase the supply of housing without adversely affecting surrounding property prices”.
His announcement says so twice. Tackled about this at yesterday’s press conference – asked how he could seriously promise to release large amounts of land without affecting the price – he couldn’t answer...
He is trying to have his cake and eat it too – something that conventional economics doesn’t allow. He wants to make housing more “affordable” without making it cheaper.
We can guess why. Two out of every three Australian voters already own or are in the process of paying off their houses. It is in their interest for prices to remain high or even climb. What they can’t afford is a collapse in prices to less than they paid because an entire new estate is developed next door.
John Howard knows this well. When he halved Australia’s headline rate of capital gains tax at the end of the 1990’s house prices took off. He wasn’t worried. As he explained later: "I've never heard anyone complain about the value of their home rising."
It Labor really wanted to make housing more affordable, it would undo Howard’s tax change.
But it won’t. It understands that rising house prices “make for happy voters" as a Coalition MP put it a few year’s back.
It made sure that tax wasn’t even mentioned in the discussion paper it took to its housing summit in July.
It’ll tinker at the edges, appointing a Minister for Housing whose job will be to do everything but cut its price.