There Are 10 Mill Empty Homes in Australia — Would a Vacancy Tax Fix the Housing Crisis?

Empty apartments to indicate the scale of housing vacancies in Australia and whether or not a vacancy tax Australia would work.

Vacancy rates in Australian rental properties hit their lowest point in recorded history this January. Meanwhile, the market has sent rental prices surging. What’s more, homeownership has never been more difficult, with prices climbing above the reach of those on average wages by the minute.

Politicians on both sides seem to have very few ideas and virtually no policies that will actually make a meaningful difference to the housing crisis.

Queensland is the latest state to tinker around the edges, with a recent announcement that they might consider introducing rental increase caps. However, this policy is unlikely to be embraced on a national scale. In 2022, the Federal Government rejected a Greens motion that would’ve frozen our rent for two years, calling it “extreme.”

In NSW, where the housing crisis is approaching parabolic, Sydney was revealed to be the only housing market in the country where prices are increasing, despite rising interest rates. This is thanks, in part, to a new NSW Coalition policy that allows stamp duty to be exchanged for a long-term land tax by first-home buyers. This polciy has increaed these buyers’ purchasing power.

On a national scale, the Federal Goverment has set out a plan to build 1 Million New Homes!™. Now, this might sound good on paper, but is actually not going to roll out until 2024. And, even then, will only provide 200,000 a year until the final year of this decade.

What’s more, the government isn’t building them. They instead encouraging developers to build, uh, the same amount of house they’ve been building for the past 5 years, which is not far off how many we’ve built since the 70s. Plus, only 30,000 of those houses will be social houses, the fastest way to cut homelessness, which already has a waitlist of around 60,000 families.

Still, the Treasurer Jim Chalmers’ plan involves working with our states and territories to restructure their zoning and density laws. This might mean more houses can be built in  desirable locations, which would be legitimately help. However, demand-side problems involving immigration, tax, and financial regulation could also be modified to help release the squeeze.

Now, the government is also working on a forthcoming National Housing and Homelessness Plan. But, while that’s being drawn up, Aussies are getting it from all sides while the people in power scratch their heads. This often happens while powerful’s property portfolio and investments continue to pay dividends. In the words of Agnes Flanders, “We’ve tried nothing, and we’re all out of ideas!”

There is however one idea that has been circulating online of late which appears to crop up every few years as the house crisis worsens. Proponents say it could offer instant housing relief, requires no investment, and would pump the brakes on the historic transfer of wealth from the young to the old. No, I’m not talking about a violent occupation of Vaucluse — although, who knows, let’s put a pin in that one — I’m talking about a vacancy tax.

What Is a Vacancy Tax?

In 2022, Australian Bureau of Statistics (ABS) figures revealed that there are currently 10 million homes in this country that are completely unoccupied. For context, that’s just over 10% of the total housing that Australia has.

Part of the reason houses are left vacant is because they make solid investment choices. Leaving a property unoccupied and forgoing rental income can be beneficial if the property is in a suburb where prices are climbing. Combine this with generous tax incentives like negative gearing and capital gains concessions, and it makes sense to put your money in housing that is only going to increase in value over the long term without the hassle of having tenants.

One analysis, from 2016, found that almost 15% of properties in Sydney’s wealthiest suburbs stood empty, amounting to some 90,000 homes across the metropolitan area.

A vacancy tax would disincentivise people from using properties as investments by cutting the financial benefits of doing so and penalising people for taking homes from the property and rental market.

Would a Vacancy Tax Work?

When the ABS figures were released last year, they set off alarm bells across politics, academic fields, and the media. However, experts have since noted that those figures are likely massively inflated due to the way that the ABS collects census data. Others have put the figure at around 300,000 nationwide, which is close to two years’ worth of national housing supply.

Still, those same experts have written that “there are too many ways homes in Australia can be left unoccupied for weeks, months, years — and it’s costing all of us,” citing unoccupied housing as a driver of homelessness, increased rents, and our housing market challenges.

A vacancy tax isn’t a new idea and could help address some of this, but the impact is likely to be small. Vancouver, Canada, implemented a vacancy tax in 2018 and found that the number of vacant properties dropped in the city by nearly 2,500 over two years.

Victoria actually implemented the same in 2017, which was expected, at the time, to affect 3,280 homes in the Melbourne metropolitan area. The 1% vacant residential land tax however does not appear to have made a significant difference in the city where rental vacancies are 0.8%,, just slightly below Sydney’s 0.9%, where no such tax is in place.

Still, experts have said that, with a population expected to grow by 15 million over the next three decades, we’re going to need all the help we can get to fix the housing issue and that a vacancy tax may be able to play a small role in that.

Will the Government Implement a Vacancy Tax?

Property and land taxes are collected at the state level, so the policy is not likely to be debated in Federal Parliament any time soon. This being said, the Federal Government has already implemented a vacancy tax that will need to be paid by foreign investors if they let an Austrlaian property sit uninhabited for more than six months. The fee starts at $13,200 and is designed to “increase available housing in Australia.”

On a domestic level though, outside of Victoria, states and territories do not look like they’re about to launch into a vacancy tax hike. In NSW, where the policy was requested to rejuvenate empty high streets in Sydney’s inner west, both major parties said that they did not support the idea.

The Greens have however been pushing the idea for some time. In Queensland, they introduced an Empty Homes Levy, which would put a 5% tax on vacant dwellings right across the state. This is far more radical than the policy in Victoria. But this failed to gain traction.

In the ACT, the Greens Crossbencher Johnathan Davis suggested a similar policy to a Legislative Assembly inquiry into rental and housing affordability back during 2022. The chair of the inquiry however said that there are simply too few off-market rentals at the minute for it to be effective.

But if a vacancy tax would amount to even more tinkering at the edges, what actually might solve the housing crisis? Many suggest that more supply — simply, building more houses — would fix the issue. While it can’t hurt, it’s not a panacea, as the housing supply has outstripped our population growth for at least the past two decades.

What does appear to make the most difference in lowering prices is cheaper homes built in useful locations. In metropolitan cities, this means replacing sprawling post-war family homes with smaller, more efficient medium-density apartments and townhouses. However, places with housing like that are exactly the suburbs where opposition to such development is strongest.

With Chalmers promising his 1 Million New Homes!™ will be in well-located areas, it seems these are the people he is going to have to fight.

Related: The 10 Aussie Suburbs Where House Rental Prices Have Gone Up the Most

Related: Rising Interest Rates Could Crush the Housing Market, and Millennials Aren’t Mad About It

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