home prices case shiller henry review affordable housing

U.S. home prices at post-crisis lows: Case-Shiller
brittan land tax supply of land

Brits and Aussies Push Public Recovery of Rents

Home sites are down a third, could they reach half off? Regardless, land rent could become the nest egg for us all. We trim, blend, and append three 2012 articles from: (1) MarketWatch, Feb 28, on US prices by S. Goldstein; (2) Australian Housing & Urban Research Institute on housing affordabilityg by R. Ong; and (3) New Statesman, Feb 24, on tax land by M. Hasan.

by Steve Goldstein, by Rachel Ong, and by Mehdi Hasan

U.S. home prices in December fell to their lowest level since the bubble burst, as an uptick in activity isn’t yet being matched by rising prices.

The S&P/Case-Shiller 20-city composite fell 1.1% in December, to wrap up 2011 with a 4% downturn. The index hasn’t been this low since February 2003 and has dropped 33.8% from its peak.

In December, every city measured but Phoenix and Miami saw price declines. Atlanta, Las Vegas, Seattle, and Tampa all recorded new lows.

One big unknown for the housing market is the level of so-called shadow inventory -- unsold homes that big banks, Fannie Mae and Freddie Mac own but haven’t put on the market as well as soon-to-be foreclosed houses.

While the number of households usually grew by at least 1 million to 1.5 million every year, it actually fell between March 2010 to March 2011, as young people stayed with their parents and more people shared homes. But from March to December, the number of households picked up again.

Financial markets mostly took the Case-Shiller data in stride, with the Dow Jones Industrial Average DJIA -0.03% making modest morning gains and prices for the benchmark 10-year Treasury note 10_YEAR +2.58% also narrowly higher.

The data on home prices stand in sharp contrast juxtaposed against recent reports on activity in the housing market, possibly showing that it’s the low prices that are actually spurring more home sales.

To see the whole article, click here .

JJS: It’s odd the media is so tentative about concluding that lower prices are good for sales. Indeed, homes have to become affordable for the business cycle to start back up and the economy to grow -- however hazardously to the environment -- again. One way to win affordable housing, and to flatten the manic business cycle, is to use the government’s power to tax.

The Henry Review recommended two key changes to taxation arrangements to promote more balanced investment in private rental accommodation and improve housing affordability: (1) introduce a Savings Income Discount (SID) of 40 per cent for net rental income (including capital gains) from non-business assets, and (2) remove stamp duties and levy a land tax on a per land holding basis.

Imposition of a reformed land tax will be felt most keenly where pressure on land use is most acute, and will speed up development in areas where land is more expensive. The removal of stamp duty might also affect the timing of development as its abolition will speed transfers of property, as ‘empty nesters’ now find trading down is a more effective method of releasing housing equity.

It is estimated that the average plot with a land value of $335 000 (at 2006 prices) will decline by $24 000, or approximately 5 per cent. However, the expected decline in land price will be greatest in those suburbs in and around the CBD (at around 12%), where land is currently most expensive. In suburbs further away from the CBD, the percentage decline in mean land value will be lower at 8 per cent or less.

To see the whole article, click here .

JJS: Along with the academic analysis comes a popular one.

Samuel Brittan, often described as the "doyen of British economic journalists", has an important column in today's Financial Times, provocatively entitled: Tax England's green and pleasant land

Brittan -- despite his background as a Thatcherite and monetarist – proposes a land tax. Indeed, as the Lib Dem Business Secretary Vince Cable did. Cable was correct to point out that such taxes are harder to dodge, while being progressive and fair, and a potential means of redistributing wealth.

It's also a mainstream and sensible proposal. "[F]ar from being an outrageous Bolshevik idea," explains BrittanT, “the case for a land tax is one of the oldest and least disputed propositions in economic thought.”

The basic point is that the supply of land, with rare exceptions such as reclamation in the Netherlands, is fixed. But because of its scarcity owners can command an income over and above the normal return to the enterprises placed upon it. Gross UK trading profits of non-financial and non-oil corporations are running at over £200bn per year or about 20 per cent of gross domestic output. Some part of this is not true profit but the return on land.

There is one way in which the supply of usable land can increase. That is when land, previously off limits, is newly released by local authorities for development. The consequent increase in value, say some land tax campaigners, is created by "the community". But to argue in this way is to sell the case short. The case for a land tax is valid even for land which always was available for development or which remains in agricultural use.

My editor Jason Cowley made the case for a land tax in a New Statesman cover story in October 2010: An annual land value tax would encourage owners of empty buildings and empty land to put their properties to good use. Towns and cities would become more efficient and the need for urban sprawl would be reduced.

A senior Labour figure told me recently that the the party leadership plans to focus on "taxes at the top" in the coming days and weeks. Good. It's a case I made in the Guardian just a fortnight ago -- and I do hope that land taxes, mansion taxes, and the rest feature as part of the impending discussion. Perhaps the shadow health secretary can chip in again. And David Miliband, too. Oh, and from the right, Conservative Home's Tim Montgomerie.

To see the whole article, click here .

JJS: The British press has covered this fundamental geonomic reform nearly daily lately. One must wonder if it’s just coincidence or if something’s afoot. It’s not often in history that reason prevails, but it could happen now. Do what you can do help bring it about. Share this article with friends and family.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

During this bottom, who catches a break?

While some governments recover rents …

Lower land prices so at last the cycle can turn

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