Joe Hockey says the housing affordability problem is about a lack of housing supply and that is a state problem.

Time to show some national leadership Joe if you want to be taken seriously as Treasurer and future leader of your party.

If Mr Hockey wants to get supply moving all he needs to do is to offer to pay the servicing and development costs of bringing new blocks of land to market with the proceeds of a small Commonwealth Land Tax or if he prefer a profit financing model – a municipal utility bond scheme for SMSF.

Commonwealth Land Tax

Nothing new about the idea either,  there was a Commonwealth Land Tax from 1910 until 1953.  Joe – here is a link to the old one to save you some time drafting it.

http://www.comlaw.gov.au/Series/C1910A00021

A small Commonwealth land tax administered by the ATO will generate more than enough funds for Mr Hockey to offer to pay for the costs of servicing and bringing new building blocks to market or even offering new local home buyers a rebate on part of the GST they get whacked with when buying a new home.

He will have a queue of developers and state government land development agencies out his door and up the street seeking to have the servicing costs of new building blocks funded.

That will get supply happening more responsively and side step the problem of states whingeing they don’t have the money or gouging the “first user” (often a first home buyer) for as much as they can via developer levies.

Yes – the states could just as easily impose a state land tax and use the proceeds to fund the servicing costs of new subdivisions as an alternative to the current first user pays all approach but state governments are pretty useless when it comes to thinking outside of the box or taking responsibility for raising the money they want to spend.

Nothing particularly controversial either about having the government fund the provision of the basic infrastructure required to bring land to market.  In fact it makes sense as the Commonwealth government is the one driving the population ponzi with high rates of migration so it is about time that it “owned” the housing and infrastructure problems they enjoy creating.

Even the communications challenged Mr Hockey should be able to sell the idea of a small Commonwealth Land Tax to provide the upfront costs of servicing land needed to house a rapidly growing population.  If a Big Australia is widely supported there will be wide support for a small tax to make it work.

Municipal Utility District bonds

And if the idea of a Commonwealth Land Tax is too much big picture for little Joe or he would prefer that the purchasers of those blocks cough up the cash for the cost of servicing ‘their’ block (“user pays” for the little people is close to the heart for many liberals), he could lead the way on developing a private bond market model of financing the costs of new land servicing.

Those financial sector brainiacs eating the muffins each morning in his office should be able to put a basic plan together by afternoon tea and bikkies.

The Municipal Utility Bond model has been used in the United States for years and it would not be difficult for Joe to provide the necessary ‘incentives’ and assistance (those brainiacs again)  to get the state governments to introduce the necessary laws and regulations to allow repayments of the bonds to be secured as a first charge against the title to the land serviced with the money raised by the bonds.

That way all those SMSF can invest in a nice secure infrastructure bond market and there will be a solid and responsive supply of new fully serviced building blocks.  Plus new home buyers (or subsequent buyers) will be able to buy a block of land and new home and pay the servicing costs off over say 30 years instead of in one mortgage bloating lump when they can least afford it.

And most importantly, the Municipal Utility Bond market model means that all those folk lucky enough to live in a house built before the 1980s when the public purse stopped paying servicing costs as “user pays” took hold, will not have to contribute (via a Commonwealth Land Tax) to the cost of servicing the land their children and grandchildren may choose to live on.  So all those selfish types will have no reason to squeal.

Either way Mr Hockey it is about time you started to demonstrate some leadership on the issue of affordable housing  and improved new housing supply and not just spend your time running around in circles in large red boots tooting a horn.

But then perhaps you are not seriously talking about supply and were just clowning around clutching any plausible excuse to do NOTHING to fix the problem of highly inflated prices for what should be our national competitive advantage  – low cost land for housing and productive industry.

To read the original version of this comment in the original context at Macrobusiness.com.au click this link. (link maybe locked – but there is a free trial available).