Excellent post - hit the nail right on the head.Shuz wrote:Do correct me if I'm wrong, because I haven't read up on any of this housing affordability stuff, but I'm just going by a theory which sounds about right.
As far as I know, the cost of building and developing a new neighbourhood like Seaford Rise costs about $2billion to provide telecommunications, power, water, roads and parks. That cost has to be covered by taxes - land tax, council rates, and 'installation' fees of phone lines, power boxes, water metres, etc. to each home in this development. In a development of say, 400 homes being sold at an average price of $300,000 plus the land tax and stamp duty fees etc. of about $40,000 - That only gives the government about $160million in taxes (not taking into account of the taxes accrued thereafter by each resident living and taxes acquired with changeover of home owners in a lifetime of 50years) - a revenue that isn't anywhere near enough tax to justify the $2b cost of developing that suburb and its essential needs. Even the revenue from the taxes gained in that 50 year lifetime of the suburb wouldn't subsidise the cost of developing that suburb in the first place by a long margin.
So who has to subsidise the cost of developing these suburbs? The taxpayers living elsewhere. Everyone else's rates just 'marginally' go up each year, the water bills go up, the power bills go up - to keep up with the cost of subsidising these suburbs, and the problem continues year after year, because another 5 developments like this get added onto our already excessively large area of urban sprawl. It is no wonder that businesses can't afford to match wage increases with the rate of inflation - Therefore the rates go higher and higher again, taxes are increased again. And I think its important to note particularly in these times of economic failure that what has happened is that the government has been pressured for so long to 'cut taxes' so that we as the taxpayers can afford to pay off our tax burdens... it is very much a snowballing effect.
Traditionally, developers have made profits from selling land and homes with minimal services. Taxpayers and ratepayers then have to cover the cost of providing these services - not only does the developer make a profit due to someone else picking up the slack, but also the property owner as their value rises as the infrastructure and community facilities are improved.
In NSW this was countered by what is called Section 94 contributions - these allow Councils to charge developers to enable Councils to improve infrastructure and community facilities. Of course house prices go up as developers need to factor these costs into their development costs. I'm sure something similar exists in Adelaide.
Further to s.94 contributions, for the Grow Centres in Sydney, the Government has imposed further levies called the Special Infrastructue Fund (iirc) and this takes an amount from each development in the growth centre and is put together the more regional level infrastructure required to serve it, such as railway lines, arterial roads and so on. I'm sure something similar exists in Adelaide.
Finally, house prices are all about supply and demand. There's plenty of cheap houses around, its just that there isn't much demand to live in those places. This will NEVER ever go away. If you want a cheap house, go buy up in Orroroo or somewhere.