Might Citizen Referendums Provide a Basis to Provide Affordable Housing
20 Pages Posted: 15 Jun 2016
Date Written: February 29, 2016
This paper is motivated by the Australian Prime Minister suggesting that urban infrastructure be funded by capturing the uplift in land values it creates with land taxes. However, in the Australian context this could reduce housing affordability. An alternative approach is described to fund infrastructure that at the same time increases housing affordability. This alternative approach is dependent upon facilitating legislation to allow citizens to vote on creating a resident controlled Real Estate Investment Trust (REIT). While all property owners obtain shares in the REIT pro-rata to the area of their land, only residents obtain votes and surplus profits. The REIT shares do not obtain ownership of any buildings on the land. All improvements obtain a separate privately negotiable “strata” title stapled to the REIT shares. The resulting duplex tenure system allows most of the uplift in land values from infrastructure investment to provide the collateral to fund new investments serviced by rent/rates as occurred in the first Garden City of Letchworth. The REIT becomes self-financing to allow developers and first homebuyers to obtain sites without cost to substantially reduce the cost of housing. A virtuous self-reinforcing process of urban improvement can be established to attract developers and new residents as achieved at Letchworth. A theoretical contribution of the paper is to identify how wealth inequality arises that includes surplus profits not reported by accountants and so not recognized by economists.
Keywords: Duplex tenure, Housing affordability, Infrastructure funding, Land taxes, Resident referendums, Surplus profits
JEL Classification: B41, D02, H71, K 11, P14, R21, R31, R53
Suggested Citation: Suggested Citation