Gavin A. Wood

The Tax Treatment of Housing: Economic Issues and Reform Measures

Housing taxation expenditures are viewed by many as an important source of housing subsidies, although they have frequently emerged as taxation systems have evolved, rather than being designed specifically to aid housing consumption or production . The increasing severity of constraints on government budget deficits has elevated the issue of housing tax expenditures beyond that of mere academic curiosity . Some governments have sought to curb the growth of housing tax expenditures by reforming the tax treatment of housing . Is there a case for reform measures? Are there coherent and operational reform measures worthy of serious consideration? These questions raise a host of issues concerned with macro-economic performance, allocative efficiency and equity : macro-economic performance, because housing tax expenditures can erode the tax base, and thereby affect governments budget deficits; allocative efficiency, because housing taxation expenditures will influence relative rates of return on housing assets and lead to changes in the economic behaviour of households and firms ; and equity, because housing taxation expenditures alter the relative tax burdens among individual taxpayers, and between owneroccupiers and tenants . In this paper each of these issues is addressed and the prospects for reform assessed in an international context . In doing so, I draw on the papers presented at the Joseph Rowntree International Conference on Housing Finance held in York in June 1989 . These provide relevant material on the existing array of housing tax expenditures employed by a representative sample of Organisation for Economic Cooperation and Development (OECD) countries. Firstly, I discuss the relevance of the tax expenditure concept and briefly describe the housing taxation practices of these countries . Next, I explain why housing tax expenditures have attracted critical attention in recent years . This is followed by an examination of the attributes of tax expenditures as a means of supporting housing consumption and production, and the tenure-neutral reform proposals that are increasingly advocated by commentators on housing policy . Lastly, the recent reform measures introduced by OECD governments are explained and evaluated, and are followed by some concluding remarks .

Promoting the supply of low income rental housing

Abstract There is disturbing evidence of a contraction in the stock of low income private rental housing. In this paper we offer evidence indicating that federal government tax preferences, economies of scope and higher operating costs are part of the explanation for this contraction. The Australian Bureau of Statistics Rental Investors’ Survey is used to gauge whether low income housing tax credits and tax‐free capital gains thresholds can be used to promote the supply of low income rental housing.

Comprehensive Income Measures, Housing Equity, and Tax-Transfer Effects

Cash income is widely recognised as a deficient measure of income, as it takes no account of the contribution of net worth to consumption potential. Housing equity is a particularly important component of net worth. Comprehensive income measures incorporate housing equity by adding its annuitized value to cash income. However, such an approach fails to take into account adverse tax-transfer effects on conversion of housing equity. As such, the contribution of housing equity to potential consumption is significantly exaggerated. A net comprehensive income measure, which directly incorporates the tax-transfer effects from housing equity conversion, is introduced. Simulation exercises are conducted, to demonstrate the importance of taking into account tax-transfer effects when measuring the comprehensive income of those homeowner income units in receipt of government pensions and benefits. Copyright 2000 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Poverty and income inequality measurement: Accommodating a role for owner-occupied housing

The most common method used in Australia to identify whether an income unit is in poverty is to compare the income units disposable cash income with a cash income-based poverty line adapted to each income units needs. If disposable cash income lies below the poverty threshold then the income unit is deemed to be in poverty. This approach was adopted in the Commission of Inquiry into Poverty (Henderson, 1975) and in numerous subsequent pieces of poverty-related research in Australia.

Financial Deregulation and Access to Home Ownership in Australia

Since the deregulation of Australian Housing Finance interest rates in early 1986 the market has determined the rate prospective home buyers must meet for their loans. Deregulation has brought higher interest rates and considerable public discussion concerning the plight of home buyers and these interest rate rises. The paper analyses post-1985 interest rate, house price and incomes data from six capital cities, and computes movements in the deposit gap (the difference between borrowing capacity and house prices). The empirical work demonstrates that, by the fourth quarter of 1988, house price inflation was the major factor contributing to a widening of the deposit gap.

Factors influencing mode of claims settlement in workers' compensation cases

This paper examines the variables that influence the means by which 10,192 injured workers settled their compensation claims during 1990. The data on which this study is based come from a state in Australia where there are three means by which workers compensation claims can be settled by lump sum payment: settlement following a specific injury payment, early settlement payment and settlement following a common law payment. This paper is specifically concerned with identifying the variables that determine whether the claim will be settled by a lump sum payment and whether different modes of claims settlement by lump sum are unique and predictable from a range of variables that include injury characteristics and demographics. The results of logistic regression modelling revealed that those who received a lump sum settlement could be reliably distinguished from those who did not receive such a payment. Each mode of settlement varied in the extent to which it could be predicted. Contrary to expectations, the most difficult form of settlement mode to predict was that of specific injury payments (4% accurate) with the most predictive being early settlement payments (81% accurate). Common law payments were also highly predictable (48% accurate). The form of lump sum payment received by injured workers was found to depend on a range of injury characteristics, indices of severity and for common law payments, gender and potential income loss. It is argued that although injury characteristics play a part in the process of claims settlement, personal circumstances and insurance company policies are influential in dictating the form by which workers compensation cases are finalized.

Vocational rehabilitation programmes: A financial appraisal

This paper seeks to evaluate the efficacy of rehabilitation programs in facilitating injured workers return to work. A major methodological problem with such investigations is the inability of the analyst to observe the counter factual, i.e. the outcome had the workers compensation claimant not received rehabilitation services. In this paper the results are reported of an empirical investigation of the effectiveness of rehabilitation programs undertaken by 503 injured workers. An internal control group of injured workers who fail to complete rehabilitation programs is used to assess the impact of rehabilitation. Multivariate statistical techniques are used to hold injury and socio-economic characteristics constant, and to arrive at an estimate of the probability of a successful return to work. This probability estimate is then used to weight the potential cost saving. Our findings are that every

Why Stamp Duties are an Increasing Financial Burden on Australian Home Buyers

1 spent on rehabilitation services yields a reduction of system costs of

Factors influencing the cost of workers' compensation claims: The effects of settlement method, injury characteristics, and demographics

2.31. nThis paper seeks to evaluate the efficacy of rehabilitation programs in facilitating injured workers return to work. A major methodological problem with such investigations is the inability of the analyst to observe the counter-factual, i.e. the outcome had the workers compensation claimant not received rehabilitation services. In this paper the results are reported of an empirical investigation of the effectiveness of rehabilitation programs undertaken by 503 injured workers. An internal control group of injured workers who fail to complete rehabilitation programs is used to assess the impact of rehabilitation. Multivariate statistical techniques are used to hold injury and socio-economic characteristics constant, and to arrive at an estimate of the probability of a successful return to work. This probability estimate is then used to `weight the potential cost saving. Our findings are that every

Australia's housing choices: Retrospect and prospect

1 spent on rehabilitation services yields a reduction of system costs of