The Yoga Place Blog

Raising Global Consciousness

The common factor behind affordable house prices in world markets is a high property tax not deregulated markets

What has caused the large increase in house prices in Australia that are now coming to haunt us in the form of a housing affordability crisis?

Is a shortage of land supply caused by state government controls the sole reason for the price increases?, and will deregulation of this function bring prices back to affordable levels such as those found in Texas?

Does the Texas model have something to teach us about keeping housing prices affordable? Is there anything common about affordable housing markets across the world that may be a key explanatory factor for their affordability status?

My quick answer is there are many causes behind the price rises. Amongst these are the supply of land, the demand for housing, expectations of the future price of housing and land, an increased ability to pay more for housing (lower interest rates, easy availability of credit, reduced lending criteria etc).

The common factor in affordable housing markets is a high property tax.

I disagree withe the protagonists like the right leaning think tank -The Institute for Public Affairs (IPA) - and John Howard who blame the whole price rise on land supply shortage and claim that falling interest rates played no role in it. I agree that supply shortages are a factor but to the full explanation. Look at the IPA analysis in more detail and you will see that real price of rural land doubled in the two years 2001/02 to 2003/04 - their own analysis disproves their point and demonstrates the impact of interest rates but they are blind to it.

I disagree with the IPA analysis of the Texas housing market . They use the Texas market as an example to prove their assertion that land shortages and not falling interest rates are the sole driver behind housing price increases worldwide. They look over the recent past and note that while housing prices in most of the world increased as interest rate fell they remained constant in Texas. Why did they remain constant - why didn't the prices increase when the same monthly mortgage repayment could now buy a more expensive house. The reason according to the IPA is that the supply of land in Texas is deregulated and this means that the demand for housing can never overwhelm the capacity of the market to supply housing. Therefore prices don't rise if demand increases as it does when interest rates fall. I agree that it is a contributing factor but it misses the main reason - the high property tax rates in Texas.

So perversely - and I say this because the IPA is a free market think tank - Texas does provide a model for how we can keep housing affordable and avoid house price bubbles. But the solution is a socialising high property tax rather than the free market deregulation of land supply.

How the IPA and their cohorts could have missed the high property taxes in their analysis is beyond me. Maybe they didn't do their research properly or don't understand economics and human behaviour. Or maybe they were just being totally dishonest and hoping they would be able to spin the property tax issue out when it was discovered.

Texas is not the only example of house prices being constrained by high property taxes. One of the main proponents of planning deregulation as the key to maintaining affordable housing is a website called Demographia.com. They have made a survey of housing prices in 159 markets around the world. They found that in only 42 of these markets the ratio of median house prices to median wages less than 3, their definition of affordable housing. So I did a quick internet search on property taxes in those markets - guess what was common - high property taxes. And like most taxes they are not that popular.


Land supply deregulation would help reduce house prices but not uniformly across all parts of a city. It's major effect would be on the fringes of cities in virgin land developments and in existing suburbs close to these areas. But it is unlikely to have much of an impact on existing built up suburbs that are in high demand. So we would still be left with high house prices and the associated problems that we can now start to recognise they bring. What looked like such a positive thing initially has left us less resilient as a nation and as families and individuals. For all but the wealthy, double incomes are now required, 30-40% of income needs to go into pay the mortgage. In systems language speak there is no buffer in the system.

My recommendation - if you want to reduce house prices across the board - is to scrap taxes that are levied when properties are bought and sold. These taxes distort the market. Replace these taxes with a high property tax that is phased in over say 10 years. There would need to be exemptions and reductions available for retired people, disabled, unemployed etc.


Background Information

With the housing crisis hitting centre stage there is a group of organisations and individuals who have a very clear position that there is only one reason for the price increases and that can be sheeted down to a shortage of supply of land. Moreover, they claim that the sole reason for this shortage of supply of land is due to poor state government planning, over regulation and land rationing.

"There is a real problem in Australia about the affordability of the first home, and it's quite clear that the main cause of the high cost of housing in this country is the lack of supply of land," - John Howard, Prime Minister

"High home prices are due to state government controls." - Alan Moran, Institute of Public Affairs

Alan Moran has penned also penned a 93 page document titled "The Tragedy of Planning" in which he explores this theme in more detail and comes to the conclusions that interest rates have played a negligible role in the increase in housing prices. As the basis for his argument he uses information from Demographia.com. which as I explained earlier tries to link affordable housing markets to land deregulation while totally failing to mention anything about land tax rates as a possible cause.

He also uses charts where he compares Australian residential and farming land prices over time (figures 2 to 5). His logic is that farm land supply isn't constrained and therefore will not increase in price when interest rates fall. If the supply of residential land was not artificially constrained by planning regulations its price would behave like rural land. But have a close look at figure 5 and you will see that the real price of farmland looks like it has doubled in the two years between 2001/02 and 2003/04. Not a good look for an argument that says that interest rates have nothing to do with the price of land. I am amazed that he didn't pick this up or no one else commenting on this issue has.

Now we have an initiative called The Great Australian dream project. - to quote the front page of their website its a "joint initiative of the Institute of Public Affairs and the Housing Industry Association, The Great Australian Dream Project has been created to promote research and inform discussion on the major causes of housing unaffordability in Australia and to encourage the adoption of policies that will once again put home ownership back within the reach of ordinary Australians"
It was launched by no one less that Peter Costello and is hosting a nation wide tour by Wendell Cox the man behind Demographia.com who as I have pointed out has no idea of what is driving housing prices but is on a free market crusade.

If you know of anyone who wants high quality strategy/policy work done I am available for hire - I used to work for Boston Consulting Group


Is your diet keeping you healthy or is it one of the reasons why you are sick?


By: Alan McCrindle

I am posting this in response to a question that was raised from my post where I wrote about fructose as a hidden poison in our diet.

The person who raised the question asked me if there was a link between food and health. He had already made the experiential link between what he ate and his emotional state.

I have tried to keep the explanation as simple as possible it as simple as possible.

The fact that it is not common knowledge that what we eat (what, when, how much etc.) is one of the key drivers of disease is scandalous.

If you want to see how food effects health at a very gross level, look at statistics on how a country's disease profile changes as it becomes Westernised and its population switches from its traditional diet and lifestyle to a western diet and lifestyle. You will see that the population starts getting the same chronic diseases that we get in the west - chronic diseases that they very rarely suffered from in the past.

The specific chronic diseases we suffer from are a product of our diet and lifestyles and our our genetic propensity.

What do I mean by genetic propensity? Our western diet and lifestyle leads to chronic inflammatory disease. How this inflammatory disease expresses itself in the body depends on individual genetics. The inflamation is the environment that switches on the gene/s that manifest the specific disease.

The key point to understand is that genetic predisposition for a specific disease does not mean that it has to manifest. That gene needs to be switched on to activate the disease process. The switch is the environment and a key factor for controlling that environment is diet and lifestyle.

Ayurveda - the traditional medical system from India - has a very well developed understanding of these links. Good health is based on good digestion.

In Ayurveda we see that diseases like chronic heart disease, type 2 diabetes, arthritis etc. are essentially different manifestations of an inflammatory environment that started in the digestive tract.

Lets say that have a chronic inflammatory disease that has manifested itself as arthritis. If your GP treats it symptomatically with say a COX two inhibitor (anti-inflammatory drug) - without fixing the problem that is causing the inflammatory environment - the inflammation will simply show up somewhere else as say heart disease. To remove the problem you have to remove the cause not supress the symptom.

So why does a western diet and lifestyle cause these problems? Why don't they manifest as readily with traditional diets and lifestyles?

If you want to understand this from an evolutionary / genetic perspective realise that our body/mind systems are the product of millions of years of evolution. Over 99.999..% of that period we lived a very different lifestyle and ate very different food tahn what we do now. Our bodies are a product of their historical environmental conditions. So we are fundamentally a machine designed to run on a specific food, exercise, sleep mix.

You can think of your body as a vehicle. Some are designed like tractors, some like sedans and some like high performance sports cars. A tractor is slow and steady and does not need much maintenance. A high performance sports car will give great performance but it needs much more maintenance than a tractor. Irrespective of the type of vehicle however it will last longer if it is driven carefully, given the right fuel, oil and water and serviced appropriately.

And on the subject of the importance of using the correct fuel you can think of the impact of running your existing car on a petrol plus ethanol mix. If you use a mix of say 5% ethanol and 95 percent petrol you car will run pretty much the same as on pure petrol. There will be a small power loss and you will need to use slightly more fuel to travel the same distance. However if you use a 20% ethanol 80% petrol mix you will not only suffer a larger power drop and fuel consumption, but your engine will slowly be damaged.

If we stick with this analogy of an ethanol plus petrol fuel mix, we can ask ourselves what types of foods do we have in our diets that are like ethanol - something that will work as fuel but that we historically weren't designed to use as fuel.

Some foods such as wheat and milk have only been around since we domesticated plants and animals - about 8,000 to 10,000 years. This has not been long enough for the body to evolve to deal with these foods effectively. Many health problems can be eliminated by removing these foods from ones diet. Refined sugar is another example.

If you want to see the drastic health effects that food can have you need look no further than the Australian Aborigines. Until just a few years ago they were living a hunter gather life eating non processed foods. Their body systems have had no time to adapt to eat many of our foods.

As a result the rates of diseases such as type 2 diabetes, heart disease etc are at epidemic proportions in the aboriginal population.

If you ask western medicine why the aborigines are suffering form these diseases they will tell you that the cause is their diet - processed western food, especially sugar.

So why is it that western medicine blames the aboriginal health problems on food, but then seems to completely ignore this as a casual factor in the non aboriginal population.

There are many reasons, but one of the most obvious is that pharmaceutical companies play a large role in how the medical profession approaches and treats disease.

Pharmaceutical companies make money from patented drugs. They can't make money from food and lifestyle changes because they can't be patented.

Western medicines are primarily "refined foods" - Natural foods that have been refined to isolated the "active ingredient".

So in the west we use "refined foods" to make major changes to the way the body works supposedly to cure disease.

If refined foods have such a major impact on body function when classified as a medicine, it should come as no surprise that they are having exactly the same sorts of effects when we eat them as "normal food". Most of what we eat today is processed or refined food. Food additives fit in here too.

It is a scandal. The food industry is making us sick with processed foods and the medical system is trying to patch us up with refined foods. I am not suggesting that there is a conspiracy or premeditation - simply an inconvenient lack of awareness.

Unfortunately change will be difficult because our whole society is based around convenient processed foods and "quick fix" - take a pill - medicine.

It is not easy to be healthy in our society and it is becoming harder by the day - we have to work for health - it cant come from tablets. We have to exercise our bodies to make them function properly. We have to sleep them enough for them to repair themselves properly. We have to protect them from stress. In our increasingly 24/7 time poor society this is becoming harder and harder to do.

Much of the increase in the rate of depression can be linked back to increased stress levels. Expect this to increase.

And thanks to a process called epigenetics, we are locking future generations into even worse health outcomes - but I won't go there now.