More than a million homes across Australia are sitting empty at a time of worsening housing affordability and a rental crisis, prompting calls to make owners of ‘ghost properties’ pay up.

Startling figures from the 2021 Census released last week revealed 10% of all residential dwellings are unoccupied, equating to 1,043,776 unoccupied homes, many of which might otherwise be available to homebuyers or tenants.

“It means that housing supply statistics are completely distorted,” said Catherine Cashmore, president of the Prosper Australia Research Institute. 

“When we have people saying we just need to build more houses to increase supply… well, it’s just not that simple.”

Nationally, the rental vacancy rate is currently sitting at an alarming low of just 1%, while many housing markets have been long constrained by an undersupply of available properties, forcing prices up.

A controversial proposal to impose a hefty tax on the owners of empty homes – dubbed ‘ghost properties' – is gaining support.

But PropTrack economist Angus Moore said it was a complex issue.

“Empty homes are not an efficient use of housing stock,” Mr Moore said. “They could be used to house someone but aren’t.

“It should be something we try to minimise, but the best way to do that is unclear.”

The 2021 Census revealed over one million homes were empty. Picture: Getty

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Why are so many houses vacant?

There are myriad reasons why owners might decide to leave a property vacant.

For some, it’s ‘land banking’ – the practice of waiting to take advantage of growth opportunities through re-development at a future point in time. For others, their second or third property is used as a holiday home a few months of the year, or as a short-term rental on sites like Airbnb.  

And for others, it’s a purely speculative vacancy where price growth in a rising market easily eclipses rental yield and the problems that can come with managing a long-term tenancy.

But at the heart of it is the uniquely Australian view that property is not just purchased as a place to live, but as a vehicle to accumulate long-term personal wealth.

“Real estate in this country is driven by speculation – we don’t buy real estate because of need, we buy it because of greed,” Ms Cashmore said.

“There’s an encouragement to hoard property, particularly in a rising market, and we end up with a huge number of properties sitting vacant.

“People like the idea that you can get rich in your sleep without working. It’s a little bit like winning the lottery and that’s why people do it.”

Experts say the solution to the housing affordability crunch is more supply - but there are plenty of vacant properties. Picture: Getty

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The significant social impact

In simple economics, the smaller supply of housing there is, the greater the impact on affordability.  So vacant properties do contribute to higher prices.

“Those homes are unused,” Ms Cashman said. “They’re not available for rent, and they’re not available for sale. The only time you see them coming on to the market is when we have a financial crisis.” 

But there are broader consequences outside of the buying and selling space, with reduced supply adding pressures in the cut-throat rental market.

“Low vacancy rates are putting pressure on communities and causing churn, and that’s the biggest concern – being forced to leave communities has an adverse effect on people’s mental health because their social fabric is being torn apart,” said Geoff Brailey, social researcher and director of solutions at McCrindle Research.

With high demand and limited supply, finding a rental at the moment is hard for many Australians. Picture: Getty

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There’s also future population growth to consider, especially with Australia’s migration program resuming post-Covid and the international student market set to take off again.

“The Australian population is expected to grow to 40 million by the middle of this century, so that means we’re going to see an extra 15 million people over the next three decades,” Mr Brailey said.

“We need these homes to help accommodate all of those extra people.”

The possible solutions

Back in 2017, Victoria introduced a vacant residential land tax, which was applied to 16 local government areas in and around Greater Melbourne.

The tax, which was specifically created to address housing supply, was imposed on the owners of properties vacant for more than six months in a calendar year. It requires the owners to pay 1% of the capital improved value of land. 

So, the owner of an empty property worth $500,000 would have to pay $5000 per annum.

Housing pressures are only set to intensify with strong projected population growth. Picture: Getty

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It’s a tax in-line with many economists’ views that inefficient state taxes like stamp duty should be replaced by broad-based land taxes, and it has plenty of support.

The Greens want to see an empty property introduced nationwide, along with the phasing out of negative gearing and capital gains tax breaks, complemented by the building of more public and affordable housing.

“It’s a small cost relative to the price of a home but it’s going to act as an incentive for people to use the home productively,” Mr Moore said of the proposed tax. 

There are growing calls to impose a tax on the owners of so-called 'ghost properties'. Picture: Getty

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Mr Brailey said it was a good first step.

“We want to see incentives to encourage people to use unoccupied dwellings,” he said. 

“You don’t want to discourage investors but make those properties more accessible for people who are in a housing crisis.”

But the tax in its current state is not without its issues.

“The vacant property tax is a complex tax,” Mr Moore said. “You have to self-report, so it’s difficult to verify and it’s difficult to enforce.”