Are John Howard and Peter Costello right? Are state governments responsible for high housing prices?

Since the debate kicked off a fortnight ago, the feds have hammered the states on the matter. They’ve pointed the finger back at the feds, but South Australian Premier Mike Rann has announced a review of long-term industrial and residential land requirements. Yesterday the NSW Government pledged to make available 60,000 lots in greater Sydney by July 2008.

Matt Price called the PM’s bluff in the News Limited tabloids over the weekend. He called it classic Howard, claiming credit for the housing boom that has increased the wealth of Australians but refusing to acknowledge the downside of federal policies like first-home owners’ grants, capital gains tax exemptions and negative gearing.

In fact, this issue might be heading straight back to the consequences of the Government’s reluctance to entertain serious tax reform. The Tenants Union of Victoria made an interesting contribution to the debate yesterday. “We have a housing crisis in Australia that’s been caused by a severe shortage of affordable property,’ policy officer David Imber said. “Simply releasing land, which almost all States have already done, is not going to suddenly create affordability because it won’t address the underlying reason for the crisis – the unfair tax system whose endless tax concessions has contributed to speculation, record high prices and declining levels of affordability.”

And Imber broadened the debate:

One of the symptoms of the housing crisis is that people are living where they can afford, principally in outer suburbs, rather than where their families, jobs or social connections are… Urban sprawl has negative environmental consequences as well as social and economic costs. Continuing to eat up farming land for housing is only going to lead to people paying higher transport costs and everyone else paying increased taxes for new essential services like hospitals and schools.

Which creates new cost burdens, largely for state governments. Who will blame the feds? Who will then point the finger at…