The Opposition and negative gearing: it's a tax policy not a housing affordability policy

Today, the Opposition has again argued that changing Australia’s negative gearing arrangements will improve housing affordability despite the fact that even the policy’s own supporters argue it will do almost nothing to help housing affordability.

“The Grattan Institute and the McKell Institute are two of the biggest supporters of the Opposition policy to limit negative gearing. By their own estimates, this is a big tax policy and not a housing affordability policy”, said Ken Morrison, Chief Executive of the Property Council of Australia.

“We are happy to have a tax debate on the Opposition’s plans to raise $32 billion in additional property tax and its impact on jobs, rents and revenue, but we should not pretend this policy will do anything to help young home buyers buy their first home. Indeed, this policy shuts the door for many young home owners who might seek to negatively gear their first home.

The reports from the McKell Institute and the Grattan Institute speak for themselves:

The McKell Institute Report “Why housing prices won’t crash”

“This report finds that under current arrangements, house prices across Australia’s 8 capital cities are forecast to grow at 3.09% per year, while under the proposed changes, house prices are also forecast to grow, albeit at a more modest 2.60 % per year across the same 8 cities.”

Mckell also argues that most of the difference if prices can be attributed to the Opposition’s proposed changes to Capital Gains Tax and not negative gearing:

“we estimate a 0.5 per cent reduction in housing price growth per year from the discontinuation of the CGT discount.

The Grattan Institute: Hot Property

“Our proposed changes will improve housing affordability – a little. We estimate prices would be up to 2 per cent lower than otherwise.

They go on to say:

The changes will not cause housing markets to collapse: their effects on prices are small compared to factors such as interest rates and supply of land.”

“There are many ways that the industry and our political leaders can engage to develop solutions to help more Australians buy their own homes. However, changing negative gearing is not a housing affordability solution, it’s just a proposal to raise $32 billion in new taxes”, said Mr Morrison.

Media contact:  Paul Ritchie  |E [email protected]