The Housing Industry Association has slammed any proposal to remove or reduce negative gearing, which it says will further worsen Australia’s ongoing housing crisis.
Australia has been on the receiving end of a shovel of mixed messages from the government on negative gearing policy last week, whose stance on reform still remains unclear.
Prime Minister Anthony Albanese, Treasurer Jim Chalmers and various Labor backbenchers seemingly flip-flopped over whether the government would – or should – be open to negative gearing changes after it was revealed the Treasury was requested to explore reform options.
But the Housing Industry Association has blasted the idea, telling Build-it any such changes would be a disaster in the nation’s efforts to solve it’s housing and rental woes.
HIA Chief Economist Tim Reardon said such changes won’t lead to more affordable housing, arguing that taxing investors more would further reduce housing supply, driving up both rent and home prices.
“There’s a very short-term perspective, particularly of people in the public domain in Canberra who think you can increase taxes on housing or investors and somehow increase the supply… it’s a very bizarre logic,” he told Build-it.
Speaking to Build-it at last week’s Construction Outlook breakfast in Brisbane, Mr Reardon said it was imperative the government avoid measures that could erode market and investor confidence, especially in the new home construction space.
“The biggest problem is restoring market confidence in the housing industry after the last couple of years,” he said.
“The last thing we need is for the government to add to that uncertainty at the moment.”
“If consumers have a reason to withhold purchasing a new home, they will, so we don’t need this discussion (right now).”
What is negative gearing?
Negative gearing allows investors to offset losses on rental properties against their taxable income, with critics arguing it has fueled housing demand and driven up property prices, making it harder for first-home buyers to enter the market.
Reform advocates say limiting or removing negative gearing could reduce investor competition, ease housing affordability issues, and redirect tax benefits toward increasing housing supply or funding public services, especially social housing.
Both property owners and investors will be seeking greater clarification over the current week regarding Labor’s stance on the policy after Prime Minister Albanese seemingly left the door open to possible changes on Friday.
However, with 90 per cent of negatively geared property owners having just one negatively geared property, Mr Reardon says proposed modifications would do more harm than good, with much of the Australian public misled over who owns negatively geared homes.
There’s an argument that somehow limiting households to negatively gearing one property…is somehow better than one person with ten properties,” he said.
“There’s certainly no difference from an equity, social, or economic perspective, whether it is one person with ten properties or ten with one.”
“The average income of someone negatively gearing a property is under $120,000 if you looked for the median person, they are a 40-year-old female nurse earning less.”
On Friday, Mr Reardon hinted the HIA could conduct a policy change-up of their own, telling Build-it the association may retake the reigns on communicating how increased taxes on property investors would lead to fewer homes being built.
“We spent a lot of time in 2019 communicating to people about how increasing taxes leads to fewer homes being built, but in the last few years, we stopped doing that to allow other people to communicate that message, and perhaps that message hasn’t gotten through,” he explained.
