Housing affordability is at the centre of this election, yet two major reforms seem all but off-limits
- Written by The Conversation
This federal election, both major parties have offered a “grab bag” of policy fixes for Australia’s stubborn housing affordability crisis. But there are still two big policy elephants in the room, which neither side wants to touch.
The first is negative gearing. This can apply to business losses relating to any investment. But in the context of housing, it allows property investors to claim annual losses incurred renting out an investment property as deductions against their taxable income.
Proponents argue this boosts the supply of rental housing by encouraging investment. Critics say it’s an unfair tax break that disproportionately benefits the wealthy while driving up house prices.
This situation has been controversial for a long time. The Hawke government tried to implement major reforms in the 1980s but these were reversed soon afterwards.
The second “elephant”, which some economists argue “put a rocket under” housing prices, is the 50% capital gains tax discount for assets held for longer than a year. This was introduced by the Howard government at the turn of the millennium.
In 2019, the then Labor leader Bill Shorten learned the hard way what can happen when you bring negative gearing and capital gains tax reform to an election as part of a “big target” platform. Yet these tax concessions remain highly contentious.
Whom do they benefit most? Are they behind the housing crisis? Is keeping them fair on the rest of us? We invited four experts to unpack this debate. Here are the elements they told us are most crucial:
