Negative gearing changes will not address housing supply issues: PM

Former treasurer Joe Hockey has issued a warning as the treasury department looks at negative gearing changes.

Tinkering with negative gearing will push landlords to increase rents, former treasurer Joe Hockey has warned, as Anthony Albanese insists Labor is not considering changes to housing tax concessions ahead of the next election.

After previously leaving the door open to future negative gearing changes, the Prime Minister hardened his stance on Thursday declaring “no, we’re not” when asked if Labor was “considering” the reforms ahead of the next federal election.

“What we’re doing is planning for our Homes for Australia policy,” he said.

“That’s the policy that we have, and that’s what my government has focused on.”

Mr Albanese said he was concerned changes to negative gearing would not address Australia’s shortage of housing. “I’m not convinced it will make any difference that’s positive when it comes to supply,” he said.

Prime Minister Anthony Albanese. Picture: Martin Ollman

This week Mr Albanese has also repeatedly said he had “no plans” to change negative gearing, which was the same language he used prior Labor’s overhaul of the stage-three tax cuts.

In July last year Mr Albanese said the government had “no plans to change our position” on the tax cuts.

“We have no plans to touch or change negative gearing,” he said again on Thursday.

Mr Hockey said Australian governments should try to “skew” the housing system to favour new builds, rather than try to squeeze marginal benefits from changes that mostly impact the existing stock of homes.
“If you can have additional incentives for anyone who buys a new property, then it will stimulate the housing market, but it’s got to be a comprehensive plan,” he told the National Press Club on Thursday.
Mr Hockey said negative gearing changes would lead to landlords who were struggling to pay the interest on a loan adjusting by increasing rents.

Former treasurer Joe Hockey speaks at the National Press Club of Australia. Picture: Martin Ollman

Peter Tulip, chief economist at the Centre for Independent Studies, said tax changes were an ineffective instrument to increase housing supply.

“The estimates of the effect of negative gearing and capital gains tax concession are really tiny,” he said.

“Fiddling around with things like that is really a distraction from the big issues in housing policy.”

Mr Tulip said estimates on the effect of zoning restrictions showed it had a “huge” impact on housing affordability issues.

“This (negative gearing) discussion occurs because the federal government does not have direct control over housing, all it has is control over tax and spending so they are talking about what they can do rather than what is relevant or helpful,” he said.

“It is symbolic rather than practical.”

RMIT social and affordable housing expert Dr Liam Davies said the Commonwealth foregoes about $6bn a year in tax revenue due to negative gearing and capital gains tax discounts, for which there was “very poor transparency of outcomes, particularly for tenants”.

“There is another option: to make negative gearing and capital gains tax an opt-in system for investors whose properties meet national standards for fair rental contracts and construction quality,” he said.