Labor’s proposed negative gearing changes could cause soaring rents

Millions of tenants could be hit with soaring rents under Bill Shorten’s plan to cut back the tax break for investors across NSW. The Daily Telegraph can reveal which suburbs will be hardest hit. SEE IF YOUR’S MAKES THE LIST.

• Labor to spend billions on affordable housing
• Rental stress hits 300,000 NSW homes

Close to a million NSW households could face soaring rents under Bill Shorten’s negative gearing restrictions — and it’s Labor electorates that top the list of where battlers will be hit.

Exclusive data paints a picture of where rents are expected to rise under Bill Shorten’s plan to cut back the tax break for new investors across NSW.

As multiple experts predict the squeeze on new investors will steadily drive rents up over years, it can be revealed that the Labor-held electorates of Sydney, Parramatta and Kingsford Smith would be hardest hit in the state by the on flow effect of rising rents.

Experts believe the squeeze on investors will be passed down to renters. Picture: Lukas Coch

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Treasurer Josh Frydenberg told The Daily Telegraph the rent increase “will in the least force people to tighten their belts and an increase the likelihood of more people requiring social housing.”

Mr Shorten has painted negative gearing as a policy that helps the wealthy, but the predicted impact on everyday renters will hurt his own voters.

BIS Oxford Economics director Frank Gelber said the impact on rents from the policy needed modelling but should not be underestimated.

“It’s not trivial, it’s a significant amount”

Even a one per cent rise in rent would cost the average two bedroom renter in NSW an extra $265 a year.

ABS data shows that more than 826,000 private dwellings were rented in NSW in 2016.

Of those, an electorate based breakdown shows that the Labor-held electorate Sydney has the biggest number of renters — 50,450.

This is followed by Labor electorates of Parramatta (29,384) and Kingsford Smith (29,266).

Labor electorates of Watson, Grayndler and Barton also feature in the top ten spots where renters will be hit by hikes.

Liberal electorates of Reid, North Sydney and Bennelong also make the top 10 list, plus Malcolm Turnbull’s former electorate of Wentworth.

Mr Shorten’s policy will wind back tax deductions on investment properties by limiting negative gearing benefits to newly built homes over the long term.

This will not be retrospective and existing investment properties can continue to claim the tax breaks.

Mortgage company boss John Symond warned last month the changes could “tip Australia into recession”.

“Hundreds of thousands of people who rent in New South Wales will be hit with higher rents if Labor gets its way and introduces its big new housing tax,” Mr Frydenberg said.

“Experts have been warning for months that Labor’s plan to abolish negative gearing as we know it will drive up the cost of rent.

“For every one per cent increase in rent, an average renter in New South Wales would pay an extra $250 a year.

Treasurer Josh Frydenberg said the rent increase may lead to tenant being forced into social housing. Picture: Kym Smith

“This is a significant increase that will hurt singles, couples and families.

A spokeswoman for Mr Shorten said Labor’s reforms would see more houses being built adding “that’s good for renters”.

“This is because new negative gearing subsidies will still be available but for new properties only,” she said.

“Not surprised the Liberals continue to team up with vested interests to run baseless scare campaigns — they’ve got no plans for housing and they only care about the top end of town.”

Labor announced a separate affordable housing policy last Sunday to create 250,000 affordable dwellings over 10 years has been considered an attempt to deflect criticism over rising rents under the negative gearing changes.

Housing Industry Association principal economist Tim Reardon predicted renters across Australia will be hit with an extra $500 million in additional rental fees each year if Labor’s changes to negative gearing and capital gains tax are introduced.

“The impact on renters is quite simple, if you increase the tax on investors, those costs will be passed through to renters,” Mr Reardon told The Daily Telegraph.

“A doubling in the rate of capital gains tax on investors is something they will factor into the cost of rental prices,” he said.

“The proposed changes are estimated to raise an extra $500 million in tax revenue per year for the federal government, so the cost of that will be shared among renters.”

CAPITAL PUNISHMENT TO IMPACT TENANTS

Frank Gelber.

BIS Oxford Economics director Frank Gelber says Bill Shorten’s proposed changes to negative gearing will push up rents, force more Australians into public housing and cost state governments money.

The leading economist said Labor’s promise to limit negative gearing to new homes and cut the capital gains tax discount from 50 per cent to 25 per cent would be “damaging” for Australia.

Mr Gelber said property investors drive economic growth by using their capital to fund the construction of apartments and houses across the nation.

“At the end of the day, what it means is the next time we have to build and we need a new lot of investors to finance growth in the rental population, people are going to have to pay a higher rent to underwrite the investment,” he said.

“From the rental market point of view, a lot of those people are struggling to pay the rent, and a lot more of them will end up in welfare housing. State governments have been trying to exit welfare housing for decades, and I reckon they will end up carrying the can.”

Mr Gelber said the negative gearing changes were a worry, but the biggest threat to the economy was cutting the capital gains discount in half.

“We have already frightened investors off, and now we are going to make sure they never come back again by increasing the capital gains tax they pay and reducing their tax concessions on interest payments,” he said.