Why messing with negative gearing rules is bad for renters

Messing with negative gearing rules will only make an already tragic tale worse, writes Tim McIntyre.

ANALYSIS

Australia is in a rental supply crisis and has been for some years now.

Since Covid, asking rents grew by more than 20 per cent in consecutive years, while vacancy rates fell to below 1 per cent in some capitals.

The only way this situation will change is if more supply becomes available for renters.

And as much as we love to hammer landlords for being greedy by hiking rents and making families live in substandard properties because they’ve got no other choice, the fact of the matter is those landlords are the only ones who can deliver more supply.

Make no mistake. Messing with negative gearing rules, whether capping the number of properties eligible per person or taking away the tax benefit altogether, will deter landlords from entering the market and providing rental properties to the third of the adult population that still so desperately need them.

Those already in the market will likely either sell their properties, reducing the rental stock further, or hike up their rents to cover their extra costs.

See, landlords, like any private investors, don’t just stick around and cop punishment. They leave and take their money elsewhere. Property investment is a free market. People are free to invest and they’re free to exit the market too.

It’s in a government’s best interest to boost supply. They can do this by facilitating construction of new properties and also by enticing private investors to purchase and supply rental properties to the market.

That is, if they want renters to have somewhere to live. And anyone who has seen the numbers of tents in parks in our capitals in recent years would observe that, sadly, a lot of renters don’t have somewhere to live.

We know how woefully behind the pace the construction of new properties is. Forcing investors to take supply out of the market will only make an already tragic tale worse.

Originally published as Why messing with negative gearing rules is bad for renters