‘It would be a mistake’: Fears for housing affordability if negative gearing goes

The housing industry has come out swinging against any plans to scrap negative gearing, saying it would only cause the housing affordability crisis to worsen.

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The housing affordability crisis would only worsen and the goal of 1 million new homes in five years made almost impossible if negative gearing and capital gains tax discounts were scrapped, the housing industry has warned.

The housing and construction sectors are on high-alert after the Albanese Government this week failed to rule out looking at negative gearing or capital gains tax discounts in future budget repair.

It followed the government’s surprise policy this week to double the tax on superannuation earnings above $3 million from July 1, 2025.

HIA chief economist Tim Reardon. Picture: Supplied

In an already difficult market with soaring interest rates, Housing Industry Association senior economist Tim Reardon said housing would not be made more affordable with additional taxes.

“You put a tax on carbon to get less carbon. If you put a tax on housing, you will get less houses. That is contrary to the government’s goals,” he said.

“As you tax housing more, you get fewer homes and the affordability constraints worsen.”

He said the government was making positive steps in housing, including setting up Housing Australia as well as investing in social and affordable housing.

“Any increase in taxation on homes will move them further away from that goal,” he said.

But he urged any government to look at the past 40 years of negative gearing policy changes, including Paul Keatings bid to scrap it in the 1980s, as a “cautionary tale”.

The government released a tax expenditure statement this week which showed $48 billion in revenue went towards the capital gains tax exemption on a main residence, $23 billion for the 50 per cent discount on an asset and $3.6 billion in negative gearing.

Mr Reardon said “it would be a mistake” to think scrapping these concessions would lead to the same amount of money going back into the budget, as it would change consumer behaviour.

“These figures over-estimate enormously the additional revenue streams that come from additional taxes on housing,” he said.

Opposition leader Peter Dutton yesterday accused the government on working on its superannuation plan, and even negative gearing, “for months, presumably since the election”.

“(This is) at a time when families are seeing an increase in the pressures on their own household budgets and in their own small business budgets,” he said.

Opposition leader Peter Dutton. Picture: NCA NewsWire / Martin Ollman

Senior Labor Minister Tanya Plibersek said Mr Dutton needed to outline how he intended to deal with debt.

“Last time Peter Dutton was in government when he was the Health Minister, he wanted to introduce a $6 co-payment through Medicare because he thought that was a good way of dealing with debt and reducing spending,” she said.

Mr Chalmers has explicitly ruled out scrapping the capital gains tax exemption on the family home, but not done so for negative gearing or other CGT concessions.

“We don’t intend to reheat the policies of the 2019 election, we’ve made that really clear,” Mr Chalmers said.

Originally published as ‘It would be a mistake’: Fears for housing affordability if negative gearing goes