Although some believe changes in property taxes could help alleviate the housing crisis, experts warn it could drive rents up even further.
Australian National University economist Ben Phillip says negative gearing and the Capital Gains Tax discount are not major contributors to growing house prices. “Negative gearing is a relatively small deduction, so it’s unlikely to have a dramatic impact on prices, particularly if the government grandfathered existing investors,” he says.
Chief economist of the Centre for Independent Studies Peter Tulip says increasing taxes will lead to less investment and fewer homes being built. “Taxing landlords increases rents because incentives to build are reduced,” he says. Treasury figures show about 1.1 million property investors recorded total rental losses of $7.8 billion in FY2021 with a tax benefit of about $2.7 billion.
Tulip says the best way to address the housing crisis is to reduce the amount of red tape and delays around zoning and planning. He says this could lead to higher-density development in better locations close to public transport. University of Melbourne research says eliminating negative gearing could reduce total housing supply by 1.8% and increase rents by 2.5%. HIA Chief Economist Tim Reardon says increasing taxes will result in less investment in housing, less construction and worsening affordability.