Negative gearing to stay for the sake of renters, says Morrison
In a pre-budget speech today, Treasurer Scott Morrison said that restricting negative gearing would worsen housing affordability problems for renters and hurt “mum and dad” investors.
In the lead up to the May 9 budget announcement, Morrison’s argument was that restricting negative gearing tax breaks wouldn’t help first home buyers get into the market - and would in fact drive up the cost of housing for the 30% of Aussies who rent.
And it was renters, along with “mum and dad” investors, that the Treasurer was preoccupied with during his address to the Australian Housing and Urban Research Institute today.
“Our private rental stock is owned by mums and dads. Figures to be released later this week show 2 million taxpayers in Australia have an interest in a residential investment property. 72% own just one property and 90% own no more than two,” he said.
"Just over 1.3 million of these taxpayers negatively gear their investments, including 58,000 teachers and one in five police officers. Two-thirds of those taxpayers who negatively gear their investments have a taxable income of $80,000 or less."
Instead of changing negative gearing rules, Morrison suggested that the Federal Government was working to establish an Affordable Housing Finance Corporation, similar to the The Housing Finance Corporation in the UK.
An Affordable Housing Working Group had previously “found a 'financing gap' is a major barrier to the supply of affordable housing” and this body would work to remedy that issue, by acting as a "bond aggregator." This means it would “issue bonds to the market, and on-lend these funds to community housing providers — allowing them to access cheaper and longer term finance.”
Regarding those looking to buy their first home, Morrison maintained his argument from October last year, when he said that state governments needed to increase the supply of land to the property market.
With property demand and therefore prices rising through the roof, particularly in hubs like Sydney and Melbourne, where prices have risen 19% and 16% respectively in the past year, it has become harder and harder for buyers to get a foot in the door.
The rate of homeownership in Australia fell from 71% to 67% between 2002 and 2014, with young homebuyers hit hardest. Less than 30% of 25-34 year olds owned a home in this period, while 52.4% of 35-44 year olds did.
And it seems there are no quick answers or easy relief for beleaguered homebuyers.
"One budget will not turn these issues around in isolation, but we can make a start. There are no single or easy solutions and the payback is achieved in some cases over a generation – not an electoral or budget cycle," Morrison said.
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