Restrict negative gearing to new construction

Letter to the Editor
David Collyer

THANK YOU, Tim Colebatch, for your clear-eyed review of our hopelessly distorted housing market (”Housing at these prices will leave us all a heavy debt to bear”, Comment, 23/3). Your solution – to quarantine negative gearing – invites the property spivs to (again) deafen us with the lie that ending negative gearing would reduce the supply of rental housing and increase rents.

But it is possible to restrict negative gearing and the canyon it has carved in the tax system while reducing rents. One way is to allow negative gearing only on built-to-rent housing construction: landlords who buy existing homes to rent out add nothing to supply.

The other is to allow negative gearing only while the property is occupied but not while it is merely ”available” for rent.

Australia’s population growth sets heavy demands on building occupancy and housing construction. Both these measures would increase the supply of housing, to the benefit of all.

1 Comment

  1. Bruce Gray04-04-2010

    Well said. I agree the role of investors should be to create new supply (for the high popn growth rate the Fed Govt desires).

    In addition, the other solution bandied around currently is to cap negative gearing tax deds.

    Whatever, a smart govt solution will be graduated, so as not to shock free market dynamics.

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