Australia is in the midst of a housing affordability crisis. Rents have skyrocketed, home prices have soared out of reach for many, and incomes have stagnated. This has priced a whole generation of Australians out of the housing market.
The root cause of this crisis lies in decades of housing policy that favors wealthy investors over home buyers. Two policies in particular have distorted the housing market: negative gearing and the capital gains tax (CGT) discount. Together, these generous tax breaks have fueled dangerous levels of speculation in the property market.
A new survey from Unions NSW lays bare the extent of the problem. The peak body surveyed over 2,000 workers and found 72% want reforms to negative gearing, while 66% support reducing the CGT discount on investment properties.
The results expose a striking generational divide. Young Australians are overwhelmingly in favor of reform, with support as high as 79% among 18-24 year olds. Older Australians reliant on rental income are also strong supporters, with 82% of over 65s wanting change.
As Mark Morey, Unions NSW Secretary, notes: “It’s currently easier to buy your 10th property than it is to buy your first.” First home buyers have effectively been locked out while wealthy investors snap up multiple properties.
The Albanese government now has a mandate for reform. With public opinion firmly behind change, they must act to create a fairer housing system.
What reforms are needed?
Negative gearing allows investors to deduct rental losses against their wages. This gives property an unfair tax advantage over other assets. Meanwhile, the 50% CGT discount rewards speculative behavior by halving tax on investment property profits.
Together, these policies fuel dangerous levels of speculation. Investors are incentivized to take on huge debts to chase capital gains rather than rental income. This pushes up prices and shuts ordinary home buyers out of the market.
There are several options to reform these tax settings:
- Limit negative gearing to one property per person. Prevent deductions for vacant properties.
- Cut the CGT discount to 25% for new properties. Grandfather existing properties.
- Abolish negative gearing entirely. Grandfather the CGT discount to pre-2024 properties.
Modelling shows these measures could save up to $99 billion over four years. The budget savings should be reinvested into programs that improve housing affordability and increase supply.
The time for reform is now
With rents and prices spiraling out of control, Australia urgently needs a fairer housing system. The warped incentives created by negative gearing and the CGT discount have enriched property barons at the expense of ordinary home buyers.
It’s time to restore balance and give young Australians a fighting chance to own their own home. The Albanese government must show courage and stand up to the vested interests profiting from the status quo.
With public opinion on their side, now is the moment for reform. Let’s create a housing market that works for all Australians, not just wealthy property investors. The time for tinkering is over – we need bold action to tackle this crisis at its roots.