Michael Pascoe: Negative gearing to change – it’s ‘the vibe’

Apr 26, 2024
House in construction. Project with brick and blueprint on white

“There is a tide in the affairs of men. Which, taken at the flood, leads on to fortune”

The tide – or maybe call it “the vibe” – is running in the direction of the Albanese government being pushed into changing its timid stance on negative gearing.

Just as the eventual change to the stage-three tax cuts arrived on a rising tide of advice/calls/recommendations/studies that helped push the government to make the no-brainer adjustments to the cuts’ targeting, there is a similar surge under way to alter our treatment of negative gearing.

Not by much, certainly by not by as much as it should, but still a change that would help increase housing supply and restore a little of Labor’s credibility with its voters.

The very easy, extremely modest and entirely reasonable change to expect in next month’s federal budget is to henceforth restrict residential negative gearing to new properties.

Not only would it help our housing crisis a little, it’s also good politics for a government that needs some good politics. I’ll come back to that. And our housing crisis is becoming dramatically worse. I’ll come back to that, too.

Irrefutable logic

The Conversation’s economics editor and Crawford School of Public Policy visiting fellow, Peter Martin, spelt out the irrefutable logic of this modest proposal in February.

Yes, irrefutable. The excuse for the generous and distorting combination of negative gearing and the capital gains tax discount is that it is supposed to encourage investment in housing, increasing supply.

The simple reality is that while it has triggered a boom in the landlord class, it has done stuff-all for increasing supply, let alone the most needed supply.

As Mr Martin reported, the overwhelming majority of investor loans are for existing homes, the tax system subsidising investors bidding against would-be owner-occupiers.

This minor change is the least of what Senators David Pocock and Jacqui Lambie are pushing towards. You’d be hard pressed to find a single economist who wasn’t an LNP shill to argue against it.

For that matter, the Opposition itself would be limited to not much more than repeating its stage-three tax cuts performance – criticising Albanese and Chalmers for lying, for breaking their word, but ultimately having to go along with the change.

And, again like Labor’s come-to-Jesus moment on stage three, the political balance would be in its favour as the government needs to be seen to be doing much, much more on housing – our biggest domestic challenge – as its efforts so far are not shifting the dial one iota.

For all that $10 billion for the Housing Australia Future Fund sounds like a big number, as well as the extra few billion the Greens managed to leverage out of the government, it’s not enough to stop our proportion of public and community housing continuing to shrink. It is not putting a dent in the crisis.

Despite all the nice announcements, people know the reality, either through their personal experience or via the Greens capitalising on the crisis.

Keeping the faith

Three of the four latest polls had Labor’s primary vote slipping, the Resolve poll down to 30 per cent, below the 2022 election result, with Labor and the Coalition 50-50 on two-party preferred.

The Resolve commentary rounded up the usual suspects of rising prices and higher interest rates. What it did not consider, or at least mention, was Labor supporters’ disenchantment with a perceived lack of ticker on issues dear to them.

AUKUS, Gaza, housing, Julian Assange, whistleblowers, transparency, HECS, environmental protection delays, fossil fuel influence, the level of JobSeeker, sovereignty – the Albanese government trying to remain a small target on the political highwire leaves plenty of issues over which Labor voters could make at least a protest vote with their first preference allocation.

It’s a totally unscientific measurement, but I was surprised by the conformity of subsequent comments when I wondered on Twitter (alias X) how many Labor votes were dropped over such issues – 35 out of 39 replies backing the disappointment line.

Housing policy is a matter of principle, longer-term social equity and immediate cost-of-living focus. For roughly half of Australia, it’s very personal right now.

Which is why showing a little political ticker with the smallest of possible negative gearing changes is the least that should be expected next month.

More needed, urgently

Vastly more is urgently needed, as honestly and harshly spelt out by Anglicare Australia’s latest rental affordability snapshot.

Anglicare finds present housing policy needs to be turned on its head to solve the housing affordability crisis as the only honest solution is immediately committing to building public and community housing on a much larger scale.

It was a delight to hear Anglicare executive director Kasy Chambers telling it straight on ABC News Radio on Tuesday. None of that fluffing around with upzoning, blaming councils and continuing to focus on giving private developers and investors what they want:

  • Our current rate of social housing construction is about 3000 dwellings a year
  • Just maintaining our inadequate present proportion of social housing requires 15,000 new dwellings a year
  • To solve the shortfall would require building 25,000 social homes each year for two decades

The Albanese government’s election slogan HAFF is supposed to enable an extra 4000 social and 2000 affordable dwellings each year for five years, after which the fund just continues to subsidise those 30,000 dwellings.

Anglicare wants the government’s present effective spending upended. Instead of scores of billions of dollars in tax concessions for investors each year and single-digit billions for social housing, the scores of billions need to go public and community housing construction.

Decades of federal and state governments of both stripes walking away from public housing, drunk on failed neoliberal policy of outsourcing affordable housing to the private sector, has produced the current crisis.

Present policies will not solve that crisis. It is not simply a matter of “more supply”, it needs to be the most urgently-needed type of supply, that which private investors don’t provide.

The opening Shakespearian quote in full should be kept in mind:

There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat;
And we must take the current when it serves,
Or lose our ventures.

A small adjustment to negative gearing, hypothecating the saved funds to public housing, is the very least to expect in the May 14 budget if Labor wants to keep faith with its supporters.

 

Republished from THE NEW DAILY, April 23,2024

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