Labor’s reckless housing policy
LABOR’S housing policy is certain to reduce property prices and could lead to long-term rent increases.
The decision to end negative gearing (except for newly constructed properties) and to dramatically increase investor’s capital gains tax liability was designed to tackle housing affordability at a time when property prices were surging.
It was a dumb policy then but now, as property prices continue to fall, Labor’s policy is nothing short of reckless idiocy. For the close to 70 per cent of Australians who either own their home or are paying it off, there is nothing positive about their biggest asset falling in value.
The depressed housing market has led to Opposition Leader Bill Shorten making some wildly contradictory remarks in defence of a policy that is under renewed pressure with a range of experts urging Labor to rethink the plan.
Appearing on The Bolt Report on Sky News Australia last week, Shorten claimed in one breath that his policies were needed to help firsthome buyers enter the market and with the next breath he said that they would have negligible impact.
“If you’re selling the family home, none of our policies affect you,” Shorcriminate ten claimed. Pardon me? Yes, it’s true that owner-occupiers will not be impacted by Labor’s CGT increase but they will feel the full impact of the market’s downturn, and it’s downright disingenuous to claim otherwise.
Empty nesters and retirees downsizing to use funds from the sale to finance retirement will be adversely affected, along with every one else.
Shorten continued: “Our policy isn’t going to make a big impact on prices. I’ve got teenagers … Why is it fair that when they bid for a house, there’s someone getting a taxpayer subsidy for their sixth investment property? What we’re doing is winding back an unsustainable tax policy.”
If your policy won’t negatively impact prices, how will it help your children buy a home? And, why dis- against those investing in property as opposed to the share market or business activities?
It didn’t get any clearer as the explanation continued. “If you look at the total value of housing stock in Australia and then you look at the amount that is negatively geared, the negatively geared amount is a very small proportion of the overall housing stock,” Shorten said.
Which is it, Mr Prime Minister-InWaiting? Are your policies, as promised, going to make housing more affordable or will they have next to no impact — in which case, why even bother?
If negative gearing properties are such a minuscule proportion of the overall market, then why is the policy “unsustainable”?
Further, how can a policy be unsustainable given ATO data shows that only 9.6 per cent of taxpayers used negative gearing in 2016, down from 13.4 per cent in 2013?
Shorten finally found some clarity in explaining that housing prices are affected by job security, land availability and bank lending practices but that still doesn’t explain why Labor is clinging to a policy that will hurt ordinary families.
Under Labor’s plan, those who already have negative-geared properties will maintain entitlements. Economists predict the grandfathering provision will likely see investors less likely to sell which has undesirable implications.
Why should property investors who pay stamp duty upon purchasing a property, ongoing land taxes and CGT when selling be denied the opportunity to claim the costs of their investment, particularly when any rental income earned is taxed. The one in 10 Australian taxpayers who negatively gear a rental property are simply using the same rules that apply to those investing in shares or other wealth creation vehicles by deducting costs against income earned.
Property Council of Australia CEO Ken Morrison has warned that Labor’s policies are designed to take investors out of the market and would lead to a host of problems.
Modelling by Cadence Economics, commissioned by Master Builders Australia, revealed Labor’s plan could see 42,000 fewer new dwellings and 32,000 fewer full-time jobs.
It’s time for Labor to drop a policy that is more about the politics of envy and ignorance than sound economic management.