Higher rents won’t help housing affordability

Treasury documents released today highlight the risk of rising rents under the Opposition’s proposed changes to negative gearing.

Property Council Chief Executive Ken Morrison said policymakers should heed the advice from Treasury warning of adverse rental outcomes for Australians.

“Treasury identified that investors face falling returns,” Mr Morrison said.

“We believe lower returns from investment properties would mean less investment, a tighter market and therefore upwards pressure on rental prices.

“We question the point of a ‘housing affordability’ policy that does next to nothing to reduce house prices but risks an increase in rents.

“Domestic investors could also seek to recoup losses in tax benefits through higher rents.

“Any proposed solution to Australia’s housing affordability challenges shouldn’t come at the expense of people renting.

“Increases in rent would only exacerbate the housing affordability challenge and make it even more difficult for people renting to enter the housing market as owner occupiers.

“Negative gearing should be retained with policy efforts focused instead on pulling the levers that can have a real impact on supply and prices.

“There is scope for the capital gains tax discount to be reduced to 40 per cent but running the risk of higher rents from removing negative gearing without any significant fall in house prices is a gamble no government should take.

“We’ve put forward a raft of policy measures in our pre-budget submission that would have a much more meaningful impact in reducing the cost of housing burden for everyday Australians.”

Media contact:  Fiona Benson |  E fbenson@propertycouncil.com.au