Greens leader Adam Bandt will today ramp pressure on the Albanese Government to fix the two party’s housing crisis.
At the National Press Club, Bandt will argue that the federal government can “collectively act to protect the interests of renters “by using national cabinet”, citing Scott Morrison’s decision to seek a freeze on evictions during the Covid epidemic. He claims that a two-year rent freeze would be possible if state governments merely extended their current one-year cap on rent increases.
Bandt will argue that Canberra gives “billions… to investors and landlords through negative gearing and capital gains tax handouts”. The measures, he says, are “driving up prices and rents”.
The Greens leader will propose the elimination of the 50% capital gains discount for houses and interest deductions for individuals with more than one investment property purchased before 1 July 2023, saving $74.1bn over 10 years.
The Greens want these funds to be recycled as $43.6 billion in increased rent assistance, $16 billion towards a fund to incentivize governments to freeze rent, and $9.8 billion towards constructing 225,000 publicly owned rental dwellings.
According to the PBO, “the policy would greatly reduce the return on investment for landlords, such that many would be unlikely to invest unless prices fell significantly or rents increased significantly.”
I agree with the PBO. Removing the capital gains discount will put a big dent in the property investment case for Australia’s army of specufestors and price gains will reverse and fall.
The capital gains discount has been a key prop to the house price bubble since it was introduced by Peter Costello in 1999.
This is very good in principle, and MB has argued for a long time to cut the discount.
But not if you aim to fix a housing shortage and rental crisis with more supply. If that is your goal, a better idea would be to cut the discount on established properties and leave it on new dwellings.
Perhaps that’s what The Greens have in mind, but the media is not reporting it. Even then, falling prices will retard supply.
So will the rent freeze and the public building, which will raise costs and reduce returns further.
Over ten years, The Greens endorsed maniac immigration program will create the need for 2m new dwellings, so the public construction will still be only 10.25%.
Yet, somehow, a private sector with little to negative returns is supposed to build the other 89.75%.
The economics of The Greens’ reform doesn’t add up, and the housing shortage crisis would only intensify.
Unless falling house prices are so significant that they trigger a recession, unemployment shock and a run higher in the number of persons per dwelling.
I’m all for deflating house prices, but I don’t think that’s what The Greens have in mind.
If you want to run lunatic levels of immigration, then Australia’s supply inelastic housing market needs rental and capital gains to respond.
If you don’t want capital and/or rental price gains, then cut immigration.
