Here we go again. Australia’s real estate treasurer, Scott Morrison, appeared on ABC’s Report last night whereby he repeated the lie that Labor’s proposed negative gearing reforms – which would restrict negative gearing to newly constructed dwellings – would reduce the rental stock and force-up rents:
“You’ve got a quarter of the investment property – the rental property in this country – is owned by mum & dad investors. Now, you need people to own rental stock otherwise people’s rents go up. And this is why [Labor’s policy] has always been, we think, a very ill-considered way to deal with issues that are happening in the Sydney and Melbourne markets…”
So, according to Morrison, negative gearing boosts the rental stock and holds down rents. Really?
Surely, if negative gearing had any impact on the cost of renting, its abolition between 1985 and 1987 would have caused rents nationally to explode? Yet, the evidence shows absolutely no impact (shown in red):
And why would it when 9 out of ten investors purchase established dwellings:
Hence, the overwhelming majority of investors are not creating new housing stock, but merely substituting homes for sale into homes for let. Even if investors sold their rental homes, it would merely turn renters into owner-occupiers, leaving the supply-demand balance largely unchanged.
Besides, Morrison’s comparison of Labor’s policy with the 1980s experience is misleading given Labor’s plan would redirect investors towards newly constructed dwellings, thereby adding to supply and lowering rents (other things equal).
In fact, Labor’s negative gearing plan is exactly the same approach as the Coalition’s policy on foreign investment, which aims to boost dwelling supply and lower rents. May I remind Scott Morrison of what he said in February regarding Australia’s foreign investment regime:
“The Government’s policy to channel foreign investment into new dwellings creates additional jobs in the construction industry, increases housing supply and supports economic growth”.
Which of course follows Kelly O’Dwyer’s comments in 2015:
“Currently the framework seeks to channel foreign investment in residential real estate into new dwellings in order to increase the housing stock for Australians to build, buy or rent. Foreign investment is encouraged in new dwellings whether they be apartments, units or homes because in addition to creating more supply, it also creates more jobs for the building and construction sector – all of which helps to grow our economy”.
How is Labor’s policy with regards to negative gearing any different to the Coalition’s policy on foreign investment?
Both policies seek to channel “investment into new dwellings”. Therefore, both should create “additional jobs in the construction industry”, “increase the housing stock for Australians to build, buy or rent”, support “economic growth”, and increase rental availability and affordability.
Joe Hockey understood this, which is why he urged the following is his valedictory parliamentary speech:
“…negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property…”.
If you want to understand the depth of the Coalition’s negative gearing lies you can read more about them here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here. I could go on but I’ve run out energy. Note that I could provide another 401 separate links in which the Coalition and its affiliates have lied about negative gearing.
