Bereft of policy and facing electoral annihilation, Prime Minister Scott Morrison has resorted to spewing more rent lies about Labor’s negative gearing policy. From The Courier Mail:
“The house you own will be worth less and the rent you pay will be more (and) Labor just doesn’t understand this,” he said.
“It’s not just homeowners being hit, it’s renters too.
“With fewer investment properties in the market, and investors having to earn more because their values are going down, rents will go up. That is what happened last time Labor tried this. They never learn from their mistakes”…
“Even if you don’t negatively gear, if you’re in an area where others do, you have to ask yourself what will it do to your house price and the rent you pay.”
For the thousandth (but certainly not the last) time, let’s debunk Scott Morrison’s rent lies.
First, negative gearing inflates prices, turning would-be owner-occupiers into renters. Reducing investor demand would boost the number of first home buyers, thereby transferring homes for rent into homes for sale. Indeed, there is a direct inverse correlation between investors and owner-occupiers. Thus, if you reduce the former, you increase the latter:
Second, and related to the above, 90% of investors purchase established homes not new homes. Therefore, they aren’t actually adding to supply, but rather inflating the value of existing homes and turning homes for sale into homes for let:
Again, unwinding negative gearing would merely turn renters into home owners, leaving the rental supply demand equation unchanged.
Third, Labor’s policy will direct negative gearing into newly constructed dwellings only, thereby boosting overall supply (other things equal) and placing downward pressure on rents.
Because of this, one Sydney developer this week claimed that Labor’s policy would be a “shot in the arm” for the off-the-plan market. The Real Estate Institute of Western Australia (REIWA) also recently argued that Labor’s policy would make rents more affordable, whereas major developer Stockland stated that Labor’s policy would put a rocket under new home construction.
Of course, this is precisely the stated objective of Labor’s policy: to put taxpayer subsidies to work to boost supply and lower both prices and rents.
Fourth, the stated policy objective of Labor’s policy is exactly the same as that used by the Coalition to support its policy of restricting foreign investment to newly constructed dwellings. This, too, was aimed precisely at boosting dwelling supply, economic activity and jobs, as explained by the chair of the foreign investment inquiry, Liberal MP Kelly O’Dwyer:
“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”.
Therefore, how can Scott Morrison credibly support restricting foreign buyers to new builds because it boosts rental supply, jobs and growth, but not negative gearing? His position is utterly contradictory.
Finally, landlords in Australia already charge what the rental market can take. It is a ‘market’ after all, not a charity. Landlords don’t keep rents low just because they receive negative gearing benefits. Nor will they be able to magically lift rents if/when negative gearing is removed. Remove negative gearing and prices would fall, lifting rental yields. It’s hardly rocket science.
Scott Morrison’s negative gearing rent lies have been debunked so many times, it’s hard to believe he can make these statements with a straight face. It’s time to send him to the electoral guillotine.