Government urged to scrap property investor tax concessions

A coalition of housing, homelessness, and welfare organisations has urged the federal government to get rid of investor tax breaks in order to help build more social housing across Australia.

Campaign group Everybody’s Home has released a new report that suggests housing affordability has plummeted in Australia due to the current tax structure that seemingly incentivises private property investment over investment in social and affordable housing.

According to the campaign’s Written Off report, government actions have been to blame for the undersupply of affordable and social housing in Australia.

In the report, Everybody’s Home estimated that the cost of revenue forgone from capital gains tax exemptions equals more than $38 billion since 2010 (based on analysis by the Parliamentary Budget Office).

When forecasting this out to 2033, the budget is expected to lose around $228 billion to negative gearing and capital gains tax concessions, it said.

The contention is that tax breaks for investors in the coming decade could result in the construction of over half a million social homes, surpassing spending on social housing by at least fivefold.

The report lambasted the government for fuelling “demand-side” assistance to people in the private market through first home buyer grants, Commonwealth Rent Assistance, and tax concessions for investors who earn incomes as landlords (such as negative gearing).

“Together these policies have a dual perverse effect of both reducing housing affordability and increasing wealth inequality,” it read, estimating that tax breaks for investors have outstripped federal spending on social housing by at least five times,” the report read.

“[Federal] government actions have not only failed to solve Australia’s supply and affordability problem, they have created and worsened them.

“By turning away from social housing and prioritising the tax treatment of investors, governments have pushed up the cost of housing. In doing so they have created a housing system that has driven inequality between those who can afford to buy and invest in housing and those who cannot.”

Emphasising the growing gap, the report noted that government expenditure on public and community housing per person was approximately $164 in 1982, which significantly decreased to $61 by 2022.

As such, the coalition group is recommending that the government not only abolish negative gearing and the capital gains tax discount to reduce “speculative” investment, but also use this money to build 1 million social housing properties over the next two decades to meet current and future needs.

It said that the cost of investor tax breaks over the next decade could build more than half a million (549,301) social homes.

Everybody’s Home has also put forward a recommendation to increase and expand Commonwealth Rent Assistance so that it relieves financial stress for people on low incomes.

Everybody’s Home spokesperson Maiy Azize commented: “In the midst of a major cost-of-living crisis, the federal government is spending record amounts on housing to line the pockets of investors. That has made renting and buying homes more expensive than ever.

“Tax handouts for investors will be a quarter of a trillion dollar mistake if the government doesn’t change tack.

“Giving money to investors is a choice. If the government wants to make housing more affordable and fairer for all Australians, it can choose to put money into homes instead of investor profits.

“The government must scrap negative gearing and capital gains tax concessions, and use the revenue savings to build hundreds of thousands of social homes. This would help end Australia’s massive social housing shortfall, and help reach the goal of another 1 million social homes within the next 20 years.

“Federal governments have walked away from supplying social housing. Instead, they have prioritised the profits of property investors, pushed up the cost of housing, and made wealth inequality worse.

“The government must take action to make housing affordable. We’re calling on them to use this week’s talks to abolish unfair tax handouts and build the homes we need.”

The federal government has been targeting social and affordable housing as part of its National Housing Accord, which seeks to build 1.2 million homes over the next five years.

However, the initiative largely relies on investment from super funds and the private sector and the rising cash rate, delays with construction, rising construction costs, and a slowdown in dwelling approvals have been cited as major barriers to this target being reached.

Indeed, recent Australian Bureau of Statistics (ABS) data has revealed a decade-low number of new homes being built, which has been flagged by Housing Industry Association (HIA) senior economist Tom Devitt, who warned that the lack of housing commencement will lead to the government being unable to reach its 1.2 million housing target.

Do you think negative gearing and other property investor ‘incentives’ should be scrapped? Let us know in the comments below!

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