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Negative Gearing Is Positively Absurd

Here's how Scott Morrison can REALLY fix housing affordability.

27/10/2016 5:42 AM AEDT | Updated 27/10/2016 5:42 AM AEDT
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There are significant policy levers available for the Treasurer to pull.

Scott Morrison finally wants to talk about housing affordability. Good.

After years of pretending there isn't a problem, the Abbott/Turnbull Government has opened Pandora's Box, let the genie out of the bottle and, at long last, admitted that it is nigh on impossible for young Australians to buy their first home.

There are significant policy levers available for the Treasurer to pull, genuine actions that he could take within the remit of his portfolio, which would ease the unprecedented financial pressure on first home buyers. The problem is that he's refusing to even touch them.

So far, when talking about housing affordability, the Treasurer's been taking the easy way out and putting it all onto the State Governments, telling them to tinker at the edges of their policies and free up more land for housing developments while expediting approvals. Sure, that's one idea.

Another idea -- one that would actually change things and make it easier for people to get into their first home -- is to phase out both the Capital Gains Tax (CGT) discount and Negative Gearing benefits. These two measures cost the budget billions of dollars each year and are funnelling money straight into the pockets of the wealthiest Australians.

The CGT discount will cost the Budget $6.8 billion in the 2016-17 financial year and will mostly go to the very wealthy, with over 73 percent of the benefit flowing to the top 10 percent of income earners. Negative Gearing costs almost $4 billion each year and over half the benefits go to the top 20 percent of households.

By pouring billions of dollars into the bank accounts of the rich (those who already own investment properties), the government is increasing the cost of housing and locking others out of home ownership.

Scott Morrison doesn't like talking about this very much and I can see two possible reasons for that. It might be because he thinks any changes to Negative Gearing and CGT will "crash" the economy, as he says, or perhaps it's because the top ten negative gearing electorates in the country are all Liberal electorates.

Call me a cynic, but my money's on the latter and that's because the mathematics of politics is as ruthless as the economics of home ownership.

It's pretty safe to assume that a disproportionate number of those who own multiple investment properties vote for the Liberal Party. Turnbull and Morrison know that they rule for the wealthy and they will only enact genuine change to make the housing market fairer if they're dragged to it, kicking and screaming.

Being a young Australian right now is a lot like playing a game of Monopoly, but you start with no money and the whole board's already been bought up by the other players; you're pretty much guaranteed to go bankrupt before you even get a rundown flat on Old Kent Lane.

It's high time we recognised that the fix is in; the Australian property game is rigged in favour of those who were born in the right decade and have already Negatively Geared their way to multiple investment properties. Young Australians have been priced out of the market and are so disadvantaged financially that they can't even establish a foothold to buy their own homes, let alone avail themselves of the generous government discounts aimed at investors.

The Greens know that the current set up is unsustainable and that now is the time to restore a little fairness into the housing market. We want to bring an end to the Negative Gearing subsidy, while grandfathering those who are already availing themselves of the scheme, and phase out the CGT discount over five years.

So far, Scott Morrison has been all talk. He's shown nothing but his eagerness to continue governing for wealthy baby-boomers while rolling out the red carpet for housing market speculators.

Currently younger Australians are being slugged twice because they're paying for wealthy investor's properties through both historically high rents and their income tax contributions. The really concerning thing is, if we continue to allow the CGT discount and Negative Gearing to bleed the Budget as they do, that will never change.

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Sarah Hanson-Young is the Greens' Finance Spokesperson.

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