Housing affordability is going to continue to be a big issue. I believe Labor still has the best policy to address this issue.
There is no question that negative gearing on investment properties has distorted our housing market. A $600,000 home for a couple who wish to live in it will cost them $700 a week in principle and interest repayments. That same home if purchased by an investor will cost $100 week after tax deductions and depreciation.
It is easily understood why so many people are finding themselves being priced out of the property market. I hear some people say that the younger generation must accept that they may never own their own home (normally said by fortunate people who do own their own home). However, this is a perfect recipe to create a society where there is even a larger gap in wealth between low and middle income earners and high income earners who are fortunate to own their own home, leverage their equity and receive generous tax incentives to own investment properties.
Our Lane Cove Labor branch last year passed a motion suggesting reform on negative gearing by restricting negative gearing to newly constructed homes only. We also called that any existing negative gearing arrangements be grandfathered. This is a great example of how rank-and-file members can contribute towards creating national policy within the Labor party. This policy was adopted by the Labor party in February 2016. At our October branch meeting our membership unanimously called upon the Labor party to retain this policy.
We know as a population we are living longer, getting married or partnering and having children later in life. The phenomena of the single occupant or couple only household is also increasing. According to the Australian Bureau of Statistics, in 1900 there were an average of 6 people per household in Australia, in 1950 that number reduced to an average of 4 and today we now have less than two people per household in Australia.
Labor’s policy to restrict negative gearing to newly constructed residential property is a big step to creating more housing supply as property investors play a crucial role in helping to get new property projects started. Often, owner occupiers do not have the means or the will to purchase a home "off-the-plan" two years before they can move in. This policy will ensure that existing housing remains available for the owner occupier market.
On Election Day I spoke with several voters who opposed Labor's negative gearing reforms claiming that this policy would cause a crash in property prices and reduce properties available for rent. Really? If current arrangements are grandfathered there is no need for investors to immediately sell their existing investment properties. Hence, I don't see where a property market crash would come from. What about the belief that our policy would reduce the number of properties available for rent? Well if we are incentivising investors to take the risk and provide new housing supply how can there be a shortage of rental properties? Let's make this clear, an investor competing with a wannabe owner occupier over the purchase of an already built home does not add to housing supply. It means one less home is owned by an owner occupier. Even though that home is now available for rent, it does nothing to increase overall housing supply.
In summary, in a society where we need more housing, Labor's policy of funnelling investor’s money towards the creation of new housing supply is one serious step to help address the issue of housing supply and affordability.