The Greens have demanded limits on tax discounts for property investors in exchange for their support for the government’s “help-to-buy” housing scheme, which will be debated in parliament this week.
The federal government will likely need the support of the Greens to legislate a program that will allow some first home buyers to pay just a 2 per cent deposit for a home.
Under the scheme, the government will cover up to 40 per cent of a home’s cost and become a co-owner of the home, with homebuyers able to purchase that stake back at a later date.
But the Greens say with income limits and property price caps affecting which buyers and properties are eligible, that scheme will help only 0.2 per cent of eligible buyers each year — and would only further push up house prices.
The party’s housing spokesperson Max Chandler-Mather says if the government wants their support, it must in exchange limit negative gearing and capital gains tax discounts, as well as redirect reclaimed revenue from those changes into public housing.
“This scheme establishes a cruel lottery where only 0.2 per cent of renters will get it every year, and for the other 99.8 per cent house prices will go up,” Mr Chandler-Mather said.
“If we were able to secure phasing out negative gearing and capital gains tax concessions, some form of limit on rent increases, and a large-scale investment in good quality public housing, then I think there would be a circumstance where we’d be willing to support the government’s legislation.
“We’re always open to negotiations, but we certainly aren’t just going to roll over and support a scheme that on its own is going to make the housing crisis worse.”
Negative gearing — which allows losses from an investment property to be deducted from a person’s income tax — has become an infamous policy among younger generations who blame it and other tax concessions for driving up housing prices and locking them out of the housing market.
Mr Chandler-Mather said phasing out negative gearing would level the playing field for renters going up against property investors at house auctions, “who usually use those tax concessions to outcompete first homebuyers and bid up the price of housing”.
But the federal government has been reluctant to revisit the scheme after losing the 2019 election with its commitment to limit negative gearing.
SQM Research found at the time that Labor’s former policy to limit the tax concessions could have pushed down housing prices by as much as 12 per cent over three years — but could also have driven up rent prices with landlords unable to turn to the scheme as a safety net.
Greens challenge government to break another promise
Any changes before the next election would also constitute a further broken promise, following the recent decision to amend planned stage 3 tax cuts.
Mr Chandler-Mather said the government had proven willing to move on stage 3 because of shifting economic circumstances, and should be able to do the same on housing policy.
“Since the federal election we’ve seen house prices and rents continue to skyrocket, we’ve seen more and more people fall into serious housing stress, fewer and fewer people being able to afford to buy a home,” he said.
“The question for the government has to be: If you’re willing to shift on the stage 3 tax cuts, then why not on negative gearing and capital gains tax concessions?”
He warned the government that if it did not touch negative gearing, it would arm Greens campaigns in seats like Wills, Richmond and Moreton, where he said their message on housing was resonating.
ABC News: Nick Haggarty
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Speaking on ABC’s Insiders on Sunday, Shadow Treasurer Angus Taylor said the Liberal Party would not support any change to negative gearing.
He said it was evident Labor was entertaining changes.
“We know they’re considering this. Their answers in the parliament this week were very wishy-washy, they were all over the place,” Mr Taylor said.
The government has maintained the same line it previously used to dismiss suggestions it would not change the stage 3 tax cuts, saying negative gearing changes are not something the government has considered or was considering.
Yesterday, Treasurer Jim Chalmers was pushed on whether he had sought advice from Treasury on reforming negative gearing, as the government had done with stage 3 tax cuts.
Mr Chalmers responded that he regularly spoke with Treasury about “all aspects” of the tax system, and it would be strange if there were parts of the system he could not discuss.
Last week, independent senators David Pocock and Jacqui Lambie stated their willingness to curtail negative gearing, giving government the numbers in-principle to reform negative gearing.
Brendan Coates from the Grattan Institute urged the government to consider changing the tax breaks.
“The biggest reason for reforming negative gearing along with the capital gains tax discount is really the budget benefit,” he said.
“You could save $7 billion a year by reforming both of those – halving the capital gains tax discount to 25 per cent, and curbing negative gearing.”