The research paper, which was commissioned by the Housing Industry Association, also claimed that negative gearing helps restrain rents.
Managing director Shane Goodwin said discounting residential negative gearing in isolation would reduce the efficiency and equity of the tax system.
“New housing is one of the most highly taxed sectors in the economy, and the removal of negative gearing would only make that situation worse and discourage investment,” he said.
“This would in turn reduce housing supply and increase the cost of renting.”
Mr Goodwin said negative gearing promotes private investment in the rental market, which in turn stimulates economic activity and takes pressure off social housing.
“With an ageing workforce and future pressure on services, policy settings such as negative gearing that promote wealth creation and self-sufficiency in retirement should be promoted,” he said.
Negative gearing benefits more than just wealthy investors, according to Mr Goodwin.
“Figures from the Australian Taxation Office demonstrate that 74 per cent of tax payers receiving rental income have a taxable income of less than $80,000,” he said.