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Government involvement would drive up rental prices, says new research

02 May 2018 Eliot Hastie
Rental prices, house prices

New research has concluded that increasing the tax on investing in residential homes would force up rental prices and worsen housing affordability.

Independent research undertaken for the Housing Industry Association by the Centre for International Economics (CIE) came to the same conclusion that previous research by Independent Economics in 2014 on negative gearing arrangements had reached.

HIA’s principal economist, Tim Reardon, said that further restrictions on negative gearing would adversely affect Aussies and buying homes.

“Further restrictions on negative gearing will lower Australian living standards and increase the cost of renting a home,” Mr Reardon said.

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“Changes to negative gearing would adversely impact on the housing market, exacerbating the current undersupply of housing, and further reduce the efficiency of the housing market.”

Mr Reardon added that if the government made changes, investors would leave the market which would drive the price of rentals up.

“Driving investors out of the market will force up the price of renting, as nearly 25 per cent of rental stock is provided by private investors,” the principal economist said.

Government increases to capital gains tax had already adversely impacted on revenue and that was money the government relied upon, Mr Reardon said.

“Further research in 2017 shows that as the federal government increases capital gains tax, they take $2 of revenue away from the state governments.

“At least $1 in every $10 of government revenue is raised from a tax on housing.”

Increasing taxes and restrictions was not the way to solve the affordability challenge; instead less government involvement and less taxes would solve the issue, Mr Reardon said.

“We cannot solve the affordability challenge by increasing the tax on housing or by further restricting those that invest in housing,” the principal economist said.

“The solution to housing affordability lies in less tax and less government involvement in housing than in additional constraints on investors.”

Government involvement would drive up rental prices, says new research
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