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    Negative gearing removal to reduce housing investment and affordability: HIA

    Housing Industry Association

    The Housing Industry Association , the voice of Australia’s residential building industry has warned that restricting access to negative gearing for residential property would reduce investment in housing, erode housing affordability and put upward pressure on rents.

    The new research paper titled ‘Economic Impacts of Negative Gearing of Residential Property’ was commissioned by HIA and based on a study conducted by Independent Economics.

    According to Graham Wolfe, HIA’s Executive Director, Industry Policy and Media, the research indicates that changing residential negative gearing would reduce housing affordability, and consequently, lower Australian living standards.

    Observing that new housing was already one of the most highly taxed sectors in the economy, Mr Wolfe noted that the removal of negative gearing would only discourage investment. This would in turn reduce housing supply and increase the cost of renting.

    Mr Wolfe dispelled the notion that negative gearing was the domain of so-called ‘wealthy investors’. Official taxation statistics for 2011/12 show that over 79 per cent of those with a rental investment property have a total income of less than $100,000; around three quarters earn less than $80,000.

    Mr Wolfe said that housing tax reform should begin with abolishing stamp duty on residential property conveyances, making housing more affordable for both renters and owner-occupiers. He added that discounting residential negative gearing in isolation was a retrograde step for tax reform, in terms of both efficiency and equity.

    Pointing out the advantages of negative gearing, he said it promoted private investment in the rental market, thus stimulating economic activity and taking the pressure off social housing and the public purse. 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 encouraged.

    Mr Wolfe concluded that private investment in residential property should not be seen as a cash cow to fund the supply of affordable housing.

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