In response to the Treasury Secretary’s concerns about the social costs of inflated housing markets in Sydney and Melbourne, ACOSS has highlighted the inflationary impacts of existing tax arrangements, including negative gearing and capital gains discounts, and urged reform.
Dr Cassandra Goldie, ACOSS CEO, said “Mr John Fraser’s comments have put a spotlight on high house prices again, highlighting the economic risks and social cost, with low income and younger people locked out of the market. While low interest rates and lack of supply are both driving factors in the current inflated market, we cannot overlook the role that housing tax concessions play. Tax arrangements need to improve housing affordability not undermine it as they currently do.”
Responding to the Prime Minister’s hope that Sydney house prices keep rising modestly, Adrian Pisarski from housing peak National Shelter said, “The PM seems to ignore the damaging impact inflated house prices have on economic productivity, the liveability and sociability of our cities and the intergenerational inequity being created.”
The recently released ACOSS report on housing tax concessions, ‘Fuel on the fire: Negative gearing, Capital Gains Tax and housing affordability’, found that housing tax breaks have played a role in every housing boom since the 1980s, with easier access to credit and the cut to capital gains tax in 1999 making the situation worse.
“Between 2000 and 2013, lending for investment housing has risen by 230% compared with 165% for owner occupied housing,” said Dr Goldie.
“We are witnessing what happens when the expectation of capital gain backed by tax exemptions and bolstered by generous deductions drives speculative investment in our housing markets,” said Mr Pisarski.
“High prices damage productivity, drive key workers to the fringe of our cities and lock low income households out of wealth generation, consigning them to deteriorating rental markets and lengthy commutes,” said Mr Pisarski.
“While tax concessions are not the only problem in the housing market, they are a significant driver of speculative investment and price inflation. Reform must be seriously considered as part of the Government’s current tax review,” Dr Goldie said.
“The Government must also work to develop a strategy to improve the supply of affordable rental housing in partnership with the state and territory Governments, and to ease the pressure on low income renters in rental stress through reform of Commonwealth Rent Assistance”, Dr Goldie concluded.
Media Contacts:
Fernando de Freitas, ACOSS – 0419 626 155
Adrian Pisarski, National Shelter – 0417 975 270
For more information:
New Report calls for action on Negative Gearing and Capital Gains Tax