Tuesday, April 10, 2012

Robertson criticises negative gearing

One hundred years after a State Labor Government established the public housing system and other housing reform initiatives, the NSW State Opposition Leader, John Robertson, has said New South Wales is 'in the grip of an affordable housing crisis', and criticised the Federal Government's treatment of negative gearing as a key cause of the crisis.

(John Robertson, in public-housing-centenary sepia.)

As part of a call for debate on unaffordable housing, Mr Robertson said:

Negative gearing.... It's a subsidy to people, many of whom already own a home. Now there is nothing wrong with owning or aspiring to own more than a single property. We just need to be honest about the effects on housing affordability of a tax system that encourages such an outcome.

It augments the purchasing power of people who already own homes. It puts upward pressure on prices, helping to crowd out many others who can't even get onto the first rung of the ladder. And it’s also regressive – the higher the tax bracket that the homeowner falls into, the higher the deduction they receive.

Well said. As for our own contribution to the debate, we'd go further, and observe how negative gearing has not just screwed up prices for would-be owner-occupiers, but also distorted the rental market, particularly to the disadvantage of low-income renters.

In making his remarks, Mr Robertson referred to 'Homes for All', the first policy report of a new think-tank, the McKell Institute (named after William McKell, another Labor housing reformer who, as Premier, established the NSW Housing Commission 70 years ago)*.

 (William McKell)

The McKell Institute puts forward 40 'actions' to fix the 'systemic crisis in housing', including:
  • phasing out negative gearing, at least in relation to existing properties; 
  • replacing stamp duty with a broad-based land tax that includes land for owner-occupied housing (we note that Mr Robertson mentions getting rid of stamp duty, but not the bigger and more imprtant reform of land tax);
  • otherwise directing tax policy away from inflating demand for housing; and
  • reform of the planning system to liberalise development controls.
None of these proposals is really new – but that's fine, it just means that there's a good deal of well-founded opinion and consensus behind them. The most important thing is that they're being made by an organisation that has been established particularly to inform policy development by the Labor Party, and that the State leader is listening.

* That makes four Labor politicians referred to here at the Brown Couch in the space of one week and three posts. Don't worry - we'll address the imbalance with some posts on non-Labor parties and housing in coming weeks.

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