Call to Eliminate Negative Gearing

Housing stimulus measure have a nasty habit of simply increasing the cost of housing. And then there is the issue of fairness. Why should one segment of the population subsidize others' real estate investments?

 Cut negative gearing to help poor: ACOSS

In a bid to combat soaring house prices, the Australian Council of Social Service (ACOSS) says the federal government needs to cut negative gearing, a tax break for mortgaged landlords.

"We do need the political parties to be having a stronger focus on what needs to be done to address poverty and inequality in Australia," ACOSS chief executive Cassandra Goldie told reporters on Monday.

The Hawke government scrapped negative gearing in the mid-1980s but the policy was reinstated after investors fled the housing market, leading to a shortfall in rental accommodation.

Now, that was an interesting outcome. Wouldn't the houses have shifted to owner occupied, reducing the demand for rentals? Was something else causing the crush? Possibly immigration?

From http://www.rba.gov.au/publications/bulletin/2007/sep/2.html

ACOSS makes a plea for the cost of housing to come down not so the homeless can buy houses, but so that service providers have a chance of assisting those in need to find shelter. Ironic that if houses become too much of the economy they become more out of reach.

If elimination of the policy isn't possible, perhaps allowing negative gearing only for areas in need? It is a subsidy after all (someone else is paying the skipped taxes). It can be policy directed.