Rather than tinkering around the housing affordability problem, it's time to end negative gearing for good, says Frank O'Shea.
FEDERAL TREASURER SCOTT MORRISON now admits that there is a problem with housing affordability. Prices in Sydney have risen 18.9 per cent in the past year, the mathematical equivalent of a doubling in four years. It is not easy to find some information about the problem because any facts or data more than a few months old are already out of date.
So what do politicians suggest? Here are their two current favourites: remove stamp duty and allow early access to superannuation. Now, think about each of those for a moment and ask yourself what they have in common. Each of them would result in an increase in prices, they would inflate the bubble even more. So, as far as our current political masters are concerned, the best way to help young people buy their first home would be to increase the price of what they want to buy.
To whom? https://t.co/felTgIKtKH— Lᴏʀᴅ Wᴇɴᴛᴡᴏʀᴛʜ (@LordofWentworth) April 11, 2017
We don’t need an expert to tell us that if the states remove $30,000 stamp duty, at least half of that will be added immediately to the price of a house and the remainder within three years. Do you really expect that vendors and estate agents will leave that $30,000 untouched?
But the idea of using superannuation is a real doozie and it is to the credit of the Opposition that they are opposing it. It would lead to an immediate surge in prices, while the banks and finance houses would be delighted to gain access to the superannuation lolly jar. It greatly distresses them that all this money is out there and they have no way of getting at it; so watch them finding subtle reasons to support the government on this.
There are other suggestions, of course, for helping young people buy their first house: release more land, get the oldies out of their homes and move them to Woop Woop, improve infrastructure so that people can live in wup wup, move government departments to Woop Woop (per Barnaby Joyce), get better jobs (Joe Hockey). But we can imagine that these were merely late-night thought bubbles encouraged by the bonhomie of wine and cigars and they do not need to be taken seriously.
The ALP, to give them their due, have suggested that something be done about negative gearing as a way of dealing with the problem, even if they seem to be a little tentative in promoting the idea. This may be because ScoMo has only to claim teachers and nurses are among the most enthusiastic users of negative gearing.
The latest tax data proves it: negative gearing benefits the rich the most https://t.co/nJHyhftvkj— 'Crazy' Labor Person (@SophiaMcGrane) April 12, 2017
You wouldn’t want to turn off the teachers and nurses, now, would you?
The statistical truth is that the groups in society that are most involved in ownership of multiple properties are the politicians themselves, state and Federal. Something like 56 per cent of those we elect to run our affairs have property portfolios, considerably more than whatever small percentage of teachers and nurses have such investments. So if we ask politicians to fix the problem, we are in effect expecting the foxes to guard the henhouse for us.
The Treasurer also said that negative gearing was a good thing because it has "been around for a century". This guy is in charge of money in the country and that’s the best he can up with. Corporal punishment was common in schools for much longer than that, women did not have the vote for even longer. Only blimps or sadists would dare use that “around for a hundred years” argument as a reason for retaining a corrupt system.
The Government have at their disposal a simple lever that will fix the upward cost of housing. It is called negative gearing, the deceitful sleight-of-hand that allows investors to write off losses against income. The ALP suggests that this might be removed for new investors and new homes, but it is easy to imagine how the accountants would be able to get around that — did somebody mention trusts and how many pollies have those things?
More than half of all property sales are made to investors, people who can use negative gearing to fund their purchase at the expense of the taxpayer. The result is that Australia has a generation of young people who will never – can never – own their own home. We are creating a two-tier society. Surely history has told us how that way lie huge social problems.
So, let us take the bull by the horns and remove negative gearing. Completely. No exceptions. This will bring on a recession, of course; banks will fail, businesses will close. But we can look our children in the eye and say that we did not allow the country to go the way of blood that finished the Bourbons and the Romanovs.
And, as Ireland is now showing, even the teachers and nurses will quickly get over it.
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