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While this report was produced several years ago the core elements of the key reforms proposed remain of interest.
If we as a nation are to meet the costs of providing a home for all our citizens we need to make some changes to where subsidies and support for housing from the public purse are channelled.
A vital goal for tax reform is to improve the affordability of housing. Australia has among the most expensive housing in the world. From 2002-12, average prices rose by 92% for houses and 40%
for flats while average rents rose by 76% for houses and 92% for flats well above the CPI.
The high cost of housing is caused by too much demand chasing too little supply.
Since 2000 there has been an explosion of rental property investment. From 2000 to 2013 lending for investment housing rose by 230% compared with a rise of 165% in lending for owner-occupied housing.
But instead of improving affordability, it has made matters worse:
– Investors are bidding up the price of existing homes without building enough new ones.
– Tax breaks for housing are not the only cause of high housing costs, but they are an important one.
– This report focuses on negative gearing arrangements and the 50% discount on Capital Gains Tax for investors.
– It explains how these tax breaks work, who benefits, how much they cost, and their impact on housing markets and the economy.
It proposes reforms to improve the fairness and efficiency of federal tax support for housing.