Fighting for Renters

Greens’ leader Adam Bandt’s appeared at a press conference recently sporting a t-shirt claiming he was “Fighting for Renters”. The progressive-left party wants to prevent investors with more than one property from claiming the expenses of owning additional rental homes from their taxable income. They also would like to impose rent caps, a rent freeze and abolish the capital gains tax discount.

In the context of who provides 89 percent of all rental homes in Australia, perhaps Mr Bandt’s t-shirt ought to have read, “Against Property Investors”. Last time I looked, it is the private investor market that supplies nearly 9 in 10 of all rental homes in the nation. The government provides about 11 percent. If seems obvious that to disincentivise private investors (with things like rent freezes and changes to tax settings), investors will stop providing enough houses for renters. This leads to shorter supply (investors will sell) which pushes rents even higher. This is exactly what is unfolding across the nation right now. Supply is the core of the issue; the rest is mere tinkering.

Calling for significant changes to negative gearing and removing the capital gains tax (CGT) discount would demolish the current rental housing system, causing a rental crisis far worse than currently experienced. The Greens say they want solutions to address the rental crisis ‘right now’. Well, you don’t and simply can’t solve it by turning on the very people that supply the houses; you can’t magic more housing supply out of thin air if all your policies are designed to whack investors. Unless, of course, the aim is to have no private investors at all, which would cost taxpayers a mere $3 trillion – the value of rental homes in Australia and about 3-times annual GDP.

Current negative gearing and CGT settings incentivises investment into the rental market, increasing housing supply. Removing or restricting it inevitably reduces investor activity, particularly among middle-income Australians who rely on such provisions to build wealth and plan for retirement. According to REIWA, a recent survey conducted via reiwa.com concluded 68 percent of property investors would “consider selling” should changes to current tax settings be made. This should send a shiver down the spine of renters.

It’s a misconception that negative gearing solely benefits the wealthy. According to the Australian Taxation Office, a significant portion of negatively geared investors earn under $100,000 annually. These are everyday Australians—teachers, nurses, and tradespeople—leveraging investment to supplement their future financial security. Reducing the attractiveness of property investment risks locking out these individuals from participating in wealth creation.

The CGT discount discourages over-speculation while promoting housing stability. A less volatile, long-term investor-driven market provides more consistent rental availability and pricing for tenants, compared to a system dominated by frequent turnover and profit-chasing behaviour. There is no avoiding that the only way to address rental affordability is by increasing supply and unhelpful policies that seek to diminish supply rather than incentivise it is counter-intuitive madness.