Senate debates

Thursday, 19 March 2015


Housing Affordability

7:06 pm

Photo of John MadiganJohn Madigan (Victoria, Independent) Share this | | Hansard source

Tonight I wish to speak about housing affordability and the issue of negative gearing. Negative gearing is a divisive issue. Many people love it and many people hate it. Neither side it seems is willing to forfeit ground. The core issue is that it encourages investors to purchase houses and this encourages the inflation of house prices. It is important, however, that we do not dehumanise housing investors. Many property market investors are mums and dads. They are trying to get ahead in life. They choose to put their hard-earned money in bricks and mortar and land rather than the share market or dodgy investment schemes. Many investors who build or purchase an investment property do so through hardship and sacrifice. Other, more wealthy investors, are looking to diversify, and property is just one part of their portfolio.

According to an HIA report, the house price to house income ratio doubled between the years 1995 and 2010 from 2.3 times household income to 4.6 times. It is becoming more expensive to buy a home. Negative gearing as we know it has been a key contributing factor in this. Negative gearing transforms houses into commodities for those who own them.

We have a situation in this country where single- and dual-income families must compete with big local and foreign investors to purchase a home. Homes have become a commodity for investors to store and make a profit on their capital. Do I suggest that it would be a good idea to get rid of negative gearing altogether? Absolutely not. Negative gearing has a place.

Contrary to popular belief, building a house and renting is not for the risk averse. It requires hard work, and things can go wrong. When considering the rental market debate, if one actually looks at the expenses landlords incur due to wear and tear, leasing properties is still a risky business. It is for this reason that I believe negative gearing should only be made available to those who invest in the interest of the community. For example, a mum-and-dad investor who builds new houses of a size suitable for a family should be encouraged. Sure, they are going to make a profit from the rent, but the community will profit from an increase in supply on the housing market. A mum-and-dad investor who purchases an already established home should not be encouraged, because they are simply competing with those who are trying to buy a home for themselves.

I do not profess to have all the answers; however, I believe we should place a limit on the current negative gearing system. Whether this means you can negatively gear up to five newly built properties or whether one can negatively gear up to a certain value, I think these ideas should be considered when addressing negative gearing. We need more housing. Negative gearing is a factor. Its form and future must be part of the public debate.