Malcolm Turnbull should embrace my negative gearing policy: Richard Holden
Jonathan ChancellorDecember 7, 2020
Australia has a serious housing affordability problem, according to Richard Holden, professor of economics at UNSW Australia Business School.
"Since 1997 price-to-income and price-to-rent ratios have nearly doubled," he recently wrote in the Australian Financial Review.
"Since 1995, price-to-income ratios have grown 50 per cent more than the OECD average."
He said the undisputed facts were Sydney's price to income ratio of 12.2 makes it the second least affordable city in the world, behind Hong Kong. Melbourne ranks fourth.
"It turns out that London and San Francisco are cheap by comparison."
In June 2015 he wrote a report for the McKell Institute called Switching Gears, which suggested that certain changes to negative gearing could have a positive impact on housing affordability, the federal budget, job creation and growth.
"The ALP last week announced a policy that essentially adopts this recommendation."
He said it respected existing investment arrangements and provided a smooth transition away from negative gearing of existing dwellings, rather than an abrupt disruption that would come from either capping or eliminating it.
"Modifying negative gearing along the lines of my McKell plan is the market-based, incentive-driven approach to solving our housing affordability problem.
"It addresses the skewed tax incentives in the current regime, and it uses the power of markets to tackle the housing affordability problem.
"Perhaps that is why is has been met with general approval from economists like Saul Eslake and Warwick McKibbin, former politicians like Jeff Kennett, and business leaders like Jillian Broadbent."
When I wrote the report I imagined that a pro-market, pro-incentive, fiscal conservative like Malcolm Turnbull would smile on the plan.
"Instead, it has been welcomed by the Labor Party and Mr Turnbull has booed it," Richard Holden said.
Jonathan Chancellor
Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.