The Green Party’s housing policy for young Australians has been gaining popularity among the under-30 demographic. However, it is important to analyze the potential consequences of their policies. The Greens advocate for an increase in public sector rental housing and the marginalization of private housing. They propose the abolition of negative gearing, which has significant implications for those who can’t afford to buy and must rely on renting.
The Greens argue that negative gearing prevents homeownership by keeping potential buyers out of the market. However, this perspective overlooks the fact that a significant portion of Australians rent, and some of them are future homeowners. Policies that disadvantage investors who rent also limit renting options for aspiring homeowners while they save for a deposit.
Negative gearing allows investors to deduct their expenses from their income, including income from other sources. The abolition of negative gearing would not result in immediate savings for the government, as investors would simply carry forward their losses until the property becomes cash flow positive. The value to the government is less than what proponents of abolishing negative gearing often assume.
Furthermore, Australia is currently facing a housing shortage, which necessitates encouraging people to build more houses. Negative gearing facilitates this by allowing investors to leverage their capital and engage in economic activity that generates tax revenue for the government. Models advocating for the abolition of negative gearing do not consider the positive impact on economic activity and tax revenue.
Contrary to popular belief, homeowners already enjoy tax advantages. While investors pay capital gains tax, homeowners do not. Additionally, homeowners do not pay tax on the “rent” that accrues to them by owning the property, known as “imputed rent.” These tax advantages give homeowners an edge in terms of affordability.
The Greens also propose imposing rent caps to regulate the rental market. However, history has shown that rent control policies do not work effectively. Argentina recently abolished rental controls, resulting in a 20 percent decrease in rents and a doubling of houses available for rent. When property owners have their rights restricted, they make strategic decisions that often lead to unintended consequences.
If young Australians do not critically analyze the Greens’ housing policies, they may unknowingly contribute to their own housing nightmare. Homeownership and affordable renting may become out of reach if these policies are implemented. In such a scenario, public housing may be the only option, mirroring the experiences of the current Prime Minister, who grew up in public housing.
It is crucial for young Australians to understand the potential ramifications of the Green Party’s housing policies before aligning themselves with the party’s ideology. By carefully considering the implications of these policies, young Australians can make informed decisions that best serve their housing needs and aspirations for the future.
