Negative gearing must go.
Negative gearing must go. Brett Wortman

Negative gearing must go to make housing affordable

NEGATIVE gearing and first home owner grants must be abolished if Australia wants to improve housing affordability; a leading economist has told a Senate inquiry.

Economist Saul Eslake was a member of the National Housing Supply Council until the Abbott Government did away with the advisory body in November last year.

The respected economist has put a submission into a Senate inquiry on housing affordability, urging the removal of negative gearing and first home owner grants.

His submission, Australian Housing Policy: 50 Years of Failure, has hit out at successive governments' refusals to do away with the tax breaks and incentive payments.

"It's hard to think of any government policy that has been pursued for so long, in the face of such incontrovertible evidence that it doesn't work, than the policy of giving cash to first home buyers in the belief that doing so will promote home ownership," he wrote.

Mr Eslake wrote since the scheme was introduced in 1964, state and federal governments had spent at least $22 billion on first home owner grants, as well as an extra $3 billion in stamp duty tax breaks.

"In those circumstances, cash handouts for first home buyers have simply added to upward pressure on housing prices, enriching vendors while doing precisely nothing to assist young people (or anybody else) into home ownership," he wrote.

Mr Eslake also hit out at negative gearing, writing that by reducing home owners' and investors' tax liabilities, it essentially exacerbated the "mis-match between the demand for and supply of housing".

But the economist, known for his views, argued there were not enough votes in such radical policy changes for politicians to actually make the changes.

"While political parties and governments profess to care about first home buyers, the reality is that in a typical year fewer than 100,000 people succeed in attaining home ownership for the first time, whereas there are some 5.8 million households (and over 8 million people) who already own at least one property," he wrote.

"Hence there are 100,000 votes for policies which might result in lower house prices, and over 8 million votes against policies which might result in lower house prices.

"Politics - more than any other single factor - means that Australians are likely to have to live with a dysfunctional housing system for a long time yet to come."  

Should the first home owners grant and negative gearing be dropped?

This poll ended on 30 January 2014.

Current Results

Yes, they both should go


No, keep them


Only negative gearing should be dropped


Only the first home owners grant should be dropped


This is not a scientific poll. The results reflect only the opinions of those who chose to participate.