The Wrap: After a decades-long fight, housing tax reform becomes reality

The government’s changes to negative gearing and capital gains tax passed the parliament last week. This is a big moment in the fight to make housing more affordable.

For too long, policies targeting housing affordability have done nothing to slow the rapid increase in house prices. In fact, many of them made prices rise faster.

While it is early days, it seems that the housing market is already slowing and there are predictions that there will be small falls in house prices. These falls in prices are mainly being driven by uncertainty in the market. Many people are waiting on the side lines to see how everything washes out.

But we’re also hearing stories of auctions where investors have vanished, and first home buyers are winning. This is what success looks like and after everything stabilises in the coming weeks, hopefully this continues to happen.

This change has not been easy and ever since it was announced in the May budget, vested interests have thrown the kitchen sink at stopping it. They have done this because for so long the very rich have been happy paying less tax than workers earning a wage.

Over the last few weeks, they have mounted a campaign to convince people that these changes will hurt young people the most. That it is really a death tax. It will increase rents. And the ultimate claim, that it is causing house prices to fall a bit. You know, making housing cheaper.

They have claimed it will hurt every group in Australia apart from the very group that it will impact the most, the wealthy. After all, the top 1% get almost 60% of the benefit from the 50% capital gains tax discount.

In the Institute’s long fight to reform the discount, I’ve often been accused of hating property investors, but I’m not against people investing to try and get ahead. What I’m against, is the rules that encourage people to invest in housing because it has tax advantages. What we want to change is the rules so that people aren’t incentivised to make housing unaffordable.

But public opinion has changed. A recent poll found that a majority of people (54%) supported lower house prices, will only 11% opposed. The remaining 35% said they were unsure or neutral.

This is a huge shift from 2003 when then Prime Minister Howard famously said, “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.”

This change has happened because of a concerted push for change. There was nothing easy about making this happen.

The Institute wrote its first paper criticising the capital gains tax discount in August 1999, when the changers were still being debated in parliament. We have been pushing ever since with research, opinion pieces, media interviews, events, talks, social media posts, and many other ways to get our message out.

And along the way we have been helped by our many supporters. We couldn’t have done it without them.

There have been plenty of times when I’ve been told that there is no way that we could achieve this kind of change, particularly after the Shorten Labor opposition lost the 2019 election, and it became accepted political truth that reform was impossible.

But there have also been so many times when people have got in contact with us to congratulate us for fighting for this reform and to give us messages of encouragement.

With their support, we have reached so many people, built important alliances, and our ideas have won out. The Australia Institute really is a place that does research that matters.

Reform takes time and a lot of effort, and the Institute is not afraid to be in the fight for the long haul. This is why celebrating these wins is so important.

Whether it is stopping the big business tax cut, reshaping the stage 3 tax cuts so that they benefited people on low and middle incomes, or these changes that will make a real difference to housing affordability, they all took huge amounts of effort from so many talent and passionate people.