Fixing our housing crisis means fixing investor tax breaks

For years, Australia’s housing crisis has been treated as a mystery. Prices keep rising. Rents keep climbing. More people are locked out of a safe, affordable home. And yet many are scared to mention the policies that helped get us here.

That’s why it’s encouraging to see the Government seriously considering changes to the capital gains tax discount.

This isn’t a fringe issue. It goes to the heart of why housing has become so expensive, and why inequality keeps growing.

The capital gains tax discount is a tax break for people who make money selling assets like property, making it easier for them to make more profits and pay less tax. It was introduced in 1999, and since then, it has helped turn housing into an investment game that rewards those who already own property while pushing prices and rents higher for everyone else.

A new report from Anglicare Australia shows just how damaging this has been.

Since the discount was introduced, rents have risen much faster than wages. Weekly asking rents have been rising in the order of ten percent every year. That leaves people with less money for food, energy, transport and healthcare, and very little room to cope when something goes wrong.

This isn’t just a coincidence. Tax breaks like the capital gains tax discount shape behaviour. They make property more attractive to investors. They encourage people with money to buy more homes, not to live in them, but to profit from them. And investors most attracted by these tax breaks – investors who are making a loss – are the ones most likely to push rents up.

Every year, Anglicare Australia releases its Rental Affordability Snapshot. Every year, the results get worse.

We track weekly asking rents across the country, and year after year they rise, even as proponents claim tax breaks for investors are needed to keep rents down.

If that argument were true, renters would be better off after 25 years of the capital gains tax discount. Instead, they’ve never been doing it tougher.

The evidence is clear: these tax concessions haven’t protected renters. They’ve helped fuel the problem. They’ve also deepened inequality.

Our latest report shows that the biggest benefits of the capital gains tax discount flow to people on the highest incomes, who already hold the most wealth. Meanwhile, people who rely on wages or income support pay full tax on what they earn, while struggling to compete in a housing market stacked against them.

This is public money being used to widen the gap between those who own property and those who don’t. That’s why the current debate matters so much.

But how the government approaches reform matters just as much as whether it does anything at all.

If changes to the capital gains tax discount are treated simply as a way to raise money for the Budget, we will miss a huge opportunity. The goal shouldn’t just be to collect more revenue. It should be to change behaviour, to stop encouraging speculation and start supporting housing that people can actually afford.

What happens to the money raised matters too. If the money raised from reform is folded into general spending, or recycled into middle-class welfare that pushes prices up again, we’ll be back where we started. The housing crisis won’t be fixed by reshuffling dollars at the top.

That money should be invested in public and community housing. These are secure rentals that people can afford, and that offer a real alternative to an overheated private market.

We don’t need more evidence to take action. We don’t lack public support. What we need now is the courage to change the rules that helped create this crisis, and to use that change to build a housing system that works for everyone, not just those who already have the most.

Kasy Chambers is the Executive Director of Anglicare Australia.