Tuesday, 28 October 2014

An argument for negative gearing

In Negative gearing is not so negative Michael Pascoe argues that negative gearing is not necessarily a bad thing. As he writes, and this is something I've thought for a long time, the issue with housing affordability isn't the presence of investors but the lack of supply. On the positive side, the additional investors attracted by negative gearing increase the supply of rental accommodation in the market, this lowering rental costs.
More fundamentally, the article homed in on the negative gearing scapegoat because it only addressed the housing affordability question from one side of the equation – demand – and did not mention the other side – supply. Fixing the supply problem is a better way of solving the housing affordability problem than trying to arbitrarily restrict broad taxation principles for one particular sub-set of an asset class.
Increasing supply, given our population growth, is a much better way of equitably dealing with housing affordability.

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