The Negative Gearing Myth: Unveiling the Truth

Negative gearing costs Australian taxpayers billions annually, but the belief that abolishing it would cause a rental crisis is disputed. Historical data from the 1980s shows that rent increases were tied to low vacancy rates, not the policy change. The continued debate underscores the need for honest discussions on housing policy.

This year, negative gearing is costing Australian taxpayers billions, yet defenders argue its removal would spark a rental crisis—an assertion unfounded in historical data. In the 1980s, rent hikes were linked to low vacancy rates in Sydney and Perth, not the abolishment of negative gearing.

Despite this, proponents of negative gearing continue to cite this period as evidence that rents would soar if the policy were abolished today. However, increasing calls to repeal negative gearing have gained traction amid a national housing crisis.

Changes to capital gains tax in 1999 further fueled the attractiveness of negative gearing for investors, deferring and reducing taxable income. Yet evidence suggests that ending negative gearing would not affect rents, as any reduction in rental housing supply would be offset by an equivalent decrease in rental demand.

(With inputs from agencies.)