The REAL reason the Albo government is tiptoeing behind the scenes to reduce negative gearing – and it has nothing to do with Australia’s housing crisis, writes PETER VAN ONSELEN

Negative gearing could therefore be back on the table as another tax concession that Labor wants to curb.

We will soon see if they have the courage of their convictions to drive change.

Former opposition leader Bill Shorten lost two elections trying to make the case for reducing negative gearing in investment properties.

The second defeat, in 2019, was deemed an “unmissable election” before it was duly lost and Scott Morrison imposed three years in charge on us before he lost the 2022 election.

Prime Minister Anthony Albanese became tangled this week trying to rhetorically navigate his way through questions about whether his government had asked the Treasury to model different ways of cutting the tax concession.

The word salad that Albo handed over finally suggested no.

Unsurprisingly, voters and commentators alike are unconvinced by his denials and believe instead that curbing negative leverage can once again be a live policy option.

This is because Albo has lied to us before by denying that policy changes are happening.

He did so when asked about plans to change the legislated stage three income tax cuts, just before changing them.

The Labor Party did the same when it changed the super rules and imposed changes to international relations that they did not implement at the last election.

Regardless of whether or not Albo ultimately decides to bring negative leverage reforms to the next election, we must mention the real motivation for even considering them.

It has nothing to do with making housing more affordable or accessible.

The motivation for reducing negative gearing has to do with increasing government tax revenue while clamping down on what is perceived as a tax advantage for the wealthy.

The idea that changes in negative leverage could help solve the “housing crisis” is almost absurd in words, but I’ll explain why anyway.

Not only does it do nothing to increase supply – which is the real problem when there are currently not enough people who can access the housing they need – but reducing negative gearing risks making access to affordable housing even more difficult.

This is because currently rented investment properties provide residence to people who often cannot afford to buy. So instead, they rent.

If negative leverage is removed, yes, purchase prices could go down slightly, although that is far from guaranteed. But not enough for many tenants to decide to buy.

However, if reducing negative gearing takes investors out of the real estate market and into other, more tax-effective investments, this leaves renters with fewer options.

Especially if it reduces the number of properties under construction, which it probably would.

Many developers appreciate what they sell to investors who buy to take advantage of tax concessions.

If that market dries up, so could supply.

So we really need to point out the government’s primary motivation here: reducing negative gearing as a way to raise taxes and ideologically clamp down on wealthy investors.

Many people who have negative investment properties are not that rich to begin with.

For example, a certain writer for a left-wing publication who is always talking about housing issues but never reveals that he has an investment property that is currently in negative gear.

This is probably a good time to disclose that I don’t own any negatively oriented properties. I invest in other asset classes beyond the family home.

But the point here is that it is inappropriate to say that only the rich negatively influence investment properties.

Some do, but most invest their money in many other ways. Many of those who negatively target properties are aspirational, not wealthy.

I have no philosophical opposition to reforming the negative gearing rules, and I believe the ability to own large amounts of property (rather than just one or two) should be changed to reduce tax liability.

But it needs to be incorporated into a broader tax reform package to improve the entire scope of how we tax and spend.

Otherwise, Labor would simply be using the change to falsify the true purpose behind it.

Giving the impression that you are tackling the housing crisis when all you are doing is lining the pockets of the Treasury in an attempt to stifle aspirations.

If the Labor Party really cared about increasing housing supply, it would do what it promised but has so far failed to do, and reduce the very high levels of immigration.

It would also make deals with the state government to free up more supply of housing, also known as land, and find ways to reduce the cost and time of bureaucracy attached to new construction projects.

And you might consider limiting negative leverage to long-term rentals rather than short-term accommodations.

This would ensure that such investment properties are used to assist with the construction of homes and not just for holiday accommodation.