$5 billion. What should the government do with it?

[spotweldersfriend]

$5 BILLION.That's how much it costs hard WORKING Australians for the middle class entitlement scheme known as Negative Gearing.So what do you suggest this money could be better spent on?
I personally would like to see it used entirely on public housing.This would ease the housing shortage,put the brakes on skyrocketing rents and of course provide lots of employment in the housing industry.

[spotweldersfriend]

There are nowhere enough rental properties available now.Try renting a place in Sydney for instance.Get in line with the other 50 people to inspect an overpriced dog box.Private investors don't come anywhere in meeting demand.
When the states were involved in public housing years ago,not only was there enough housing to meet demand-and remember in the 50'd and 60's migrants were pouring into Australia-but private rentals were affordable too.What percentage of a workers wages is gobbled up today compared with the 70's. Much more I bet.Again,what other country has negative gearing?

[spotweldersfriend]

Rental prices would be cheaper than the private sector,but working people would not be eligible for the cheap rents pensioners etc would be charged.Once the scheme has been up and running for a while the $5 billion would be still available to the states for admin./maintenance and the rent revenue could be used as the states see fit-education,health and maybe more construction.

[amber-eyed-girl]

Spot, I think at least Canada and NZ also have it.

Remember that once a property moves into positive gearing, capital gains tax needs to be paid upon a sale, which it does not as yet, on the family home.

Swings and roundabouts.

And do not count on the 5B rolling in every year.

As soon as negative gearing would be abolished, anyone inclined to borrow to invest in housing would reconsider, looking for the most attractive investment opportunity, and there would be quite a few current investors moving out of that area for the same reason.

That could have a detrimental affect on those who cannot quite afford their own home, but would not meet public housing requirements financially.

[amber-eyed-girl]

So my concerns are that the well-enough off to not be able to claim any benefits from expanded public housing under your scheme, would become the new poor...as private rents skyrocket when there are less investor homes available for rent. As you say above...there are not enough rental properties now.

Axe negative gearing and that will become an immediate crisis...if we go with your scheme, it takes many years to plan public housing, select the land, buy the land, choose the developers and get the things built.

Meanwhile, the investors have sold up to those who can afford to swap from rent to ownership, and put their money into shares instead.

[amber-eyed-girl]

Also, remember that the Hawke govt abolished negative gearing, and within their term in office with Keating as treasurer, they brought it back as rental housing dried up. That was the stated reason for bringing it back.

[spotweldersfriend]

Young couples cannot afford to buy a home amber.Not unless they move to Broken Hill.
The $5 billion should be availabl in perpetuity,like money for health and education.After all they're not losing the money.Just re-directing it.
The current administration has been mouthing off since before it got in office about entitlement.That's what negative gearing is in my opinion.
Close to a third of Australians rent and the figure is rising.
A tramsition period would need to be I'm place of course.
This from wikipedia so I'm not sure if it is correct
Negative gearing by property investors reduced personal income tax revenue by $600 million in the 01-02 tax year.$3.9 billion in the 04-05 year and $13.2 billion in 2010-2011,

[*crikey*mate*]

reduced personal income tax, but how much money did it save the govt in administration and maintenance costs?

[amber-eyed-girl]

Unfortunately Spot, the 5B would not be there as an ongoing, as this has been tried before...by a Labor government.

Investors left the housing market with such an impact that neg. gearing had to be reintroduced for the good of more people, by the same government.

As investors leave, the rents for the young couples will increase, leaving them worse off.

[spotweldersfriend]

How much saved in admin costs? I'll wager it wouldn't reach $13.2 billion. If those figures are correct its increased threefold in just 5 years.How much will it cost us by 2020?

[carls*world · Accepted solution]

and may I ask why government housing construction would increase employment in the housing industry any more than housing construction payed for by private owners?


How many NEW homes are being built for private rental investors with the current NG benefits? Not many here in SA, they're busy snapping up the mortgagee sales established homes, that owner occupiers can no longer afford to buy. So not creating any relief on the pressure there. Just shifting the trend further from home ownership to rental, shuffling deck chairs so to speak.
One other point I've made here before, the first Govt housing project in the country was the SA housing trust. It's sole reason for being at it's inception? To house workers cheaply to attract business to the state, enabling them to pay lower wages. Not a charity organisation for unemployed, disabled etc, with a percentage of homes built for sale to workers. It worked, and along with that, set a low benchmark rental rate for the relatively small number of private rentals that existed then.

Had that path been followed through to today, I would imagine housing would be plentiful, basic 3x1 house prices would be stable around the 3.5x normal common worker's wage, rents would be 25% of the normal common worker's wage (note the use of "common worker" not the "average wage" which the "average worker" is well short of earning) and the rental income to the Govt would be far higher than it is now, keeping less than sufficient housing stocks, to house only those on heavily subsidised rents. It used to make the Govt money.