Increasing housing supply still the solution. Comment on McKell Institute Housing Affordability Paper

“The McKell Institute’s Choosing Opportunity, A Policy Blueprint For A Fairer Australia report is a welcome articulation of the methodology and underlying assumptions that seeks to provide justification for Labor’s proposed changes to negative gearing and capital gains tax,” Wilhelm Harnisch, CEO of Master Builders Australia said.

“The report’s modelling does not explain how the current negative gearing provisions are the cause of the housing affordability problem, nor does it therefore provide an evidence-based reason why it is a solution to fixing it,” he said.

“In fact, while calling for changes to negative gearing the report at the same time recognises that this would have little impact on housing affordability. More importantly the report recognises the importance of housing supply in moderating house price increases,” Wilhelm Harnisch said.

“Part of the modelling wrongly assumes a constant increase in new housing supply of 10 per cent per annum when, in fact, supply is highly variable which has caused house prices to escalate. This has nothing do with negative gearing,” he said.

“Master Builders has long been concerned about housing affordability and continues to call on all governments to tackle the structural impediments as the only sustainable solution to improving housing affordability for home owners, renters and other disadvantaged groups in the community,” Wilhelm Harnisch said.

“Tackling the structural barriers to increasing the housing supply will also grow the economy, create more jobs and increase our standard of living,” he said.

“The report fails to demonstrate that negative gearing is the fundamental cause of rising house prices. Therefore tinkering with negative gearing cannot be at the core of a public policy response to Australia’s housing affordability challenge,” Wilhelm Harnisch said.