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  • Labor's policy won't improve housing affordability

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    Labor's policy won't improve housing affordability - reiwa.comThe Real Estate Institute of Australia (REIA) has slammed the Opposition’s announcement that they intend to limit negative gearing to newly constructed properties, stating the policy will not achieve the claimed objectives of improving housing supply and affordability.

    REIA President Neville Sanders said Labor’s policy was built on the popular perception of the declining amount of investor loans committed to new housing construction relative to the total value of housing finance for established properties.

    “Independent research commissioned by REIA shows that around 27 per cent of all loans for the construction of new housing in 2014 were to investors and that this proportion has remained relatively constant over the last 30 years,” Mr Sanders said.

    In contrast, the number of investor loans for new housing had increased more than seven-fold since 1986.

    Mr Sanders acknowledged housing supply was critical in resolving the affordability problem but said Labor’s policy would not address the issue and would in fact exacerbate the problem.

    “Supply is constrained by a number of longstanding challenges including regulatory and zoning constraints and cost structures including taxing of building. These factors are not addressed in Labor’s policy.

    "As a consequence it is highly unlikely that there would be the supply response anticipated by Labor and instead many investors would exit the rental property market resulting in higher rents.

    “Should it be implemented this change is likely to add considerable turmoil and volatility to the rental property and housing markets. Further, it would probably not raise much additional tax revenue.

    “The proposal fails the general principle of good taxation policy that it should not favour particular investment classes. Limiting negative gearing to new dwellings will only add a distortion that reduces investment in housing, erode housing affordability and put upward pressure on rents,” Mr Sanders said.

    Read REIA’s full media release.