Investors solve the housing crisis

This topic comes off the back of my radio interview with the ABC last week.  

When housing supply and affordability issues are raised, the blame is often pinned on property investors.
 
The latest critic has been former Mirvac CEO, Susan Lloyd-Hurwitz, who has been handpicked to advise the government on ways to solve the housing crisis.
 
“My personal opinion is that negative gearing and capital gains tax concessions do contribute to Australians investing in real estate for capital gain rather than for income,” she said. 
 
Then there’s the myriad of politicians joining the pile on. And the radical proposals by the others to freeze rents and limit negative gearing to one property.
 
We need more houses, not less. That’s the reason we have a housing and affordability crisis in the first place. It’s also the solution – build more houses.
 
Three out of 10 houses in Australia are rented, and almost all of them are owned by mum-and-dad property investors. In other words, nearly 1 in 3 Australians have a roof over their head thanks to mum-and-dad property investors.
 
For every 1 government-provided social house in Australia, there are nearly 7 investment houses providing the supply we desperately need.
 
The biggest misconception is that every property investor in Australia is wealthy and/or a high-income earner.
 
The reality is 2.23 million Australians own an investment property and two thirds earn $100,000 or less, with half aged 50 or younger. The most common occupations of property investors are nurses, accountants, teachers, electricians and administration workers.
 
I believe the incentives offered to property investors – namely negative gearing and the 50 per cent capital gains discount – are one of the greatest political and social policies ever created.
 
It’s a win-win. Mum-and-dad investors are doing the heavy lifting, providing much-needed housing supply at a faster pace than the government, while building their wealth to avoid being supported by the government in retirement.
 
The government spends a whopping $220 billion each year on our welfare system. And it’s not getting any cheaper; in fact, it’s growing by 13 per cent annually (compounding for those who have read Bulletproof Investing!).
 
Compare that with the $100 million that gets refunded to property investors as a result of negative gearing…
 
Fortunately, Anthony Albanese has already ruled out making any changes to negative gearing or capital gains tax.
 
If the government wants a fast solution to the housing crisis, it should provide incentives for mum-and-dad property investors, rather than providing accelerated depreciation and tax discounts to super funds and foreign corporations. 
 
We need 100,000 houses to fix the housing crisis – you wouldn’t need many of the 2.23 million mum-and-dad property investors to build one more to solve the problem.
 
The other alternative is to push ahead with the Help to Buy shared equity scheme, proposed by the Australian government in the lead up to the election, but didn’t seem to get a start in the 2023 Budget.