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Housing crisis: negative gearing will stay

Fri August 31, 2012 4:23pm

FEDERAL Housing and Homelessness Minister Brendan O'Connor has ruled out changes to negative gearing for property owners in the face of a housing affordability crisis.

Speaking to reporters in Perth on Friday, where he had met with state counterparts at a COAG meeting on housing and homelessness, Mr O'Connor said more needed to be done fast to promote housing affordability.

However, removing tax incentives for speculators was not an option.

Negative gearing allows landlords to offset the shortfall between rental income and interest payments against their taxable income.

The idea is to provide an incentive to invest and build more affordable rental housing.

But some experts argue the measure increases speculative demand - and home prices - by spurring competition among investors, as opposed to owner-occupiers, and reliance on capital gains.

"Some people say (negative gearing has) attracted capital to the housing sector, which has increased housing stock," Mr O'Connor said.

"Others talk about the lack of capacity for people to enter the housing market.

"But we've ruled out reviewing negative gearing (because) we believe it has been effective in some ways."

ABS statistics show more than 100,000 people were homeless in Australia at the 2006 census.

Mr O'Connor said there were now better opportunities for owner-occupiers to enter the market with lower interest rates, low inflation and cooling house prices.

But this did not detract from the need to build more affordable housing for those on lower incomes.

"Eighteen per cent of people who use homeless services are under the age of 10," he said.

"We have too many women and children sleeping in cars."

Releasing more land was key to the supply of affordable housing, Mr O'Connor said, and this was the states' responsibility.

He said the federal government was currently working with the states to replace the National Partnership on Homelessness Agreement, which will expire on June 30.

"It is unacceptable that so many Australians live without a home, and we need to continue to dedicate resources to the objective," he said.

"We need new ways to increase housing stock."

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