Who’ll provide the shelter?

BY MICHAEL DAVOREN

When governments of any persuasion start talking about making changes to those things that incentivise investors, people get concerned.

Rightly so.

Government legislation can seriously affect how society can meet the need for shelter.

In Australia, we are heading towards an election. Should the Labor Party’s proposed negative gearing and capital gains tax changes be subsequently introduced in the fallout of that election, impacts will be felt.

Shelter is a basic human need - like air, food and water. All people need shelter - an ongoing, sustainable supply of decent, habitable shelter. In some countries, including Australia, homelessness is already an issue with housing availability under pressure.

The rather large percentage of households that rent – currently around 30 per cent in Australia and around 37 per cent in New Zealand – will need investors who are willing to provide rental housing.

A great percentage of those providing shelter for everyday Australians and New Zealanders are ‘everyday’ landlords and property investors, not just the alreadywealthy making even more money through rentals and growing portfolios.

What is the main reason these ‘ordinary people’ are investing? It is because there is a tax incentive. The need for shelter is being met because investors have tax incentives. Incentives for the average person to be involved in the supply of housing is critically important, and it is only through financial incentives that people are likely to be involved.

Realistically there is no other reason. No matter how wishful we might be and how philanthropic we’d like to think people are, the average ‘Joe/ Josephine’ won’t be involved unless it is to create wealth through financial gain.

Most people don’t become landlords for purely altruistic reasons. They are investors, and in a business that they should not be penalised for. And property does not have an unfair tax advantage over other investments, as some have suggested.

New Zealand’s housing shortage continues to worsen, especially in Auckland, though an increase in dwelling consents has been greeted with confidence. However, it is acknowledged that the cumulative decade of housing shortage will take some time to tackle.

Whether Australia or New Zealand, someone has to supply the housing, and in the short term – today and tomorrow - not just in the future.

Take the incentives away – or introduce disincentives - and the investor will flee. Their motivation will disappear and that basic need for shelter will be shaken to its core. It will affect people from all walks of life, and from all financial levels, exactly as occurred when the Hawke government removed negative gearing in 1985. Capital Gains Tax was introduced in September that same year. Six months after Treasurer Paul Keating announced the removal of negative gearing, it was reinstated.

While words are often tossed around in the guise of election promises, there is no real talk of government stepping up to meet rental demand. I have heard no government, no party, no politician and no public servant address who is going to fill the gap, or make any mention of governmentassisted housing, in a way that fills me with great confidence in a 2019 approach or outcome.

My genuine concern is for the percentage of renters who will be affected by increasing competition for less rental stock, and higher rents. Where will they turn when the supply of rental properties dries up?

When a government pulls incentives for investors, there’s likely to be more suffering and homelessness.

Incentives that encourage investors to provide housing should be balanced against the needs of people to provide their own housing, because both renters and owner occupiers make up the population of a nation, and both need shelter.