Landlords pay almost $7 billion a year more in tax than home owners, pushing rents higher

Tackling housing affordability in the right order

Extra taxes being passed onto renters are regressive, because renters have lower average incomes than owner occupiers.

The most recent Bureau of Statistics data we have, from 2019–20, showed average gross weekly income for all households was $2,329. But for renter households, it was only $1,908.

To help both renters and would-be owner-occupiers with housing affordability, far greater national reform is needed beyond how we tax property owners.

As former prime minister John Howard has observed since retiring, the planning policies of both local and state governments

avoid policy decisions that might reduce the value of the existing housing stock in an area […] The interests of current home owners are always preferred to those of new entrants.

While politically difficult, it’s in the national interest for those planning policies to change to increase the space available for housing. That would increase national income and reduce inequality.

In the meantime, the first priority for housing tax reform should be to better share the existing tax burden between renters and owner-occupiers.

More than a decade ago, the Henry Tax Review recommended broadening the base for land tax to include owner-occupiers, similar to local government rates which are a more efficient tax. That could fund a substantial reduction in tax rates for land tax.

It would also finally mean land tax was no longer an extra cost on renters compared to owner-occupiers.

So first we should reduce rents by reforming land tax. Under lower rents, it would become reasonable to tighten up negative gearing in future federal budgets.