Scott Morrison has avoided responding to a call from a Liberal party colleague for the government to develop more “nuanced” housing policies that include negative gearing changes.
The Liberal backbencher John Alexander said the odds were stacked against homebuyers in their competition with investors, and the Turnbull government ought to stop ruling out particular policy areas for potential reform just for political reasons.
But the treasurer refused to buy into the debate, pointing to Britain’s housing affordability crisis as evidence that negative gearing was no solution.
“They have an even bigger problem than we do here, people pay more of their income in rents there, and they pay more of their incomes on their mortgages than they do in Australia,” Morrison said.
“What’s interesting in the UK is they’ve never had negative gearing. Yet they have the same and worse affordability problems than Australia has.
In an opinion piece at the weekend, Alexander floated the idea of allowing the Australian Prudential Regulation Authority to control house price inflation in the same way as the Reserve Bank controls inflation, saying when Apra pressed the banks to reduce their loan-to-value ratio requirements in 2015 – and cap lending growth for investor loans – investor appetite cooled immediately.
He asked: “Should this not be an area worth further consideration and development?”
“The RBA is charged with containing general inflation to between 2% to 3% – by monthly adjustments to the prime rate, taking into consideration all market factors.
“Should Apra be charged with containing investor-driven housing market volatility to a defined band – by monthly adjustments to the allowable loan-to-value ratio for new investor loans, taking into consideration all market factors?” he asked.
Alexander expanded on his idea on ABC radio on Monday, saying under his proposal Apra should target house price inflation by taking into account everything that makes prices increase.
He said the Turnbull government also ought to allow itself to reform all factors that made house prices increase, including negative gearing.
“So what then of your government’s policy to not look at [negative gearing], to say it’s all about supply?” the ABC’s Fran Kelly asked.
Alexander replied: “Well, I disagree with that. Supply is absolutely vital, but as I have said before … it’s like playing Roger Federer. If you play him once you will surely lose and if you were to play him 1,000 times you would lose 1,000 times, and that’s what it’s like for the homebuyer going against the investor the way things are at the moment.
“We’ve got to look at nuancing, whether it’s negative gearing, or nuancing some containment of the investor and the empowerment of the homebuyer,” he said.
Speaking to Sydney’s 2GB radio on Monday, Morrison said housing affordability was even worse in Britain and “they’ve never had negative gearing”. “What both countries I think are faced with are this supply issue,” he said.
Last week, when the federal infrastructure minister Paul Fletcher visited a Sydney electorate, he dismissed a question about negative gearing by saying he did not think Sydneysiders thought about housing affordability on a daily basis.
Alexander wrote at the weekend: “I’ve had thousands of conversations with constituents in my six years as the member for Bennelong; the most common concern and frustration for them is housing affordability.
“Bennelong housing costs have skyrocketed – 74% in the last three years, the fastest in Australia,” he wrote.