A former Liberal MP has called on the party to cap negative gearing and position itself as the champion of first home buyers, breaking with decades of opposition to property tax reform. The intervention reflects growing recognition that housing affordability has become politically toxic for the party traditionally aligned with property investors.
When even Liberals are calling to cap negative gearing, you know housing affordability has reached crisis levels. This could be a genuine political realignment - or it could be a former MP with nothing to lose. Either way, it shows the Coalition's investor-first housing stance is becoming untenable.
The former MP's intervention, reported by the Guardian, argues the Liberal Party needs to pivot from defending property investors to championing aspiring homeowners. The political logic is compelling: there are more locked-out potential buyers than there are investors, and those buyers are increasingly younger voters the Coalition desperately needs.
Negative gearing allows property investors to deduct losses on rental properties from their taxable income. Combined with the 50% capital gains tax discount for assets held over a year, it creates massive tax incentives for property speculation. Investors can buy properties, rent them at a loss while claiming tax deductions, then sell for capital gains taxed at half the normal rate.
This turbocharges property prices. Investors can outbid owner-occupiers because the tax benefits make losses profitable. The Reserve Bank and Treasury have both identified negative gearing and CGT discounts as contributing to housing unaffordability. But politically, touching them has been toxic.
The Liberal Party has historically been the strongest defender of negative gearing. When Labor proposed limiting it to new builds in 2016 and 2019, the Coalition ran scare campaigns about property values crashing and retirees losing income. Both times, Labor's policies were credibly argued to be contributing factors in election defeats.
So for a former Liberal MP - even one no longer in parliament - to call for capping negative gearing represents a significant shift. It suggests internal recognition that the party's property investor base is shrinking while the locked-out buyer base is growing, and that defending an increasingly unpopular tax break damages the Coalition's electoral prospects.
Mate, Australia's housing crisis is brutal. Median prices in Sydney and Melbourne are around $1 million. First home buyers compete against investors who get massive tax breaks. That's not a market - it's a rigged game.
The proposal to position the Liberal Party as "the party for first home buyers" is politically savvy but practically difficult. The Coalition's donor base, membership, and caucus are heavily weighted toward property investors. Many Liberal MPs own multiple investment properties themselves. Asking them to support policy that might reduce their personal wealth is a big ask.
But the electoral math is shifting. Homeownership rates among under-40s have collapsed. Renters are an increasingly large voting bloc. Housing affordability consistently ranks as a top voter concern. A party that can credibly claim to be fixing housing affordability could gain significant electoral advantage.
The challenge is credibility. The Liberal Party has spent decades defending negative gearing, warning against Labor's modest reform proposals, and prioritizing investor interests. Sudden conversion to the cause of first home buyers would be met with skepticism unless backed by concrete policy commitments.
Capping negative gearing is one option. Labor's approach - limiting it to new builds - aims to redirect investment toward increasing housing supply rather than bidding up existing stock. Other proposals include reducing the number of properties that can be negatively geared, or phasing out the CGT discount over time.
Each approach has trade-offs. Investors and real estate industry groups argue that negative gearing supports rental supply and that removing it would increase rents or crash property values. Academic evidence is mixed, though most economists agree the current settings favor speculation over productive investment.
The political breakthrough would be a bipartisan agreement that housing affordability requires reform of property tax settings. If both major parties committed to limiting negative gearing and adjusting CGT discounts, it would neutralize the issue politically while enabling meaningful reform.
But that requires the Liberal Party to abandon its investor-first position, and Labor to be willing to lead on an issue that's burned them twice electorally. The former Liberal MP's intervention tests whether the Coalition is capable of that shift.
Compare Australia to countries without equivalent tax breaks for property speculation. New Zealand phased out interest deductibility for rental properties in 2021, then reversed it in 2023 under political pressure. Canada has tightened rules around investment property taxation. Germany never had equivalent speculation incentives and maintains much more stable housing costs relative to incomes.
Australia's policy settings are outliers in how heavily they subsidize property investment through the tax system. The cost is measured in locked-out buyers, excessive household debt, economic instability, and a generation for whom homeownership is increasingly impossible.
The political question is whether either major party is willing to challenge investor interests for the sake of aspiring buyers. The former Liberal MP's call suggests cracks are appearing in the Coalition's united front on negative gearing. Whether those cracks widen into policy change depends on electoral pressure and political courage.
For now, it's one voice calling for change. But it's a significant voice from within the party that's historically most opposed to property tax reform. If more Liberals join the call, the political calculus around negative gearing could shift surprisingly quickly.
The housing affordability crisis isn't going away. Prices continue climbing faster than wages. First home buyer numbers keep falling. Rental stress intensifies. At some point, political parties will have to choose between defending investor tax breaks and addressing the crisis. This intervention suggests some Liberals are ready to make that choice.
