ANY changes to negative gearing tax breaks for housing investors could erode housing affordability and put upward pressure on rents, a new report for the housing industry has argued.
The report by Independent Economics has found that reducing access to negative gearing could also dampen residential property investment.
It found that discounting negative gearing would "lower Australian living standards by making the tax system less efficient" and reduce investment, in turn effecting housing and increasing rents.
The research, released as a Senate inquiry considers the drivers of what has been dubbed an "affordability crisis" in housing, counters many submissions to the inquiry, including by respected economists.
Many witnesses to the inquiry have argued negative gearing needed to be either abolished or significantly discounted, as it prevents first home buyers from getting into the market.
But Housing Industry Association managing director Shane Goodwin said any discounting of the tax break would be a "retrograde step", arguing policy change should instead be focussed on abolishing stamp duty.
"New housing is one of the most highly taxed sectors in the economy, and the removal of negative gearing would only make that situation worse and discourage investment," he said.
"This would in turn reduce housing supply and increase the cost of renting.
"Negative gearing promotes private investment in the rental market, thus stimulating economic activity and taking the pressure off social housing and the public purse."
The Senate inquiry is expected to report its findings to parliament in late November this year.
- APN NEWSDESK