The Australian has published the results of modelling on the Green’s policy of phasing out negative gearing and the capital gains tax (CGT) discount. The modelling claims that rents will increase because the tax changes will lead to many landlords selling their properties, reducing the number of rental properties.

But a reduction in rental properties is not going to push up rents. Why? Because those houses are not being destroyed or abandoned, they’re being sold.

Who is buying those properties? They are not being sold to landlords because the tax changes are driving them to sell. If they are not selling to people who already own properties (landlords), then they must be selling to people wanting a property to live in (first home buyers).

Landlords are selling their properties to people who currently rent. After this happens there will be fewer rental properties but their will also be fewer people wanting to rent. Supply may fall but so will demand, which will not material impact rental prices.

The result of cracking down on these tax concessions will be higher home ownership rates, as renters who are currently trying to break into home ownership buy rental properties being sold by landlords.