Housing Affordability Crisis in Australia

The government is only too aware of huge problem of housing affordability, this is a long running problem and is now much worse than in the past. Last time the government had a major report on housing affordability was in 2008 - "A good house is hard to find: Housing affordability in Australia":

http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Former_Committees/hsaf/report/index

One recommendation to the enquiry suggested that negative gearing should be capped and that "There should not be unlimited access. Millionaires and billionaires should not be able to access it, and you should not be able to access it on your 20th investment property. There should be limits to it."

Negative gearing is not effective as most investors are buying (lower cost) existing properties rather than creating new affordable properties for renters:

Negative gearing is driving up property prices. It simply tends to feed to higher prices for properties, we would have lower rentals combined with better returns for owners of rental accommodation, were negative gearing to be abolished. Tax statistics show that 1.3 million people deducted losses on property investments from an overall of 12.7 million tax returns lodged, negative gearing drives up property prices and costs government $4 billion per year....and any government that would even consider changing negative gearing would be voted into oblivion.

Negative gearing should be changed to provide affordable housing...How?  Provide 100 per cent tax deduction for investment in new construction and the purchase of the new rental property. It reduces to only 30 per cent deductibility for investment in an established property. That 100 per cent deduction only applies for a benchmark affordability property—in other words one that is probably around $400,000, which could be indexed annually with CPI. But then the 100 per cent reduces down to 0 as prices go up. So over some cut-off point like $600,00. Furthermore no capital gain tax discount on sale of property, this is fair as capital gain would be taxed like any other profit.

How could we bring these changes in without a revolution? Very slowly. Let negative gearing stay as it is with any existing properties and by 2020 the new rules would apply.