Breaking News: The Government’s Bold Move to Tackle Housing Affordability Could Shake Up Property Investment—But at What Cost?
Updated February 27, 2026 — 9:54am, first published 9:52am
In a move that’s sure to spark debate, the Albanese government is exploring new limits on negative gearing, potentially capping the number of rental properties investors can claim tax deductions on to just two. But here’s where it gets controversial: Is this a fair step toward leveling the playing field for young Australians, or an overreach that penalizes hardworking investors? Let’s dive in.
Government insiders have confirmed that Treasury has been tasked with modeling changes to negative gearing rules, a policy that allows investors to offset property-related losses—like interest, rates, and maintenance—against their taxable income. This comes as the government scrambles to find savings and boost revenue ahead of the May federal budget. And this is the part most people miss: These changes are being considered alongside tweaks to the capital gains tax discount, which currently lets investors pay tax on only 50% of their property profits after a year of ownership.
Health Minister Mark Butler remained tight-lipped on the specifics but emphasized the government’s commitment to addressing housing affordability for younger Australians. “As we approach the budget, there’s a flood of speculation about what’s on the table,” he noted during a Sunrise appearance with Opposition Deputy Leader Jane Hume. “We’ve been clear about our tax and housing policies, but we also recognize the challenges young Australians face in entering the housing market.”
Why This Matters: Negative gearing has long been a divisive issue. Proponents argue it encourages investment, increases housing supply, and keeps rents in check. Critics, however, claim it disproportionately benefits wealthier Australians and inflates property prices. According to Australian Tax Office data, in 2021-22, 950,000 investors were negatively geared, while 1.3 million were positively or neutrally geared. Meanwhile, costings from the Parliamentary Budget Office reveal that negative gearing cost the government an estimated $6.9 billion in forgone revenue in 2024-25, with capital gains discounts adding another $5.4 billion.
Labor’s history with these policies is fraught. After abandoning plans to reform negative gearing and capital gains tax following election defeats in 2016 and 2019, the party is now revisiting these measures as housing affordability worsens and budget pressures mount. Treasurer Jim Chalmers has made productivity-boosting reforms a priority, and these policies are back on the table.
The Opposition’s Take: Opposition Leader Angus Taylor slammed the proposal, calling it “highly unlikely” the Coalition would support such changes. “This is an attack on working Australians who’ve invested in property as a nest egg,” he argued. “These are tradies, nurses, and everyday people who’ve helped increase housing supply.” Jane Hume echoed this sentiment, warning that higher taxes on landlords would lead to rent increases. “The real issue is supply,” she said. “Building more homes is the solution, not tinkering with taxes.”
The Bigger Picture: While some argue that limiting negative gearing could free up housing for first-time buyers, others fear it could discourage investment and exacerbate supply issues. The government’s preferred change is to the capital gains tax discount, but restrictions on negative gearing remain under consideration pending Treasury’s advice.
Food for Thought: Is the government’s approach a necessary step to address inequality, or a misguided policy that could backfire? We want to hear from you. Do you think limiting negative gearing will help young Australians enter the housing market, or will it only make matters worse? Share your thoughts in the comments below and let’s keep the conversation going.
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Written by Millie Muroi, Economics Writer, and Brittany Busch, Federal Politics Reporter.
