What young Australians should know about the Greens' housing policy

How much longer would it take an investor to buy a property if they decided to wait until they had a deposit that would allow them to "positively" gear the property?

Positive gearing means that although you've borrowed, the property is returning enough income to give you a surplus.

When interest rates were around 2 percent, that probably wasn't too much longer, but now they're more like 6 percent. It's quite a stretch.

So, by banning negative gearing it would mean that investors would be encouraged to take longer before they bought a house. This is the reverse of what you want when you have a housing shortage.

Negative gearing is a housing starts multiplier

The reason we gear most investments (and most investors and companies have some degree of gearing) is so we can do more with the same amount of capital, which is exactly what the country needs to do at the moment.

That's a good thing for renters, who need more properties, and also for buyers, who also need more properties.

It's also a good thing for the government. If investors can leverage their capital, there is more economic activity and the government gets to tax it.

There is GST on new buildings and on renovations, and there is payroll tax on building companies, and income tax from the companies and the tradies who do the work.

All models I have seen that favour abolishing negative gearing neglect this altogether.

And then there is the tax on borrowings. Again, most models advocating abolishing negative gearing don't take into account the fact that the asset producing the income still produces the same income with gearing, it just splits it differently.

Without gearing it goes entirely to the owner, with gearing it goes to the owner and to the financier.

But both pay tax. The owner may pay less tax than if they owned the whole property, but the financier will pay an amount that is roughly similar to the difference.