Adam Bandt tempts Albo with a couple of housing treats

If PM Albanese does not immediately and outright reject Adam Bandt's demand he ditch negative gearing and the proposed doubling of Capital Gains Tax it will be a tacit admission a Labor government will succumb in government.

It's in the ALP's DNA to want to ditch negative gearing and double capital gains tax. Jim Chalmers even asked Treasury in September last year to model removing negative gearing, while taxing capital at all was a Labor idea..

Bandt is offering Labor a "cheap" deal which they could easily afford, and in the event of a hung parliament he would take it. Even if there is a Labor government with a small majority, he'd still be tempted to take it to break a Senate deadlock.

While it might be a cheap deal for Labor, with these being policies they already favour, it will be expensive for renters in particular.

Negative gearing actually provides for more housing by helping investors to borrow more. More leverage means a larger investment pool, more houses and lower rents.

Capital gains makes investing in real estate worthwhile, because the income returns are generally derisory.

Gross rental yields are currently 3.7% according to CoreLogic, out of which the landlord needs to pay tax, management fees, rates, maintenance, insurance and allow for depreciation.

Compare this to the average yield of a company on the ASX, which also pays 3.7%, but this is after tax, management, depreciation, other costs incurred in earning the income, and with maybe another 3.7% put aside for investment in expanding the business.

Abolishing one and doubling tax on the other will drive investors out of the housing market and into riskier proposition like shares or topping up their superannuation (most of which is controlled by the Labor Party's allies in the trade union movement).

Last time Labor abolished negative gearing, under Paul Keating in 1985, the ban lasted for only 2 years before it was abandoned as rents began rising.

Abolishing negative gearing would overturn centuries of taxation practice. It has always been the case that the owner of a business or investment is entitled to deduct expenses from income before tax is assessed on their income.

While negative gearing is portrayed as a tax lurk in fact all that happens is that at the end of each tax year the taxpayer pools all their income together from employment, investment, consultancies etc and if the ATO has taken more in income tax than required over the total, the taxpayer receives a refund of that tax, not of his expenses.