Sydney 14 June 2016. For the millions of Australians who do not own a home, negative gearing provides the foundation of their lifestyle.

Without the tax concessions, that apply to losses incurred in buying, financing, repairing and marketing an investment property, the cost of renting a house would be prohibitive for many Australians.

Rents can be low in terms of the percentage of the value of a house only because the owners can make up the loss of potential rent from tax savings. It is as simple as that: No sensible person would buy a unit for $500,000.00 and let someone live in it for $275.00 per week. It is less than a 3% gross return. To make 10% on the money invested in the house, the weekly rent would have to be $825.00.

For renters, negative gearing on houses and apartments is the basis of their lifestyle. Instead of living close to the city in a rental that is close to schools with good reputations, close to entertainment and social infrastructure, most tenants could only afford to rent in unattractive locations. ( Supply and demand )

Bill Shorten and Labor, led by the trades union leaders, propose to change the rules. There is a real potential that private renters will not be able to find affordable houses if Labor is elected. Pressure will build on social ( taxpayer ) funded housing for lower socio-economic groups. The private rental market is working quite well now with tax concessions and private investors providing the majority of affordable homes to rent in Australia.

In Melbourne, a 4 bedroom house in Brighton can be rented ( under the present rules ) for $575.00 a week. On the other side of the population spectrum, a house in outer Melbourne suburb, ( ex country town ) Pakenham can be rented for $275.00 a week. If Labor's negative gearing changes affect housing affordability, the make up of every capital city will change. Many people will be forced to move to cheaper locations, causing massive social disruption driven by affordability.

Jeff Grochowski, a prominent real estate marketer in Melbourne said today "In the inner city, here in Melbourne the apartment rental market is soft while in the inner city fringe areas like South Yarra there is strong demand. One of the reasons that these areas are attractive is that they are affordable with an ideal mix of homes occupied by owners and renters. We see affordable low to medium density apartments continuing to be in strong rental demand. If rental prices for houses go up, some people will be forced to move to the outer areas."

Labor's proposed tax changes will have an effect on housing affordability across urban Australia as prices will alter and the types of properties being constructed will change. How this will affect the millions of families, singles, pensioners and student renters in Australia is yet to be seen. Given that there are challenges facing the global and Australian economy, with record low interest rates to stimulate activity, this may not be the time to allow Labor to experiment with people's financial and social lives.

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