The former federal Liberal MP Keith Wolahan has proposed capping negative gearing at one established property and five new builds, in a move he says would boost housing supply and help first home buyers.
In an essay titled Liberal Foundations, published on Monday in Inflection Points, Wolahan argues his party has lost more ground to Labor than to teal independents in multicultural and outer suburban seats.
He said of the 44 metropolitan seats held by the Coalition in 2013, only seven have been lost to the teals. By contrast, 28 seats were lost to Labor.
He said while the party won four elections under John Howard speaking to “Phil and Jenny” – two archetypal swing voters crafted by Liberal pollster Mark Textor – it wasn’t appealing to today’s equivalent: a 32-year-old university-educated woman renting in suburban Melbourne, whose small business-owning parents migrated from China three decades ago.
“She works hard. She pays her taxes. She wants to buy a home, start a family, and build a life. She believes in aspiration. She should be a Liberal voter, yet she is not,” he said.
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“The story of this voter highlights the structural failure of the Liberal party. It is a failure to meet the needs of today’s Australia.”
To become the “party for first home buyers”, he suggests refocusing negative gearing – a tax concession allowing investors to deduct rental property losses from their other income – toward newly built properties.
Under his proposal, investors would be limited to claiming negative gearing on one established dwelling but could claim deductions on up to five new builds.
Pointing to 2025 data showing 82% of investor loans went to established dwellings, Wolahan told Guardian Australia the change would free up more homes for young people.
“There’s also a political dimension, which says that the Liberal party is willing to touch something we didn’t in the past,” he said.
Wolahan said his policy should be “fully grandfathered” – meaning investment properties bought prior to the policy’s implementation would be unaffected – to provide “certainty” and remove the “incentive for a scare campaign”.
Wolahan – a former army commando who was once touted as future Liberal leader – lost his suburban Melbourne seat of Menzies at the 2025 election, in part due to the party’s unpopularity with Chinese Australians.
Jonathan O’Brien, who is the editor-in-chief of Inflection Points, is also the lead organiser for Yimby Melbourne. He welcomed Wolahan’s proposal to “refocus our tax settings to spur productive behaviour within our economy”.
But Martin Duck, a post-doctoral research associate at the University of Sydney, who has written extensively on negative gearing, described the proposal as “a very minor tweak”.
“It would affect just a small number of investors and would be pretty easy to get around,” Duck said, noting about 70% of the 1.12m Australians who use negative gearing do so on just one property.
Brendan Coates from the Grattan Institute said it was a “step in the right direction”, noting Australia’s “very generous” negative gearing concession was a “global outlier”.
“Channelling more of that investment into new builds would boost supply. But by how much? That’s hard to judge,” Coates said.
In a statement, the shadow treasurer, Tim Wilson, said the proposed changes to negative gearing would mean “taxing losses which will lead to less investment” and that “the real challenges are availability of skills and labour, and the cost of CFMEU-Labor cartel kickbacks that are pushed onto the price of new homes”.
The Coalition’s housing spokesperson, Andrew Bragg, was contacted for comment.
Labor has repeatedly ruled out changing negative gearing after it took a similar policy to the 2019 election under Bill Shorten and lost, but it is under pressure to reform the capital gains tax concession.
