"It could be a dollar-value limit on deductions, or the number of properties that can be negatively geared," Mr Steinert said.

Like many in the property industry, Mr Steinert said boosting housing supply was crucial and that reforms to planning processes would speed up production and cut land costs.

But his comments contradict the stance on negative gearing of the Property Council of Australia – of which he is president – and reopen the door to a crucial debate about tax policy ahead of the May budget and at a time when the country is grappling with deteriorating housing affordability that is making it harder than ever for first-home buyers to enter the property market.

Mr Steinert, who argued that affordability was a complex problem that needed a range of solutions, backed the Property Council's position that the capital gains tax deduction on investment profit could be cut to 40 per cent from the current 50 per cent, and that any change should be applied to all asset classes, not just property.

Stockland sells nearly three-quarters of its homes to first-home buyers and owner-occupiers and is less dependent on the investors who take advantage of the personal tax breaks available on property investment, so it's an easier argument for Mr Steinert to make than for other developers. But the nuanced intervention of the country's largest developer could break an impasse that has seen discussion about much-needed reform paralysed by political posturing.

Economist Saul Eslake, an advocate of changes to negative gearing, said Mr Steinert's comments were "ground-shifting".

"It's breaking the hitherto immutable wall of opposition from the property industry," Mr Eslake said. "Given that he sells primarily to owner occupiers rather than investors, he's in a very good position to judge what the impact of the existing arrangements have been on the relative capacity to buy of owner occupiers versus investors."

Even so, changes of the sort Mr Steinert proposed would only have a minor effect on property investment overall, Mr Eslake said.


"It would do something to knock out the most egregious abuses of negative gearing for tax avoidance purposes," he said.

The Property Council, which represents large developers, said negative gearing was an important part of providing vital supply of new housing.

"We have not seen evidence of negative gearing being abused," chief executive Ken Morrison said.

"Two million Australians own an investment property and of those, 1.2 million Australians negatively gear. Almost nine out of 10 people who negatively gear own one or two properties and the average deduction for those who negatively gear is only $8700. The idea there are large numbers of people with large number of properties negatively geared is not supported by evidence."

A report by the Grattan Institute think tank last year showed wealthier people use negative gearing breaks – which allow investors to offset losses and interest payments related to rental properties against other types of income – more than moderate earners. Almost 40 per cent of all negative gearing gains were made by the top 10 per cent of earners, the report showed.

The average negative gearing tax benefit of a surgeon – of whom 28 per cent negatively gear – was $3811, while the equivalent benefit of teachers – of whom just 12 per cent do it – was $288, the Grattan report showed.

Separately from any curbs on negative gearing itself, appetite for the tax break would fall if there was a reduction in capital gains tax discount, Mr Eslake said.

"If you reduce the generosity of the CGT discount, that of itself would make negative gearing less attractive," he said. "Because if you go back to 1999 when the CGT regime was changed from imposing tax on the real gain at full marginal rate to taxing the nominal gain at half the marginal rate, that represented a more generous tax treatment for property investment because the rate of increase in property prices exceeded the inflation rate by a large margin."


In contrast, growth of the All Ordinaries index had been less than the inflation rate since that time, giving share investors less of a tax break, Mr Eslake said.

"The post-1999 CGT regime has been less favourable to share market investors in general than the property market," he said.

Grattan Institute chief executive John Daley agreed that more was needed to improve housing affordability than just tweaks to capital gains and negative gearing breaks.

"Reforms to negative gearing, and its handmaiden CGT relief, are not going to solve housing affordability by themselves," Mr Daley said.

"The kinds of things that will have a much bigger impact on housing affordability in the long run are around the supply of housing – both the release of new land on the outskirts of our big cities – and, more importantly, the subdivision of the middle ring, which by and large we make very difficult."