Any push to wind back negative gearing must not constrain housing supply, Prime Minister Anthony Albanese has said, in an apparent cooling of enthusiasm on reviving a policy Labor took to the 2016 and 2019 federal elections.

Mr Albanese left the door open to revisiting the tax treatment of investment properties on Wednesday morning when he did not deny a report in Nine newspapers that Treasury had been asked to draw up options, saying he welcomed public service ideas.

But by Wednesday afternoon he began to emphasise he had not initiated any policy development and voiced doubts about the merits of the idea, citing work put out by the property lobby that less generous tax arrangements would lead to less new housing.

"The issue with negative gearing is one of supply," he told the ABC's News Breakfast on Thursday.

"Will it add to supply or will it decrease supply? The figures and research that has been produced by organisations like the Property Council indicate that it would reduce supply and therefore not contribute to solving the issue.

"And that's the issue. We just want to get on with our plan of building more homes."

Property lobby figures show slightly less supply, but more affordable homes

The reference was to a paper paid for by the Property Council and produced by Deloitte, which found Labor's 2019 election policy would shave 0.4 per cent off housing supply over a decade.

That policy would stop investors from writing off rental losses against their regular income, with exceptions for any existing investments and for any newly-built homes.

It would also have halved the discount on capital gains tax (CGT), a tax paid on the uplift in an asset's value when it is sold.

Most of the hit to housing supply came from the CGT component, with only a 0.1 per cent reduction coming from the negative gearing change.

But the paper also found that housing affordability – the reason the government cares about supply – would still improve, because demand from property investors would fall by much more than supply would.

Deloitte predicted house prices would be 4.6 per cent lower over a decade than without the policy, even larger than estimates produced by the Grattan Institute and Treasury.

Brendan Coates, the Grattan Institute's housing director, said reform to negative gearing and CGT was "the most effective thing the federal government can do" to improve home ownership, since most supply policies are set by state and territory governments.

A 2023 study by Michael Warlters from the NSW Treasury found negative gearing changes could boost long-term home ownership rates by 5 per cent by redistributing from investors to owner-occupiers.

"That's a bigger impact than anything you'd expect from super for housing, which is the Coalition's policy, or from the Help to Buy scheme, which is the government's policy."

Impact on prices likely to be small

Mr Coates said by contrast any effect to prices and by extension supply would be very small.

"The concessions are only worth $7 billion in a $10 trillion housing market, so it's unlikely to make a very big difference to supply because they're not tax changes that materially affect investor returns.

"This is a policy that's really about boosting home ownership."

He added that housing supply problems were primarily caused by planning restrictions, not a lack of investor appetite.

"There's been no shortage of capital willing to be invested in Australian housing in the last two decades. The fact that we make it harder to build more housing close to where people want to live is the first, second and third reason housing isn't affordable."

Both the Deloitte research and the Grattan research found changes to negative gearing and CGT would have a modest impact on rents, which would increase by 0.5 per cent over a decade according to Deloitte.

Mr Coates said the "tiny" impacts on rent "would only occur in the long run" and were lessened because any reduction in the supply of rentals would be accompanied by a reduction in the number of renters.