A ban on self-managed super funds borrowing money to buy housing has blindsided the sector, which says Labor should instead target "unscrupulous" operators spruiking property as an investment.

The Greens are negotiating an end to borrowing by SMFS to buy property in return for supporting the government’s contentious federal budget tax changes.

The government has yielded to the Greens and agreed to ban SMSFs from borrowing to purchase residential properties and avoiding the CGT increase.