The Housing Industry Association (HIA) has told a Senate inquiry that proposed Federal Government tax changes could lead to 35,000 fewer homes being built, raising fresh concerns about their impact on Australia’s housing supply.
The organisation said Treasury modelling behind the reforms indicates a fall in housing investment activity, with knock-on effects for construction starts and project viability at a time when demand for new housing remains high.
HIA Managing Director Jocelyn Martin said the figures presented by Treasury itself point to a policy outcome that runs counter to efforts to improve affordability.
“At a time when Australia is struggling to build enough homes, Treasury is forecasting these tax changes will deliver 35,000 fewer homes. That’s an extraordinary admission for a policy being sold as improving affordability,” she said.
She argued that reducing the attractiveness of housing investment would have predictable consequences for supply.
“You cannot solve a housing supply crisis by making housing investment less attractive. More investment builds more homes, less investment builds fewer,” Ms Martin said.
The HIA said the policy assumes capital displaced from housing would naturally flow into new residential construction, a view it believes does not reflect how investment decisions are made across competing asset classes.
According to Ms Martin, investors can shift funds into shares, commercial property or fixed income products, and Treasury’s own modelling suggests some will do so.
“The changes assume investors will simply redirect their money into new housing. In reality, housing competes with shares, commercial property, term deposits and countless other investments,” she said.
“Investors are free to take their capital elsewhere and Treasury’s modelling suggests many will do exactly that.”
The association also pointed to projections that around 75,000 existing homes may transition from investors to owner-occupiers over the next decade. While welcoming higher home ownership rates, it said this shift does not increase overall supply.
“Our core challenge is supply, and this policy does nothing to address it,” Ms Martin said.
The HIA said regional housing markets could be particularly exposed, where smaller-scale private investors often play a central role in getting projects off the ground.
“In many regional communities there are no large institutional investors waiting in the wings. Local investors are often the difference between projects proceeding or not,” Ms Martin said.
It warned that reduced participation from these investors could slow delivery of new housing in areas already facing shortages.
The submission also raised concerns about the treatment of smaller-scale developments, including knock-down rebuilds, dual-key housing and granny flats, arguing these forms of supply can help increase density without large-scale redevelopment.
“A knock-down rebuild that replaces an ageing home with a modern, energy-efficient dwelling should be encouraged, not penalised,” Ms Martin said.
“It is also unclear why housing options such as dual-key developments and granny flats are overlooked, despite their capacity to increase supply.”
Australia is currently working towards a National Housing Accord target of 1.2 million new homes over five years, a goal the HIA says will be harder to meet if investment slows further.
Ms Martin said any policy aimed at housing affordability should be measured against its impact on supply.
“If we are serious about affordability, every policy should be judged on one question: will it deliver more homes?” she said.
“On Treasury’s own numbers, these changes fail that test.”
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