Industry to tell Senate inquiry that higher taxes on investors could push up rents and delay critical new housing projects
Higher capital gains tax (CGT) on residential property would further restrict new housing and rental supply, the Housing Industry Association (HIA) will tell a federal parliamentary inquiry.
The association will argue that CGT changes would operate as an additional tax on an already heavily burdened sector when it appears before the Select Committee on the Operation of the Capital Gains Tax Discount today.
“Housing is already one of the most highly taxed sectors in the Australian economy,” said Jocelyn Martin (pictured top), managing director at the Housing Industry Association. “Independent research tells us that nearly half the cost of a new house and land package in capital cities is made up of taxes, fees and charges, and the tax burden on apartments is a similar story.”
Martin pointed out that current tax and regulatory settings were already constraining project viability across the market. “This is already reducing the ability of the market to deliver new homes, because more and more the feasibility does not stack up for projects of all sizes, even when approvals are secured,” she said.
Against that backdrop, Martin will tell the committee that changes to CGT would operate as an additional levy on housing. “Changing CGT arrangements will be akin to a new tax on an already overburdened market,” she stressed.
HIA’s submission also highlights the role of investors in funding both new housing and rental stock, noting that many newly constructed dwellings are purchased by investors rather than owner-occupiers.
“Last year, two in every five homes was financed by an investor to add to the supply of rentals, so the contribution they make to new housing can’t be overstated,” Martin said. “If we increase the tax on investors, there is little doubt that they will seek opportunities elsewhere, or if they remain in the housing market, there will be upward pressure on rents to compensate.”
Martin will also reference the underperformance to date against the federal government’s target of 1.2 million new homes over five years, arguing that the construction sector is operating below the level required to meet that goal.
“The construction industry is currently well below capacity, with the first year of the Federal Government’s commitment to build 1.2 million homes yielding around 60,000 homes less than the required target,” she said, adding that any policy moves that discourage investor participation would further undermine progress towards the target.
“The only way that Australia’s housing crisis for both owner-occupiers and renters will be addressed is through building new homes. It is a quite simple equation based on the fact that we have more households seeking accommodation than we do homes.”
She presents housing supply as an issue with broader economic implications, linking new construction to inflation, productivity and affordability outcomes.
“Housing supply is now a macroeconomic problem,” Martin said. “If we want to ease inflation, improve productivity and restore affordability, we must remove the barriers preventing new homes from being built.
“The focus of government must be on reducing barriers to increasing supply of housing, rather than going to back to the well yet again to try and squeeze more revenue out of housing.”
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