Trade body says heavy taxes on housing are constraining efforts to boost supply
The Housing Industry Association (HIA) has urged the federal government to abandon any move to raise the tax burden on housing, arguing that higher taxes on investors and new construction will impede the delivery of new homes and worsen the nation’s supply shortfall.
The call includes a push to rule out changes to negative gearing and capital gains tax in this year’s tax review, and is detailed in HIA’s latest report. The report finds that residential property is already among the most heavily taxed sectors in the Australian economy, with charges imposed at multiple stages of the development and ownership cycle. It says these imposts fall disproportionately on new dwellings, driving up project costs and rendering some developments unviable.
“You don’t fix a housing shortage by taxing housing harder,” said Tim Reardon (pictured top), chief economist of the Housing Industry Association. “And you certainly don’t make homes more affordable by destabilising the tax settings that support new home construction.
“The political reflex has been the same for decades. First it was to blame investors. Then foreigners. Then foreign investors. Meanwhile, governments quietly add more taxes, more charges and more costs to housing, and wonder why supply keeps falling short.”
Negative gearing, CGT claims challenged
According to the report, investors are central to new housing delivery, initiating more than 40% of new homes built across Australia and an even larger share of apartments and rental properties. Any policy shift that discourages investment, HIA contends, would feed directly into reduced construction activity.
“When you discourage investors, you don’t free up housing, you stop it being built,” Reardon said. “Investors don’t neatly switch from established homes into new construction when taxes rise. They leave the housing market altogether.”
The report also challenges claims that tightening negative gearing or capital gains tax would materially improve affordability or give first home buyers an edge. It reiterates that prices reflect the interaction of demand and supply, and that only an increase in dwelling completions can address a structural shortage.
“New homes don’t exist in isolation,” Reardon said. “They become established homes. Taxing established housing more heavily reduces the value of new housing as well, which makes fewer projects stack up.”
HIA is calling on the government to give long-term certainty on housing tax settings as part of the current review, arguing that stability is essential for developers, builders, lenders and investors to make multi-year commitments to new projects. It wants negative gearing and capital gains tax left unchanged, and for governments to refrain from adding further levies on new housing.
“If governments are serious about increasing housing supply, the first step is simple,” Reardon said. “Commit to tax system stability for residential investment, rule out changes to negative gearing and capital gains tax, and stop layering new taxes onto new housing construction.
“More homes will only be built if governments stop treating housing as a revenue base and start treating it as essential infrastructure.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
