HIA Managing Director Jocelyn Martin said new state-level policies, particularly in Victoria, are adding significant costs to home building that could negate recent federal initiatives aimed at making homes more affordable.
The Victorian Government has introduced legislation that will establish a new building insurance scheme, increasing premium costs and potentially limiting the number of homes builders can construct.
The legislation also includes a development bond for projects outside the domestic building insurance system that will add at least 2 per cent to building costs.
“This Victorian legislation will strangle the businesses of home builders and force many to exit the industry, reducing competition and adding further to the costs to construction,” Ms Martin said.
The new requirements also include provisions that prevent builders from seeking payment until clients confirm they don’t want to make insurance claims, and allow regulators to make rectification orders for minor defects for more than ten years after project completion.
These measures come on top of other recently introduced taxes in Victoria, including a value capture tax and second home taxes, which the HIA says are making the state increasingly dependent on housing taxation as a primary revenue source.
Ms Martin said that these additional requirements “will go a long way to offsetting the reduction in lenders mortgage insurance requirements proposed by the Prime Minister a week ago.”
The HIA suggests that meaningful housing affordability improvements would require stopping governments from increasing building costs first, followed by removing taxes, cutting red tape, and reducing infrastructure costs.
For immediate impact, the association believes federal financial support for first home buyers building new homes, similar to recently announced policies from both major parties, is the only effective short-term solution.
More substantial reform is needed according to the HIA, including removing GST from new homes until Australia builds 1.2 million homes within five years.
The association said that while housing is a necessity like food and education, which are GST-exempt, it continues to incur the tax.
“The ideal solution to increasing housing supply is to first stop governments increasing the cost of home building, such as in Victoria,” Ms Martin said.
“Then to remove taxes, red tape and delays and reduce infrastructure costs.”
The HIA is advocating for comprehensive tax reform to reduce state governments’ reliance on housing-related revenue, arguing that the current approach is unsustainable.
“Housing is a necessity, and yet it still incurs the GST, unlike other necessities such as food and education,” Ms Martin said.
“Housing is taxed less like a necessity and more like a vice, like alcohol or tobacco.”
