LJ Hooker is calling on the Federal Government to redirect billions of dollars in tax revenue generated by the property sector back into housing in this year’s upcoming Budget, if it is to address the ongoing chronic lack of supply and affordability.
A proposal from the estate group is calling on governments to reconsider how property tax revenue is used, arguing that funds collected from the sector, including stamp duty, should be reinvested into improving housing supply, affordability and mobility.
The latest data shows state and local governments collected $83.1 billion in property-related taxes in 2024/25, with stamp duty contributing $34.4 billion.
Mathew Tiller, LJ Hooker’s Group Head of Research said home values are still growing with most markets remaining undersupplied. This shortage of stock should keep a floor under prices even with higher interest rates, current global uncertainty and softer confidence.
“Australia does not have a shortage of housing policy ideas, it has a shortage of housing delivery,” Mr Tiller said.
“The housing problem is not hard to diagnose. We are not building enough homes, the cost to build them is too high and we are not making enough use of the homes we already have available.
“The National Housing Accord target is 1.2 million new homes over five years from 1 July 2024, which means we need to be consistently delivering around 60,000 homes a quarter just to stay on track, and we are not there at present.”
With the rental market relying on mum and dad investors, LJ Hooker is also urging caution when it comes to any future changes to negative gearing or capital gains tax in the 2026/27 Budget.
“Any reforms should come with very clear housing outcomes,” Mr Tiller said. “The savings should not just disappear into general revenue. They should be directly reinvested into building more social and affordable housing.”
To assist in housing delivery, LJ Hooker is calling for more social and affordable housing, better incentives for downsizing, targeted help for essential workers, and reform that improves mobility across the market.
It should also expand to apprentice support, fast track migration for key housing trades, and
tie assistance to homes actually being built.
Latest data from Cotality shows national dwelling values rose 2.1 per cent in the March
quarter and 9.9% over the year, while PropTrack shows prices were up 9.4 per cent annually
to March.
At the same time, the RBA lifted the cash rate to 4.10% in March, and housing
growth is expected to slow through 2026 as higher rates and uncertainty weigh on buyer
demand.
“This is why this Budget matters so much – we need to see reforms that are going to make a
difference now and for future generations of Australians,” Mr Tiller said.
LJ Hooker’s 2026/27 Federal Budget Wish List
1. Lower building costs to increase housing supply
One of the biggest reasons Australia is not building enough homes is that it simply costs too much to build. Cotality says residential construction costs are still more than 30 per cent higher than five years ago, while HIA says the cost to construct housing, and the cost of skilled labour, have risen by around 150 per cent since 2000.
At the same time, commencements are improving, but still not fast enough. The latest ABS data shows 53,567 homes commenced in the December quarter of 2025, the highest level since September 2021, but still below the 60,000 needed each quarter to hit the Accord target.
Solution: Provide direct cost support to small and mid-sized builders by giving them access to concessional finance, loan guarantees, and targeted subsidies for projects that add to housing supply.
2. Affordable housing for essential workers
We have been calling for a Defence Housing Australia style model for essential workers for a number of years now, and DHA shows there is already a working example of how this can operate at scale. As of 30 June 2025, DHA managed 17,353 properties across Australia, and around two thirds of that portfolio was leased from private investors rather than owned directly by government. That is what makes it such a useful model. It shows government does not have to build and own every home itself to create secure housing supply for a priority workforce.
Solution: The DHA approach should be broadened for essential workers, particularly in regional and rural Australia. A dedicated national program could use long term leasing arrangements with private investors to provide secure and affordable rental housing for nurses, teachers, police, and other frontline workers close to hospitals, schools, and emergency services. If we want those services to function properly, we need to make sure the people delivering them can actually afford to live nearby.
3. CGT savings reinvested into housing
Australia’s rental market still relies heavily on private mum and dad investors, not large institutions. Parliamentary research says the market is dominated by around 2 million individual investors, and most own only one property. That matters because if policy settings discourage those investors and they pull back, the need for rental housing does not disappear. It simply means government has to step in and provide more rental accommodation itself.
According to the Australian Institute of Health and Welfare, around 184,000 households were on Australia’s social housing waitlist at 30 June 2024. AIHW data also shows social housing has not kept pace with growth in the broader housing stock.
Solution: Building more social and affordable homes would reduce the waitlist and help take some pressure off the private rental market by housing more lower income households outside the private system. If tax reform is done in the name of housing affordability, it should deliver a clear housing outcome, more homes, especially more rental homes.
4. Make downsizing and rightsizing easier
One of the easiest ways to improve housing availability is to make it easier for older Australians to move without being financially penalised for doing so. Australia already has a large amount of underused housing stock. ABS data shows 77% of households have at least one spare bedroom. That tells you there is already a lot of housing capacity sitting inside the existing stock, but the policy settings are not doing enough to help people move through the housing cycle.
The Government has lowered the downsizer super contribution eligibility age to 55, and eligible sellers can contribute up to $300,000 each from the sale of a home into super, or $600,000 for a couple. ATO data shows 15,800 individuals made downsizer super contributions in 2024/25, contributing $4.165 billion in total.
Solution: The next step should be extending the pension assets test exemption period, simplifying the rules further, and pushing harder with the states on stamp duty relief for downsizers. Better mobility at the older end of the market would free up larger homes for growing families without building a single extra dwelling.
5. Unlock the housing cycle
Stamp duty remains one of the biggest brakes on housing turnover and labour mobility in Australia. It discourages people from moving when their housing needs change, makes downsizing harder, and reduces the efficient use of existing housing stock. It is also becoming an increasingly important revenue source for government, which is part of the problem. On the latest figures, stamp duty revenue jumped almost 12% over the year and is now 81% higher than it was five years ago.
Treasury’s Working Future white paper says labour mobility can be held back by barriers such as the difficulty of finding appropriate and affordable housing, while the Productivity Commission has long argued that transfer taxes like stamp duty reduce mobility and lead to less efficient use of land and housing. In other words, stamp duty is not just a housing tax, it is a productivity tax.
Solution: The Budget should establish a dedicated incentive fund to encourage states to reduce stamp duty, starting with targeted relief for downsizers and owner occupiers moving into homes that better suit their needs. Over time, that funding should support a broader shift toward a more efficient land tax-based system. If we want a better functioning housing market, we need to lower the tax penalty on moving.
6. Make homes more sustainable
This is one area where policy support is already showing results. Australia now has rooftop solar on a massive scale. The Clean Energy Council says rooftop solar has raced past 4 million installations on households and small businesses, and by the second half of 2025 rooftop solar was generating 14.2% of Australia’s electricity. Battery uptake has also surged. The Clean Energy Council says a record 183,245 batteries were sold in the second half of 2025 alone, more than the previous four years combined.
It shows households will invest when the incentives are clear. More sustainable homes do not just reduce emissions. They cut power bills, improve household resilience, and make the energy system less reliant on the grid during periods of stress.
Solution: The Budget should expand and extend support for rooftop solar, home batteries and energy efficient home upgrades, with targeted rebates or low-cost finance for owner occupiers and landlords upgrading existing homes. A specific stream should be aimed at lower- and middle-income households, where upfront cost remains the biggest barrier. If we want homes that are cheaper to run and less exposed to energy shocks, we need to make sustainable upgrades easier to afford.