INDUSTRY NEWSNationalReal Estate News

Higher taxes won’t solve housing crisis

Increasing taxes on housing will exacerbate affordability issues, according to the Housing Industry Association (HIA).

HIA’s Chief Economist, Tim Reardon, warns that higher housing taxes will lead to reduced investment and fewer homes being built, ultimately worsening the affordability challenge.

“We cannot tax our way out of the housing affordability problem,” Mr Reardon said.

“The solution is less tax on housing and less government distortions on the market.”

The call for fewer taxes comes on the back of the government looking at negative gearing and the role it’s playing in the property market.

The Sydney Morning Herald reported that the Albanese government had commissioned modelling of reforms to negative gearing and capital gains tax concessions.

The proposed changes are reportedly modest in scope, such as capping the number of properties a taxpayer could negatively gear.

Mr Reardon said multiple reviews of housing taxation, including the Henry Tax Review, have consistently emphasised the need to address supply constraints before considering additional taxes on homes.

Key institutions such as the Reserve Bank of Australia, Productivity Commission, and Federal and State Treasurers have identified supply constraints as a fundamental cause of the housing affordability crisis.

Mr Reardon said that a coordinated effort across all levels of government is required to enable the industry to respond to pent-up demand with appropriate housing types and locations.

He dismisses the notion that reducing rental accommodation opportunities could positively impact housing supply and rental affordability, calling such conclusions “illogical.”

He said that government policies remain the main cause of housing supply shortages.

“Addressing affordability requires a coordinated effort by all tiers of government to allow the industry to respond with the type and location of housing required to satisfy the pent-up demand,” he said.

“It is illogical to conclude that reducing opportunities to provide rental accommodation can make a meaningful impact on housing supply and rental affordability.

“As was the case in each consideration of changes to tax settings in the past, it is government policies that remain the primary cause of the shortage in housing supply.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.