Proposed changes to negative gearing and capital gains tax (CGT) discounts risk slashing Australia’s housing supply, driving up rents, and threatening construction jobs, industry leaders have warned.
The warning comes as modelling from Master Builders Australia, the Housing Industry Association (HIA), the Property Council of Australia, and the Real Estate Institute of Australia (REIA) shows the potential economic consequences of federal tax reforms. According to the report, removing negative gearing alone could reduce housing starts by up to 45,524 dwellings by the end of the decade, while changes to CGT discounts could remove a further 33,353 homes.
Combined, the two policies could see nearly 46,000 fewer dwellings, with a broader economic impact exceeding $3 billion.
Master Builders Australia CEO Denita Wawn said the report underscores the clear link between property taxes and housing supply. She explained that any increase in taxes inevitably reduces the number of homes built, which in turn affects renters and the broader housing market.
“The report that we are releasing today shows that whatever way you cut it, any time you do a tax hike on property, you reduce the supply of our homes. That is not fair to our rental market. It is not fair to the focus on building supply at a time when we need to be focusing on uplift. We are saying, as a group of concerned industry associations that the government should not change the tax settings that means a reduction in the supply of our homes,” Ms Wawn said.
Jocelyn Martin, Managing Director of HIA, pointed to the critical role that investors play in the housing market, particularly ordinary Australians who own one or two properties.
She highlighted that investors contribute significantly to new home construction, and any reduction in their participation would worsen rental affordability.
“It is well known that Australia is facing a housing crisis, and that is because we are not building enough homes. Treasurer Chalmers seems unwilling to rule out a change to the Capital Gains Tax Discount.
“We know that two in five properties of new homes built in this country are built by investors. We can ill afford to see those investors leave the market for more attractive options. We also know that 70 per cent of homes are built by investors, by people, ordinary people who have one to two homes. Our report shows that Capital Gains Tax Discount changes will have a negative impact on GDP, on employment, and also will decrease housing supply,” Ms Martin said.
REIA President Jacob Caine said higher property taxes would compound the country’s structural housing deficit, hitting both renters and the construction industry.
He argued that supply-focused policies must take precedence to avoid placing undue pressure on those least able to absorb rising costs.
“The inescapable consequences of higher property taxes are that rental home availability decreases, rents increase, and those in our community who can least afford the extra burden bear that burden, and they are renters. All policy positions and settings should be focused on increasing supply, not constraining it,” Mr Caine said.
Property Council CEO Mike Zorbas added that investment drives the majority of new home construction and is essential to maintaining rental affordability.
He said policymakers need to consider the broader economic and social consequences of taxing investment in new housing.
Property Council CEO Mike Zorbas said investment is critical to new home construction and rental affordability, warning that taxing investors would reduce supply and hurt renters.
“The simple fact is this, we won’t get more supply of new homes in this country if we hike taxes on investment in that supply. Two in five of every new home in this country are supported by the fundamental investment made by investors. That matters in the big cities and that matters in regional areas. If you shrink supply by hitting investors, you eventually end up hitting renters… Intergenerational equity in this country is best served by a radical increase in the supply of new housing. Australia is 100 homes per 1000 people behind the average of other advanced economies. How we got here is not the fault of investors.
“It is in fact, very much at the feet of three generations of Parliamentarians at a federal, state and local level who have not supplied enough housing. We only have 400 homes per 1000 people. That is absolutely execrable for a nation that has a very low population and a very large land mass.
“So, I ask the Federal Government, I ask the Federal Cabinet, I ask the National Cabinet to redouble their very welcome commitment made a couple of years ago to increase supply and increase the zoning and the approvals processes for new housing. That is the key to intergenerational equity in the housing market in this country,” Mr Zorbas said.
All four organisations reaffirmed their commitment to the National Housing Accord target of 1.2 million homes, urging the federal government to focus on policies that increase supply rather than measures that could slow construction, reduce investment, and worsen rental pressures.