The Housing Industry Association (HIA) has called on the Australian Government to rule out changes to negative gearing and capital gains tax as part of this year’s federal tax review, warning that further tax instability could slow new home construction and worsen Australia’s housing shortage.
The call follows the release of HIA’s report, Taxation of Housing and its Impact on Supply, which argues that housing is already among the most heavily taxed sectors of the Australian economy. According to the association, taxes are applied at multiple stages of the housing lifecycle, with new housing bearing a significant share of these costs.
HIA Chief Economist Tim Reardon said the report highlights long-standing issues in housing policy, particularly the impact of taxation on supply.
“You don’t fix a housing shortage by taxing housing harder,” Mr Reardon said.
The report suggests that frequent changes to housing tax settings undermine confidence in residential construction and weaken the conditions that support the delivery of new homes, without addressing the underlying supply shortfall.
HIA’s analysis indicates that investors account for more than 40 per cent of new homes built in Australia, with an even higher proportion in apartment and rental housing developments. The association argues that discouraging investment does not redirect demand toward new construction, but instead reduces overall participation in the housing market.
“Investors don’t neatly switch from established homes into new construction when taxes rise. They leave the housing market altogether,” Mr Reardon said.
The report also challenges claims that altering negative gearing or capital gains tax arrangements would improve affordability for first home buyers. According to HIA, while housing prices are influenced by supply and demand, shortages can only be resolved by increasing the number of homes built.
HIA further argues that higher taxes on established housing can affect new developments, as new homes eventually become part of the established housing market, influencing project feasibility.
As part of the tax review, the association is urging the federal government to provide certainty for residential investment by committing to stable tax settings and avoiding additional charges on 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,” Mr Reardon said.
