ALP’s housing pledge facing 200,000 shortfall

Anthony Albanese’s promise to build 1.2m new homes in five years would be cruelled by negative gearing changes, with new forecasts revealing the target is already on track to fall short by 200,000.

Anthony Albanese. Picture: NCA NewsWire / David Crosling

Anthony Albanese’s promise to build 1.2 million new homes in five years would be cruelled by negative gearing changes, with new forecasts revealing the target is on track to fall short by 200,000 without radical policy reforms.

Housing projections obtained by The Australian show that if new policy levers are not pulled, including the fast-tracking of planning approvals and lowering of land and construction costs, the government will not come close to delivering on its housing pledge.

Housing Industry Association forecasts say without accelerating planning reforms across governments, increasing labour supply and lowering taxes on new homes, just over a million homes would be constructed over five years from mid-2024.

The HIA and Master Builders Australia, which support the government’s target and national housing accord, on Monday said changes to negative gearing and capital gains tax would create further shortfalls in housing supply and curtail investment.

The Prime Minister and Housing Minister Julie Collins on Monday said they would stare down threats from the Greens to block the government’s Help-to-Buy legislation unless negative gearing was overhauled.

HIA chief economist Tim Reardon said removing negative gearing would make it harder to increase new homes starts.

“If you tax something you will get less of it,” he said. “Increasing taxes on housing whether its investors, first-home buyers or foreign investors, every time you do that will get you less houses. Increasing tax under any guise will make the problem worse.”

Acknowledging the government’s suite of housing policies and target were “worthwhile”, Mr Reardon said “our forecasts for the next five years of commencements is for just over one million new homes”.

He said the housing trajectory could improve if tax imposts were reduced, land supply unlocked and planning regimes streamlined.

“In order to achieve 1.2 million, there will need to be substantial policy reform, which leads to lower cost for land (and) lower construction costs. Inherent in that is lower tax imposts and improved regulatory system.”

Australian Bureau of Statistics monthly housing approvals figures show that on current trends, the government’s target is falling well below the 20,000-a-month required to build 1.2 million homes.

Opposition housing spokesman Michael Sukkar said ABS data, highlighting an average 10 per cent fall in approvals over the last quarter, suggests the government will be “lucky to get to 800,000 homes”

“Labor can’t get anywhere close to their 1.2 million homes promise. With a more than 400,000 home shortfall, how on earth can the Prime Minister continue to lie to Australians. He should fess up and admit he’s broken another promise, leaving Labor’s housing crisis to get even worse,” Mr Sukkar said.

As inflation moderates and hopes rise of rate cuts in late 2024, Mr Reardon said the high cash rate was holding back new stock.

Since the start of the pandemic, there had also been a 30 per cent increase in the cost of land and 30 per cent increase in construction costs.

Mr Reardon said the government would likely fall well short over the first two years of the five-year window but this could be made-up with “substantial” planning and tax reforms.

He warned that the government’s tax slug on foreign investors could be detrimental.

“They play a very important role in building housing stock in Australia. They particularly invest in apartments, which are at almost 50 per cent of the starts they were five years ago. They are a really important cohort.”

Ms Collins said the government was working with states and territories to unlock affordable and social housing under the $10bn Housing Australia Future Fund and national cabinet endorsed housing accord.

The Housing Minister told The Australian “these new investments will incentivise states and territories to undertake the necessary reforms, including critical planning reforms, to reach the 1.2 million target”.

With Greens leader Adam Bandt threatening to block the Help-to-Buy scheme unless negative gearing is dismantled, Ms Collins said “the Greens and the Liberals need to stop standing in the way of more assistance”.

“They’re standing in the way of vital new assistance to help renters into the security of home ownership. Help to Buy will bring home ownership back into reach for 40,000 Australian households,” she said.

MBA chief executive Denita Wawn told The Australian they would “go back to campaigning again if there is any hint or consideration” that Labor was revisiting Bill Shorten’s 2019 housing tax crackdown.

Ms Wawn, who along with housing and real estate industry chiefs led the campaign against Mr Shorten’s housing tax policies, said: “The Henry tax review, Productivity Commission and RBA have all said curtailing investor incentives like negative gearing and capital gains tax discounts re­duces housing supply rather than improves it”.

“The priority of the government should be on ensuring the objectives of the housing accord are fulfilled and our target of building 1.2 million homes is achieved,” she said.

Industry groups are concerned that while the government is unlikely to touch negative gearing or CGT ahead of the election, Labor could come under pressure in the event of a hung parliament.

Mr Shorten on Friday said “We’re not doing it” in response to whether Labor would consider negative gearing reforms.

“I did take a policy to restrict some of the aspects of it to the 2019 election. I have learnt my lesson,” Mr Shorten said.

On Monday, he said “to the absolute best of my knowledge, it’s not something that the current government’s been working on or focused on or thinking about”.