Government urged to consult industry before finalising the rules
Three of Australia's largest housing industry bodies have jointly cautioned that proposed adjustments to capital gains tax, negative gearing and Self-Managed Super Fund (SMSF) investment rules risk cutting the supply of new homes and pushing up rents.
The warning, issued jointly by the Housing Industry Association (HIA), the Urban Development Institute of Australia (UDIA) and the Property Council of Australia, follows the recent passage of federal tax reforms.
The three organisations argue the reforms will discourage investment in existing rental stock, tightening supply. Because building new homes costs more than acquiring existing ones, any pullback in investment is expected to add further pressure on rents.
UDIA national president Oscar Stanley (pictured top left) said consultations with developers, lenders, mortgage brokers, commercial finance specialists and other property professionals nationwide had produced a consistent message: stripping SMSF investment out of the new housing market would make residential projects harder to finance and reduce the number of homes delivered.
"The housing industry has spoken with one voice today," Stanley said. "This policy will make it harder to fund new housing and will ultimately reduce supply."
HIA industry and policy chief executive Simon Croft (pictured top centre) called for the reforms to be revised, at minimum, to protect SMSFs' ability to support new housing supply, in line with broader efforts to lift housing availability.
"The government has already acknowledged that its Budget housing tax changes will reduce supply by around 35,000 homes over the next decade," he said. "It is concerning that further restrictions on private capital have been introduced without any public assessment of the additional impact on housing supply. Apartment developments rely on meeting pre-sale thresholds, and SMSF investors play a critical role in getting these projects out of the ground."
Property Council of Australia chief executive Mike Zorbas (pictured top right) said new supply remained the industry's central concern, noting that construction and capital costs were already constraining projects.
"New housing supply is king," Zorbas said. "Construction and capital costs already prevent new projects taking flight. Changes to SMSFs are the latest handbrake on investment nobody asked for at the same time as trust tax hikes suck the certainty out of new business and hiring decisions for a substantial part of the sector."
Treasury's own budget forecasts indicate the tax changes will result in fewer homes being built over the coming decade, a figure the peak bodies say would worsen significantly if SMSFs are barred from investing in residential property.
According to the three bodies, SMSF investors typically account for at least 30% of pre-sales on apartment projects, making them a key factor in getting developments financed and underway. Removing this source of capital, they argue, would make new housing projects harder to launch.
The organisations are urging the government to:
- consult closely with industry when drafting rules for the negative gearing, CGT and SMSF changes, to avoid unworkable outcomes;
- review the combined impact of the reforms and pursue further amendments if the effects exceed Treasury's modelling;
- permit SMSFs to continue investing in new residential housing; and
- prioritise measures that speed up delivery of rental housing and lift overall supply.
Stanley stressed that Australia remains in the midst of a housing supply crisis. "Every policy should be working to increase the number of homes we build, not unintentionally reducing them," he said.
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