Tax changes threaten housing supply without broader definition of new homes, trade body warns
The Housing Industry Association (HIA) has called on the Senate to amend the federal government's proposed negative gearing and capital gains tax legislation, arguing the bill contains a narrowly drawn definition of new housing that could undermine the policy's stated aim of boosting supply.
HIA managing director Jocelyn Martin (pictured top) said the association remains opposed to the taxation changes, citing Treasury modelling it says projects a reduction in housing supply.
"Treasury's own modelling shows these changes could reduce housing supply by around 35,000 homes over the next decade," Martin said. "That is the wrong outcome at the wrong time, when Australia is already struggling to meet its housing targets. While HIA does not support the taxation changes, our focus is now on making a flawed proposal more workable and minimising the damage to housing supply."
The HIA is participating in the Senate inquiry into the legislation and has flagged its definition concerns in a forthcoming submission.
"A key concern that HIA will make in its submission to the Senate Inquiry is the draft legislation adopts a too narrow definition of 'new housing,' which does not reflect how new supply is actually delivered," Martin said. "To support supply, the legislation must capture the full range of housing being delivered in today's market."
The association is seeking explicit inclusion within the definition of: knock-down rebuilds; dual-key and multi-generational homes; secondary dwellings and granny flats; and major renovations that bring properties up to current building codes.
Martin argued that upgrading or replacing ageing dwellings constitutes a genuine contribution to effective housing supply. "Modern homes are designed to accommodate more people, support changing household structures and make better use of existing land and infrastructure," she said.
The HIA also warned that the current drafting could produce perverse outcomes whereby similar forms of new supply receive different treatment under the legislation. It noted that in many established suburbs, planning constraints limit higher-density development, making knock-down rebuilds and secondary dwellings the only viable means of increasing supply. "If these are not recognised, the policy will work against its own objective," she pointed out.
On the capital gains tax component of the proposal, Martin cautioned that the broader package risked dampening investment in new projects.
"Australia needs more investment in housing, not less," she said. "The Senate Inquiry is a critical opportunity to correct these flaws. Without meaningful amendments, these changes will reduce supply, increase pressure on affordability and undermine the stated goal of boosting new housing."
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