HIA says budget's housing initiatives do not fully compensate for the supply impact of restricting negative gearing
The Housing Industry Association (HIA) has urged the federal government to include additional supply measures in its housing legislation, warning that limiting negative gearing to new dwellings will reduce housing supply by around 35,000 homes over the next decade.
"This regressive step is not offset by policies announced last year, or those introduced by state governments," said HIA chief economist Tim Reardon (pictured top). "The 65,000 additional homes referred to in the Budget include programs previously announced, or supply that won't be delivered for many years.
"It doesn't matter how you adjust the share of 'renters vs owners', the result remains the same, we don't have enough homes. The essential nature of housing and its scarcity will see prices rise, and homes increasingly owned by wealthier households until there are enough homes."
The industry body is calling for an accelerated depreciation schedule for newly constructed homes, arguing this would improve their attractiveness to investors relative to shares, commercial property, and superannuation — without affecting total revenue over the asset's life.
"The logic error in the Budget is that it assumes investors can only invest in new or existing homes, when they can invest in shares, commercial property or other industries," Reardon said.
The association also wants foreign institutional investors — including superannuation funds and banks — to be permitted to finance new residential construction. It argues that foreign capital invested in new builds increases housing supply without adding to demand, and that progressive restrictions since 2014 have removed a significant funding source from the market.
HIA has also questioned whether the Budget's supply projections represent genuinely new policy. It estimates the First Home Buyer Deposit Scheme alone could account for more than 60,000 homes over the decade — a large share of the 65,000 the government has attributed to its broader housing initiatives.
"Increased investment in infrastructure needs to be funded from broader tax measures, not from taxes on housing," Reardon said.
HIA is also calling for one-for-one knockdown-rebuilds to qualify for negative gearing on the same basis as multi-dwelling developments. Under the proposed legislation, replacing a single home with one new detached dwelling generally does not qualify.
"This creates the bizarre outcome where a new home built to modern seven-star energy standards is treated as though it were an established dwelling," Reardon pointed out. "In many established suburbs, planning rules do not permit duplexes or apartment redevelopment. A one-for-one replacement can be the only lawful redevelopment pathway available."
Reardon warned that the cumulative effect of the tax changes would worsen affordability over time. "We cannot tax our way to increased housing supply," he said.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
