Drastic warning delivered for would-be home buyers as Labor’s capital gains tax, negative gearing changes get grilled

Labor’s controversial tax changes will worsen housing supply and slash the number of new builds by 35,000, would-be buyers have been warned.

The government’s plans to slash the 50 per cent capital gains tax discount and roll back negative gearing have come under the microscope during a Senate inquiry this week.

Labor was reminded of forecasts by Treasury that its tax changes will cause a 35,000 decline in the number of new builds over the coming decade.

Housing Industry Association’s managing director Jocelyn Martin said this forecast was a blow to Labor’s budget which aimed to bolster “intergenerational equity”.

“That’s an extraordinary admission for a policy being sold as improving affordability,” Ms Martin said.

“You cannot solve a housing supply crisis by making housing investment less attractive. More investment builds more homes – less investment builds fewer.”

The HIA is one of dozens of groups and individuals appearing at the two-day inquiry.

It was joined by Master Builders Australia (MBA) which argued more favourable tax settings were needed to boost “project feasibility”.

“We need a holistic approach taken to tax reform that leads to a turbocharging of new housing supply, instead of the ad hoc changes we have seen in this year’s budget,” MBA national director Darren Disney said at the inquiry.

Labor will restrict negative gearing to new builds and grandfather the policy for existing owners, under its budget changes.

The government has claimed this will incentivise investors to build new properties, but Ms Martin said it would primarily increase the number of owner-occupiers.

“Budget papers indicate that around 75,000 existing homes may shift to owner-occupiers over the next decade,” she said.

“While increasing home ownership is a worthwhile goal, it does not increase the number of homes – it simply redistributes them.

“Our core challenge is supply, and this policy does nothing to address it.”

A failure to increase housing supply would deal a massive blow to the Albanese government’s plan to build 1.2 million new homes between July 1, 2024 and 2029.

MBA said the housing construction workforce is short by 116,000 people while Australia is expected to fall more than 200,000 behind its new homes target.

“Our workforce shortage requires a better targeted uplift in skilled apprenticeships, supported by a better targeted skilled migration program to fill the gap,” Mr Disney said.

A new report published last week showed the Albanese government’s aspirational target will be “very challenging” if productivity remains stagnant and market volatility remains high.

The Australian Housing and Urban Research Institute (AHURI) found the sector’s fragmented structure was holding back productivity and dramatically stunting long-term capability.

Market volatility was also a major sticking point, with the report finding high migration and demographic change as instrumental drivers.

“There is a need to grow labour capacity in line with economic growth. Migration is an option. However, migration increases housing demand, which in turn increases labour demand,” the report said.