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The Federal Budget will make Australia’s housing shortage worse by reducing the supply of new homes at a time when the country is already struggling to house a growing population, according to the Housing Industry Association. Source: Timberbiz The HIA says that even the Government’s own Budget papers admit that changes to negative gearing and capital gains tax will reduce the supply of new housing by around 35,000 homes over the next decade. HIA Chief Economist Tim Reardon said the Budget was attempting to solve a housing shortage by discouraging the investment needed to build more homes. “Australia’s housing challenge is simple. Consider it as if we are trying to fit 11 million households into around 10 million homes,” said Mr Reardon. “The solution to a housing shortage is to build more homes. This Budget does the opposite.” From 1 July 2027, negative gearing for residential property will be limited to new builds, while the 50% capital gains tax discount will be replaced with cost base indexation and a 30% minimum tax rate on capital gains. Treasury estimates the reforms will support around 75,000 additional owner occupiers over the next decade, but at the cost of reducing the supply of new homes. “The Government is stopping 35,000 private homes from being built in order to raise enough revenue to build around 4,000 public homes,” said Mr Reardon. “That is a terrible trade-off in the middle of a housing crisis.” Mr Reardon said the reforms misunderstood how housing investment supports new home building. “Investors are critical to funding new housing supply and commenced around half of all new home builds in the past,” he said. “If investors leave the housing market, fewer projects proceed and fewer homes get built. “The Government assumes investors will simply redirect their money into new homes, but housing investment doesn’t work like that. “If the overall attractiveness of residential investment falls, fewer investors participate overall.” HIA welcomed the Budget’s additional $2 billion investment in housing-enabling infra-structure, including water, sewerage and roads, intended to unlock up to 65,000 homes. “These infrastructure investments are important because the industry desperately needs more shovel-ready land,” said Mr Reardon. “But infrastructure and planning reform take years to deliver new homes. The adverse tax changes hit the market confidence immediately.” Mr Reardon said the tax changes risk worsening rental affordability over time by reducing the supply of future rental housing. “At a time when vacancy rates remain critically low, reducing the number of investor-funded homes being built will inevitably place upward pressure on rents,” he said. “The Government deserves credit for recognising that infrastructure, planning and approvals are barriers to supply. “But you cannot tax your way out of a housing shortage. “The only lasting solution to housing affordability is more homes.”

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AFPA has welcomed the Federal Government’s proposed change to negative gearing legislation for new housing developments in Australia, outlined in tonight’s 2026-27 Budget. Source: Timberbiz Under the plan, negative gearing will only be available for newly built homes and grandfathered for current investors holding negatively geared assets, which was previously recommended by AFPA. “In 2024, we called for this important change to tax concessions on negative gearing to expand the supply of housing as part of a Senate inquiry into Australia’s financial regulatory framework and home ownership,” AFPA acting Chief Executive Officer Richard Hyett said. “As we recommended in a submission, this change will help to increase much-needed investment in new housing development in Australia, which will address the shortage of new dwellings and our national housing crisis. “This reform will boost confidence in the construction sector, drive new investment, and improve housing affordability. “It will help to increase the use of sustainable timber in new homes and buildings.  There are many benefits of using Australian-grown timber for housing, especially as it’s a natural, trusted, durable and renewable resource that stores carbon and can be easily re-paired. “The Government could also leverage and achieve its climate goals if this were accompanied by policies that preference Australian timber in new housing.” AFPA also supports the Budget measure to introduce free public access to Australian Standards, which will remove housing and planning red tape, and increase support for modern methods of construction. “Having free access to these standards will reduce costs to builders, while helping to improve compliance and safety for the building industry,” Mr Hyett said. The allocation of $500 million to implement Environment Protection and Biodiversity Conservation (EPBC) Act reforms is also welcomed, as it will streamline approvals and increase investment in major projects. This includes $28 million over two years specifically for transitioning forestry to the new arrangements. “Given the tight timeframes around the new national environmental laws, this funding is critical to provide resourcing to help progress bilateral agreements with states and territories, and reduce red-tape duplication,” Mr Hyett said. “As part of this investment, state and territory governments will be encouraged to prioritise progressing and signing new assessment and bilateral agreements with the Commonwealth, which is critical for Australia’s sustainable forestry industry. “We look forward to working constructively with the Government to ensure certainty for Australia’s sixth largest manufacturing sector.”  

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