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To avoid what it described as “perverse outcomes”, the industry body has called for the definition of “new housing” – which would be exempt from the proposed tax changes – to be broadened to include a wider range of housing types.
With the first tranche of the federal budget measures having passed the lower house, the bill will now be referred to the Senate economics legislation committee.
The Housing Industry Association (HIA) listed a number of suggested inclusions for the Senate to consider:
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knock-down rebuilds
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dual-key and multi-generational homes
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secondary dwellings and granny flats
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major renovations that bring homes up to modern building codes.
While the tax changes are intended to boost housing supply, HIA managing director Jocelyn Martin said they could have the opposite effect.
“Treasury’s own modelling shows these changes could reduce housing supply by around 35,000 homes over the next decade,” she 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.”
Martin said the association was engaging constructively through the Senate inquiry in an effort to improve the legislation.
“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.
“If an ageing or unliveable home is replaced or substantially upgraded, that is a genuine addition to Australia’s effective housing supply.
“Modern homes are designed to accommodate more people, support changing household structures and make better use of existing land and infrastructure.”
The HIA warned the current proposal could create situations where some housing types qualify for exemptions, while others delivering similar or greater housing capacity do not.
“In many established suburbs, planning rules limit higher-density development. Knock-down rebuilds and secondary dwellings are often the only practical way to increase supply,” Martin said.
“If these are not recognised, the policy will work against its own objective.”
Martin added that the broader tax changes, including those affecting capital gains tax, also risk dampening investor confidence and reducing the viability of new housing projects.
Other industry figures have also raised concerns. In a Senate inquiry submission seen by Broker Daily, Westbridge Funds Management chairman and Momentum Wealth managing director Damian Collins called for a more gradual approach to the reforms.
He suggested either a 10-year transition period or a capped passive loss allowance modelled on the US system.
Martin added: “Australia needs more investment in housing, not less.
“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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