The billionaire class and their parliamentary representatives, including the Pauline Hanson’s One Nation Party, argue that “mass migration” is responsible for the housing crisis and forcing Australians to pay more.
But there is no evidence to support such claims, which are really racist dog whistles to manipulate people’s housing insecurity fears.
The Australia Institute (TAI) found that, from 2014 to 2024, the number of new homes rose by 19%, outpacing population growth of 16%. Going back further, from 2001 to 2021, the population grew by 34% while new homes rose by 39%.
For young people trying to put down a deposit, however, there is a clear shortage of affordable homes and prices continue to rise.
Richard Denniss, TAI co-chief executive, wrote in The Point that the crisis is being driven by an oversupply of housing investors. “Just as we can separate demand for housing into two categories: demand from property investors and demand from first home buyers, we can do the same with supply.
“One source of supply of housing for owner-occupiers is the construction of new houses. This is the source that most commentators seem to talk about, but it’s relatively small.
“The other source of supply of housing for owner-occupiers is the giant pool of houses owned by the property investors who are so convinced that house prices will keep rising that they are willing to lose money each year that they hold onto one.” He said this pool of housing is “BIG” — around 3 million homes currently are being held by property speculators “waiting for their lightly-taxed capital gain”.
Australian Bureau of Statistics data, analysed by Cotality, shows that property investors accounted for almost 40% of the housing market in December last year, compared to first home-buyers at just 17.8%.
Investors have flooded the market since 2020 when they only accounted for 23.8% of it. According to the Australian Council of Social Service (ACOSS), they are taking out loans, on average, $100,000 higher than first-home buyers.
Only one in eight investments in property is for the building of new homes. Mostly, investors are buying up existing housing and often letting it sit empty while its value goes up.
The wealthiest 10% control two-thirds of all investment properties and receive 82% of the revenue from tax exemptions.
These property speculators and mega landlords benefit from a combination of negative gearing, which allows them to write off losses on investment properties against tax and capital gains tax (CGT) exemptions.
Denniss supports cutting the CGT discount because he believes it will “make hundreds of thousands of property speculators decide they don’t want to hang on to so many houses”.
“Rather than make investors pay ordinary amounts of tax on their capital gain, we literally give them a 50% discount meaning that someone who works all year to earn $100,000 pays at least twice as much tax as someone who was rich enough to wait while the price of a house they bought went up,” said Denniss.
TAI polling shows 50% want CGT exemptions and negative gearing wound back, while only 28% want the current system to stay.
Labor’s flagship housing policy is its 5% deposit scheme which allows first-home buyers to take on higher mortgages. The number in this cohort rose by 6.8% in the December quarter, but simultaneously mortgages also rose by a record 8.5%.
“Imagine an auction where there are just two people bidding, a young couple, looking for a place to raise a family, and a property investor looking for some negative gearing and capital gains tax concessions. Only one of them can win the auction, and even if the investor misses out, the more they were willing to bid, the more the young couple had to pay,” Denniss said.
ACOSS found that last year the federal government spent more on investor tax breaks ($12.3 billion) than social housing, homelessness services and rent assistance combined ($9.3 billion).
Cutting CGT exemptions and negative gearing would discourage property speculation and thousands of investors would likely sell some of their properties. Dennis argues those houses wouldn’t disappear, they would become available for owner-occupiers and the end result “will be cheaper homes, a fairer society and more tax revenues”.
However, as property investors are in the business of profiteering from the housing market, simply raising supply just means more property for investors and not necessarily more affordable homes.
Only a massive state investment in public homes can lower housing costs and start to reverse the marketisation of what should be a human right.
Public housing rates have fallen from 6% of housing in 1995–96, to less than 3% in 2019–20. Government builds accounted for 16% of residential construction over 1945–1970, around the same time as Australia had its highest ever home-ownership rate of 71.4%.
Right now about 190,000 households are on the public housing waiting list, with 41% of those being homeless or at risk of homelessness.
Removing unfair tax loopholes for property investors and redirecting the hundreds of billions away from the AUKUS military pact to a massive expansion of public homes would go a long way to addressing the crisis. It would also take the wind out of the sails of the racists.