The Housing Industry Association (HIA) has voiced strong opposition to the government’s proposed changes to negative gearing and capital gains tax, warning that the measures could have significant repercussions for the housing market. The association is urging the Senate to amend the proposed legislation, particularly by broadening the definition of “new housing” to better reflect the realities of the current market.

Jocelyn Martin, Managing Director of HIA, has been vocal about the potential negative impacts of the proposed changes. “Treasury’s own modelling shows these changes could reduce housing supply by around 35,000 homes over the next decade,” she stated. “That is the wrong outcome at the wrong time, when Australia is already struggling to meet its housing targets.”

The HIA’s primary concern is the narrow definition of “new housing” within the draft legislation. According to Martin, “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.”

In its submission, the HIA is calling for the definition of new housing to be expanded to include various types of development that contribute to housing supply. This includes knock-down rebuilds, dual key and multi-generational homes, secondary dwellings and granny flats, and major renovations that bring homes up to modern building codes. “If an ageing or unliveable home is replaced or substantially upgraded, that is a genuine addition to Australia’s effective housing supply,” Martin explained.

The association argues that modern homes are designed to accommodate more people and support changing household structures, making better use of existing land and infrastructure. HIA warns that excluding certain types of development from the definition of new housing could lead to unintended consequences. “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 noted. “If these are not recognised, the policy will work against its own objective.”

Beyond the definition of new housing, the HIA is also concerned about the broader implications of the proposed tax changes on investor confidence. Martin emphasised, “Australia needs more investment in housing, not less.” She warned that changes to capital gains tax could reduce the viability of new housing projects, further exacerbating the housing shortage.

The Senate Inquiry, according to Martin, presents a critical opportunity to address these concerns. “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,” she concluded.

The HIA’s stance highlights the complexities involved in reforming housing-related taxation policies. As the Senate considers the proposed legislation, the association’s recommendations underscore the need for a nuanced approach that recognises the diverse ways in which new housing is delivered in Australia.

The debate over these proposed changes comes at a time when the country is grappling with an acute housing shortage. With demand for housing outstripping supply, the HIA’s warnings about the potential impact of the legislation are likely to resonate with many stakeholders in the property and construction sectors.

As the Senate Inquiry continues, the HIA’s call for amendments will be scrutinised by policymakers, industry experts, and investors alike. The outcome of this legislative process will have significant implications for the future of housing supply and affordability in Australia.