Pathways to housing tax reform

Despite a sustained period of economic growth in Australia, housing affordability and accessibility have declined significantly in recent years. The resulting shortage of suitable, affordable housing is having an adverse effect on the housing needs and aspirations of many Australians and represents a growing risk to the Australian economy.

There is increasing evidence that tax policy settings are contributing to the problem, exacerbating intergenerational inequality, inflated housing prices and reduced mobility. In recent years there has been no shortage of credible proposals for change, most notably the comprehensive and integrated agenda set out by the Henry review (Henry, Harmer et al. 2009).

Although there is no uniform agreement on how best to progress them, there is considerable academic and policy consensus that a range of tax-related reforms can and should be made to promote housing affordability. But despite the consensus, reforms to date have been piecemeal
and ineffective, and attempts at forging a national reform program, such as the ‘Re:Think’ consultation process (see Australian Government 2015), have had limited follow-through. Again, there is general agreement on the reasons for this: that it is due to the influence of entrenched
AHURI Final Report No. 301 2 commercial interests on the political process, as well as the difficulties of coordinating reform across the federation and perceptions that policy change in this area will produce significant electoral backlash and therefore represents an untenable political risk.

Click here to read the report.