New modelling has raised concerns that recent Federal Government housing tax changes could reduce residential construction at a time when the market is already struggling to produce enough homes. Rather than adding to supply, the combined effect of changes affecting negative gearing, capital gains tax and SMSF borrowing is forecast by industry-commissioned modelling to result in fewer new projects proceeding over the next several years.
The independent modelling was commissioned by four major housing industry bodies and examines the potential impact of the policy changes between 2026-27 and 2029-30. Its central estimate is that 10,700 fewer new homes could commence construction during that period. For a housing market already facing significant supply constraints, the industry groups argue that any reduction in new dwelling commencements would make the task of meeting housing demand more difficult.
The potential effects extend beyond the number of homes being constructed. According to the analysis, reduced investment and construction activity could contribute to rents increasing by approximately $10 per week. It also estimates that more than 4,700 construction jobs could be lost, together with around $1.05 billion in economic activity.
Those forecasts underline the connection between housing investment, construction employment and rental availability. New residential projects support employment across building, trades, professional services and associated industries. At the same time, completed properties eventually increase the pool of homes available to owner-occupiers or tenants. A slowdown in commencements can therefore have consequences that continue well beyond the initial construction period.
The four housing industry groups that commissioned the modelling say policy should encourage investment in additional housing rather than create circumstances in which investors become less willing or able to fund new residential property. Their position is particularly focused on the national objective of delivering 1.2 million homes, a target that was already facing substantial challenges before the latest policy changes were considered.
“With the national 1.2 million-home target already under significant pressure, policy settings that are estimated to remove 10,700 new homes from the market move Australia further away from its housing objectives,” the groups said.
The modelling represents an industry-commissioned estimate rather than an observed outcome, so the eventual effect will depend on how investors, developers, buyers and the broader housing market respond to the changed settings. Nevertheless, the figures highlight the concern that measures affecting investment incentives can influence decisions about whether new projects proceed.
Rental conditions are an important part of that debate. When the number of available rental properties fails to keep pace with demand, tenants can face greater competition for homes. The modelling’s forecast of an approximately $10 weekly increase in rents reflects its assessment of how reduced housing investment and lower construction could flow through to the rental sector.
The projected loss of more than 4,700 construction jobs also demonstrates why housing supply has broader economic implications. Residential building supports a substantial network of workers and businesses, ranging from builders and subcontractors to suppliers and professional services. If fewer homes commence, the effect can flow through those interconnected parts of the economy.
Timing is another concern. Housing supply cannot generally be increased immediately when shortages become more pronounced. Projects require planning, finance, approvals, labour and construction before completed dwellings become available. A reduction in commencements between 2026-27 and 2029-30 could therefore affect the number of homes reaching the market beyond the period examined by the modelling.
The findings also reinforce the distinction between policies intended to influence housing demand and those designed to expand supply. Reducing competition among some groups of buyers may change purchasing conditions, but it does not directly create additional dwellings. The housing industry groups argue that increasing the overall number of homes remains essential if affordability and rental pressures are to be addressed over the longer term.
For governments, the challenge is balancing tax, investment and housing affordability objectives while maintaining enough incentive for new construction. For developers and investors, the calculation increasingly involves not only construction costs and market demand but also how changing tax and financing arrangements affect expected returns.
Ultimately, the industry groups’ argument is centred on supply. With the national housing target already difficult to achieve, they contend that policies which potentially result in fewer projects moving forward could intensify existing shortages. Their preferred direction is clear: more investment in new housing, fewer impediments to construction and policy settings that make it easier for additional homes to reach the market.
Whether the modelling’s estimated 10,700-home reduction eventuates will become clearer as construction and investment data emerge. For now, the figures add another dimension to the housing policy debate by highlighting the potential consequences for dwelling supply, rents, employment and economic activity.
