Election 2025 - Can Either Party Fix The Housing Crisis?

Whether it’s is rising rents or mortgage payments, surging costs to buy a house, or the struggle to find secure accommodation. As a federal election approaches, cost of living has emerged as one of the most pressing issues for voters.

Whilst Labor is still banging the drum on the housing policies it implemented during its first term,  the Coalition is promising to allow first-time homebuyers to use their superannuation to assist in purchasing their homes.

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But do the policies go far enough to make housing more affordable?

In a recent podcast, Grattan Institute experts Brendan Coates and Matthew Bowes analysed the housing policies proposed by the major political parties, evaluating their potential effectiveness, and suggesting areas for improvement. https://grattan.edu.au/news/election-2025-evaluating-the-housing-policies/

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Labor's housing policies

The Labor Party has implemented several housing initiatives during its first term:​

1. Housing Australia Future Fund (HAFF): This $10 billion investment fund aims to finance the construction of approximately 40,000 homes over five years, split between social and below-market-rate housing. While this initiative may temporarily halt the decline in social housing stock—from 6% in 1990 to around 4% currently—concerns remain about its long-term sustainability. Once the initial contracts are fulfilled, the fund's returns will be fully allocated, potentially hindering future growth in social housing. The Grattan Institute recommends expanding the fund to $30 billion, which could finance an additional 37,000 social housing units and ensure ongoing investment in this sector. ​
2. Rent assistance: Labor has increased Rent Assistance payments by 27% above inflation in recent years. However, the Grattan Institute suggests a further increase of at least 50% for singles and 40% for couples to prevent welfare recipients from being pushed into poverty due to rising rents.
3. Help to Buy Scheme: This program allows the government to take up to a 40% equity stake in a home alongside a first-time buyer, reducing the deposit burden and mortgage repayments. Although the scheme's income and price thresholds have been raised to include more participants, the total number of places remains capped at 40,000. This expansion may dilute the scheme's focus on low-income households and create a lottery-like system for applicants. ​

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Coalition's housing policies

The Coalition has proposed allowing first-time homebuyers to access up to $50,000, or 40% of their superannuation balance, to purchase a home. While this policy could assist higher-income earners with substantial superannuation savings, it may not benefit lower-income individuals who have minimal superannuation balances. Additionally, there is a risk that this policy could drive up housing prices, as seen in previous instances when lending restrictions were relaxed.

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Common ground: foreign investment

Both major parties propose a two-year ban on foreign residents purchasing existing homes. However, the Grattan Institute notes that such measures are unlikely to significantly impact housing affordability, as foreign investment constitutes a small fraction of the Australian housing market. ​

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Recommendations for comprehensive reform

The Grattan Institute emphasizes the need for more extensive reforms to address housing affordability effectively:

• Tax Concessions: Revisiting tax concessions like negative gearing and capital gains tax discounts could increase government revenue by approximately $11 billion. While this figure is modest relative to the $11 trillion housing market, it represents a significant amount in terms of the national budget and could be redirected to support housing affordability initiatives. ​
• Planning Regulations: Reforming land-use planning laws to facilitate increased housing supply in desirable areas is crucial. The current regulations often favor the status quo and grant substantial influence to groups opposing development, thereby restricting the availability of affordable housing. ​

In conclusion, while the housing policies proposed by both major parties offer some benefits, they may not sufficiently address the underlying issues contributing to housing affordability challenges in Australia. A more comprehensive approach, including increased investment in social housing, substantial rent assistance, tax reform, and planning regulation changes, is necessary to create a more equitable and accessible housing market

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To hear and learn more: https://grattan.edu.au/news/election-2025-evaluating-the-housing-policies/

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