MARK RILEY: Anthony Albanese faces intergenerational fairness fight ahead of Federal Budget housing changes

There has been a lot of talk about grandparents in the lead-up to next week’s Federal Budget.

That talk has been both real and metaphorical.

The Coalition has accused Prime Minister Anthony Albanese and Treasurer Jim Chalmers of setting the country on a course for inter-generational warfare — pitting parents and grandparents against their children and grandchildren.

They see the expected changes to tax concessions on investment properties as an attack on older Australians in order to benefit those younger generations.

Albanese insists it is about inter-generational equity and harmony.

He says he wants to give younger home buyers a better crack at securing property as they line up against older opponents at weekend auctions.

In a range of interviews this week, Albanese has insisted that it is mostly parents and grandparents who complain to him about the imbalances that have left so many younger Australians feeling permanently locked out of the property market.

And senior government sources assured me this week that property investors of all ages, including grandparents, would have their assets protected by any changes in the Budget through an approach known metaphorically as grandfathering.

This is the principle that protects existing assets when new tax rules are introduced.

Labor tradition considers grandfathering a matter of fairness.

It ensures those who make investment decisions based upon an existing set of rules aren’t later punished by having a less generous regime applied retrospectively.

The speculation this week is that the property tax changes coming in the Budget will offer partial grandfathering.

That is, the current negative gearing benefits and 50 per cent capital gains tax discounts would apply on existing properties until the starting date of the new arrangements. The less generous tax treatment would then apply on the value of the property from that time until it was sold.

Economists suggest doing this would have a negligible impact on house prices, lowering them by perhaps 1 or 2 per cent.

But Cabinet’s Economic Review Committee, the so-called Budget “razor gang”, has been considering an option to apply the changes only to existing homes and allow the more generous tax concessions to continue for new builds.

That would have two benefits.

It would bolster supply by directing investment towards new houses and give first-home buyers an even better chance of securing an existing property by discouraging investors from bidding.

The Parliamentary Budget Office has estimated that these tax changes would save the Budget about $5 billion a year.

That is not to be sniffed at, but in budgetary terms it is hardly a king’s ransom.

The hope is that it would become part of a broader strategy to pump new life into the National Housing Accord target of building 1.2 million new homes by 2029.

A major part of that will be slashing the regulatory red tape that is strangling development across the country.

Housing Minister Clare O’Neil told a housing conference last week that the excessive bureaucracy involved in building new houses was “madness”.

That’s quite an admission by a housing minister.

O’Neil promised the Budget would address that madness by cutting through the “thicket of regulation” that was creating an “insane environment” in which the process of building homes was taking too long and costing too much.

She said the Government wanted to see builders on site “not filling in endless forms to get their approvals”.

But she said the changes wouldn’t compromise on the essential safety provisions in the nation’s exhaustive building codes.

The objective is to get the National Housing Accord back on track. It is already 77,000 houses behind target.

Ministers maintain that the slow rate of increase is to be expected. They have been warned the changes will have a lag effect. They will take time.

But they are confident the Budget’s regulatory reforms and investment tax changes, coupled with the generous development incentives already being offered to the States and Territories, will increase the velocity of new housing construction over the next couple of years.

It is still unlikely that they’ll meet the target. But they might get closer. And that would be a better outcome for all generations.

Mark Riley is the Seven Network’s political editor