Federal election 2025: Both parties bet on the house, put the mortgage on taxpayers

Two houses, both alike in policy, In fair suburbia, where we set our scene.

Apologies to William Shakespeare, but it feels like we haven’t seen a proper housing policy in centuries.

Access to a decent, affordable abode for star-cross’d lovers remains one of the biggest failings of modern government.

The two latest fig leaves from Labor and the Opposition will do little to fix the problem. Instead, they are likely to push up demand, and as a result prices, meaning homes will climb further out of reach for first-home buyers.

Both sets of policies are primarily designed to increase the amount of cash available to new purchasers.

Labor is offering an additional $10 billion to support aspirational owners by promising 100,000 new homes for first-home buyers over eight years, in partnership with the states. It will also expand the Home Guarantee Scheme by removing the 50,000-place annual cap and income thresholds, while raising property price caps to reflect local markets - for example increasing Sydney’s cap from $900,000 to $1.5 million. The scheme will allow new homebuyers to purchase with just a 5 per cent deposit and no Lenders Mortgage Insurance.

The Coalition’s housing policy includes allowing first-home buyers to deduct interest on mortgages up to $650,000 from their taxable income for five years, available to singles earning under $175,000 and couples under $250,000. That would cost an estimated $1.25b over the next four years. They would also lift income caps and remove limits on places under the Home Guarantee Scheme. In addition, first-home buyers could access up to $50,000 from their superannuation for a deposit, with the amount to be repaid upon sale. The Coalition would also direct the banking regulator to ease lending rules by reducing the mortgage serviceability buffer from 3 to 2.5 per cent.

Both sides also claim to have policies aimed at stimulating supply.

Labor has a $10 billion Housing Australia Future Fund to develop 40,000 social and affordable housing units over five years.

The Coalition has earmarked $5 billion for basic infrastructure such as water, power and sewerage to unlock 500,000 new homes in greenfield areas.

‘Dumb’ policies, light on detail

The problem with both approaches is that they pour more money into an already overheated market, pulling forward demand while hoping some miraculous solution emerges on the supply side.

Maxwell Shifman, chief executive of developer Intrapac and former president of the Urban Development Institute of Australia, described both parties’ efforts as “announcements for the TikTok generation”.

“It’s about big, round numbers — and this is a criticism of both sides — 1.2 million homes, 100,000 homes for first-home buyers, half a million unlocked in the greenfields — none of them really have the rigour or the understanding of what it would take to get there,” he said.

Cameron Kusher, an independent housing economist, was just as scathing.

“We’re doing the same thing we’ve always done. The policy is bad, but I guess the politics is good,” he said.

“We’re getting a touch of supply-side stimulus, but it’s still very much focused on demand. And those demand-side stimuli push up prices, make it more expensive for the next cohort of buyers, and means that you have to do an even bigger stimulus package next time.”

Veteran budget-watcher Chris Richardson called the policies “two different dumbs” that would do little except boost inflation.

“More money chasing the same amount of housing is the most well-worn path to failure in Australian policymaking, and both the Government and the Opposition seem intent on proving that they can double down on that dumbness yet again,” Mr Richardson said.

High on their own supply

Mr Shifman said housing policies tend to be announced in a vacuum, designed more for voters than for delivery, and that industry bodies are often notified of major programs “ten minutes before”.

“In my view, there’s never really good enough consultation about how to actually make the policies work. It’s more about ‘we have this general direction, and then we’ll try and figure out how we make it work later’. And that’s just never effective,” he said.

Big federal announcements made without coordination with the states are “effectively meaningless”, he added, pointing to Labor’s promise to deliver 100,000 homes for first-home buyers as a prime example.

“I actually cannot fathom what they’re going to do to make that happen. I think it’s just a number that they’ve made up and haven’t really thought through the mechanics of actually delivering it.”

Mr Shifman noted that in the states where housing is least affordable — New South Wales and Victoria — governments are focusing on higher-density infill developments. But such developments are unlikely to be delivered at scale, he said, due to high construction costs and slim developer margins.

Mr Kusher said a more meaningful policy suite would involve working directly with state and local governments to fast-track approvals for new housing.

“We’ve seen construction costs escalate quite substantially. There’s not a lot you can do to bring those down, but there’s a lot you can do to reduce the fees and charges that local governments and state governments charge to developers,” he said.

“There needs to be some focus on how we can improve planning laws and ease planning restrictions. Most of those laws fall to the states, but if there’s real cash or investment incentives to make these changes, then they might be more inclined to go down that path.”

Wisely and slow. They stumble that run fast

Perhaps it’s time to come clean with the public about what it will actually take to make housing more affordable for the next generation.

Mr Kusher, who has covered housing economics for more than 20 years, said:

“I can’t think of a meaningful (policy) that would actually help to make housing much more affordable — especially not on the federal level.”

Mr Kusher said curbing immigration is a logical first step, at least to relieve short-term pressure on housing and the rental market.

“It’s a numbers game, and because we haven’t been able to supply enough housing at the moment, it makes sense to try and reduce the rate of overseas migration,” Mr Kusher said. “I think more generally, we should have a population policy that’s aligned with how much infrastructure and how much housing we can deliver.”

Mr Shifman argued that it’s time for bigger thinking — not just densifying cities, but investing in regional growth and national infrastructure.

“We are the most urbanised country on the planet in terms of the proportion of people that live in a handful of cities relative to the size of the country. It’s really quite nuts, when you think about it,” he said.

Rather than funnelling new arrivals into the dense and expensive cores of Melbourne and Sydney, he said, Australia should focus on building up mid-sized regional cities. That means better rail and road links, a more decentralised workforce, and long-term infrastructure planning. But current policy remains fixated on infill development, which is slow, expensive, and poorly suited to Australia’s low-productivity, high-cost construction sector.

“A lot of what they put out there is based on wishful thinking rather than reality,” Mr Shifman said.

Star-cross’d indeed.