Submission: Select Committee on Intergenerational Housing Inequity
What is "inequity"? And, what, if anything, should be done?
The government has launched an inquiry into “Intergenerational Housing Inequity”. But, what is “inequity”, how do we measure it, and what if anything is to be done about it? This submission focuses on the fundamental definitional problems, the need to focus on lifecycle housing costs (not merely purchase prices) and the necessity to avoid making matters worse by hiking taxes.
Read our full submission here:
Summary
This submission makes several key policy proposals, which are grounded in the below extended analysis. The fundamental premise is that we must consider whether housing is “inequitable”, what it means for housing to be “affordable”. Furthermore, we must not make policy changes that make the situation worse, reduce supply, and/or reduce revenue. Here, we summarize our key findings:
1. Any tax increase must be taken to an election. It is undemocratic, and profoundly autocratic, to institute a major tax change that was not taken to an election (and, indeed, was downplayed at the election). It undermines social cohesion, and is a threat to democracy, to encourage parties to lie in an election to be elected and then pursue policies that the electorate may not hare supported.
2. Increasing capital gains tax will backfire on housing; if you want more supply make investing more attractive (else no one will build): Hiking will result in less construction, a less efficient allocation of resources by deterring transactions, less tax revenue by incentivizing ‘forever holding’ and will penalize people who build, renovate, or modernize. It will not result in more supply and will worsen housing supply issues. By contrast, cutting CGT will encourage a more vibrant and liquid market, encouraging more construction.
3. Increasing CGT will harm younger Australians and worsen inequity: CGT hikes will deprive younger Australians of the opportunity to accrue assets and wealth that their forebears had. In so doing, hiking CGT disproportionately harms younger people relative to people who already benefited from lower CGT settings.
4. Australia already has the highest CGT rate in the world – this deters investment: Australia’s headline CGT rate can reach 47%. This is well above New Zealand, Singapore, Hong Kong, and the UAE (all at 0%). Vietnam – run by the Communist Party – scrapped CGT in 2025 (i.e., they have a CGT rate of 0%). China – also run by the Communist Party – has a CGT rate of 20%. In the US, the effective CGT rate is 21% (i.e., under a corporation). They have a 50% long term discount and a top federal income tax rate of 39%, meaning that the US has significantly lower CGT rates than Australia. The UK hiked CGT rates to 24% and CGT receipts fell. Australia is already on the wrong side of the “Laffer curve”.
5. Housing affordability discussions must consider lifecycle costs: It is not “affordable” to lose money on an asset even if the initial price is lower.
6. Policies that transfer wealth from one group to another are not equitable: It is duplicitous and deceptive to label a wealth transfer as an ‘equity’ measure. Rather, it is inequitable in the same way as it is inequitable for a robber to seize assets from your house.
7. Older people are wealthier because that is how time works: The longer a person has been alive the more years they will have had to accrue wealth and assets. This should be so obvious it goes without saying. A person who is now in “Gen Z” will eventually be elderly and have accrued assets: they will eventually become the “Boomer” to the then younger generation.
8. People do not need large savings to buy properties and Lenders already allow people to buy with low deposits: Lending products exist that allow people to buy properties with nearly 0% deposit. We already have stamp duty waivers. Thus, people do not need large savings to buy properties. This makes property more affordable, and access more equitable, than ever.
9. Reduce construction costs via lower taxes and less regulation: Government can reduce construction costs by reducing fees, charges, and taxes on new builds. It can also remove regulation, including in relation to cultural heritage, which adds costs, and causes delays.