Housing shortage is a structural challenge – Why More Taxes Won’t Fix Inflation

Australia’s housing market is facing a deep and persistent shortage of homes, and experts warn taxing the sector more is not the solution. In fact, the Housing Industry Association (HIA) calls the shortfall “a structural economic challenge”. This means the problem isn’t a short-term blip – it’s a fundamental supply issue. As mortgage brokers, we see that the real focus must be on getting more houses built and easing red tape, not adding new taxes.

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HIA Managing Director Jocelyn Martin stresses that “housing supply is no longer a cyclical issue, it is a macroeconomic problem”. With too few homes for our growing population, prices and rents keep rising, which in turn feeds into inflation and high living costs. Tackling inflation through housing policy, then, must start with boosting supply – clearing planning bottlenecks and financing more projects – rather than blaming investors or homeowners.

Adding to the squeeze, many housing projects are still waiting in the wings. The HIA highlights that dozens of apartment and housing developments are “ready to go but stuck because of financing constraints”. In other words, builders have plans and even partial sales, but they lack the final presale funding or guarantees to start construction. Industry bodies are calling for government-backed presale finance schemes to unlock these stalled projects. At the same time, there are infrastructure and workforce bottlenecks: the HIA estimates roughly $5 billion in “last-mile” funding is needed for roads, services and sites to get new projects shovel-ready. And it warns that housing targets “will not be met without a larger workforce” – we urgently need more builders, apprentices and tradespeople to actually build the homes we plan. These fixes won’t happen overnight, so even if policy changes flow from the next Budget, we shouldn’t expect a flood of new homes immediately. Building takes years – and that’s exactly why we can’t rely on higher taxes to solve a deep supply shortage.

What this means for buyers and brokers

• Borrowing power: With supply tight and prices supported, borrowers still need to qualify for larger loans. Lenders are likely to focus on serviceability, meaning income and expense checks stay strict. In practice, any small rate cut might help somewhat, but banks will remain cautious when assessing new loan applications.

• Investors: Uncertain talk of tax changes makes investors nervous. If new taxes on rentals or sales make property less profitable, some investors could step back. That reduces rental supply further and drives rents up. A healthy rental market needs ongoing investment, so broad-brush tax cuts for investors could backfire on affordability.

• First Home Buyers: Tougher credit rules plus fierce competition in a low-supply market mean it’s still hard for first-timers. Grants and schemes may help, but they also mean more buyers chasing few homes. For now, many FHBs face higher deposits, stricter lender tests and bidding wars.

Ready to make your move? For personalised advice on your buying or investing strategy, contact Ask Financials. You can also call us on +61 433 944 055 or book a free consultation today. Follow Ask Financials on Instagram and LinkedIn for more home loan tips and market updates – we’re here to guide you and help secure the right property in any market.