Structural issues, not investors, at heart of Australia’s housing affordability crisis

Australia’s housing affordability crisis is being driven by deep-rooted issues in construction productivity, labour capacity, planning systems, and government-imposed costs, according to the Property Investment Professionals of Australia (PIPA) and MCG Quantity Surveyors. The organisations argue that these structural problems, rather than investor behaviour or tax settings, are at the heart of the country’s housing woes.

MCG Quantity Surveyors Managing Director Mike Mortlock has criticised the national debate for focusing too heavily on investor-focused tax settings, such as negative gearing and Capital Gains Tax, while ignoring more significant constraints. “We keep hearing about negative gearing and Capital Gains Tax as if they’re the levers that will magically fix affordability,” Mr Mortlock said. “The real issue is that we simply cannot deliver homes at the speed and scale required. Productivity has flatlined, labour is stretched, approvals are slow and governments have embedded significant costs into every new dwelling.”

The Federal Government’s ambitious target of building 1.2 million homes over five years requires around 240,000 completions annually. This represents a 25 to 35 per cent increase from the 170,000 to 190,000 average annual completions in recent years, according to ABS Building Activity data. However, Mr Mortlock warns that the gap between ambition and capability is widening. “We’re asking an already strained sector to deliver a step-change in output without addressing the reasons it’s struggling now,” he said. “Targets and wishful thinking don’t build homes – capacity does.”

Data from the ABS National Accounts and the Productivity Commission show that construction labour productivity has been largely stagnant for decades. Mr Mortlock highlighted that output per hour worked has grown far more slowly in construction than in manufacturing or professional services. “If productivity doesn’t improve, higher targets just push up prices,” he stated. “We’re not building faster or smarter – we’re just building more expensively.”

The issue is compounded by record levels of public infrastructure investment, which are absorbing the same skilled labour needed for residential construction. ABS labour force data indicates persistently high vacancy rates across construction trades, a situation that PIPA Chair Cate Bakos describes as a structural issue that governments must confront. “Housing is competing with government-funded megaprojects for workers and materials,” Ms Bakos said. “Until we coordinate pipelines, we’re effectively bidding against ourselves, and homebuyers will pay the price.”

The Productivity Commission has repeatedly identified planning complexity as a major constraint on supply. Lengthy approval timeframes, multiple assessment layers, and rising documentation requirements add uncertainty, holding costs, and financing risks. Mr Mortlock emphasised the direct and unavoidable impact of these factors. “Time is cost in construction,” he said. “Every month added to an approval is another month of interest, labour escalation and feasibility pressure.”

Government-imposed costs further exacerbate the affordability crisis. “New housing carries GST, stamp duty, infrastructure contributions, local levies and state compliance charges which, in some growth corridors, can represent a significant share of the final dwelling price,” Mortlock explained. Ms Bakos added, “You can’t talk about housing costs without talking about the taxes and charges baked into every new home. The government is not a bystander in the property price pressures. It’s a major cost participant.”

Ms Bakos also pointed out the disproportionate level of tax property investors face compared to share market investors. “While some are state-based taxes, the reality is that property investors endure a disproportionate level of tax when contrasted against share market investors,” she said. “Property investors are widely viewed as scapegoats for additional taxes, and the unintended consequences of such targeted taxation will be damaging to the property market as a whole.”

To address these issues, Mr Mortlock called for targeted incentives to modernise the sector. “If we want more homes without permanently higher prices, we need to build differently and not just build more,” he said. Ms Bakos stressed the need for a shift in public conversation from investor blame to structural reform. “Housing affordability won’t be solved by reallocating existing homes,” she said. “It will be solved by increasing the speed and efficiency with which new homes are delivered. We need a coordinated national productivity agenda for housing that spans planning reform, labour strategy, innovation incentives and a review of embedded taxes – not a political discussion about long-standing taxation policies that have supported the supply of new investment properties for decades.”