HIA urges Senate to refine ‘new housing’ test amid tax reform concerns

The Housing Industry Association (HIA) is urging the Australian Senate to reconsider the government’s proposed amendments to negative gearing and capital gains tax, citing concerns over their potential impact on the housing market. The HIA is advocating for changes to improve what they describe as a flawed policy, particularly through the expansion of the definition of new homes.

Jocelyn Martin, Managing Director of HIA, expressed strong opposition to the proposed housing taxation changes, warning that they could deter investment and exacerbate the current housing shortage. “Treasury’s own modelling shows these changes could reduce housing supply by around 35,000 homes over the next decade,” she stated. “That is the wrong outcome at the wrong time, when Australia is already struggling to meet its housing targets.”

Despite its opposition, the HIA is actively engaging with the Senate Inquiry to refine the legislation. “While HIA does not support the taxation changes, our focus is now on making a flawed proposal more workable and minimising the damage to housing supply,” Martin explained.

A central issue for the HIA is the draft legislation’s narrow definition of “new housing,” which they argue does not accurately reflect the delivery of new supply in the market. “A key concern that HIA will make in its submission to the Senate Inquiry is the draft legislation adopts a too narrow definition of ‘new housing,’ which does not reflect how new supply is actually delivered,” Martin said.

The HIA has called on the Senate to broaden this definition to encompass a wider array of housing developments, including knock‑down rebuilds, dual key and multi-generational homes, secondary dwellings and granny flats, as well as major renovations that bring homes up to modern building codes. “If an ageing or unliveable home is replaced or substantially upgraded, that is a genuine addition to Australia’s effective housing supply,” Martin argued. “Modern homes are designed to accommodate more people, support changing household structures and make better use of existing land and infrastructure.”

The association warns that excluding these forms of development could lead to unintended consequences, where certain housing types qualify for incentives while others, which might offer similar or greater housing capacity, do not. “In many established suburbs, planning rules limit higher-density development. Knock‑down rebuilds and secondary dwellings are often the only practical way to increase supply,” Martin noted. “If these are not recognised, the policy will work against its own objective.”

Beyond the definition of new housing, the HIA also raised concerns about the broader tax changes, particularly those related to capital gains tax, which they believe could undermine investor confidence and the feasibility of new housing projects. “Australia needs more investment in housing, not less,” Martin emphasised.

The Senate Inquiry represents a crucial opportunity to address these issues, according to Martin. “The Senate Inquiry is a critical opportunity to correct these flaws. Without meaningful amendments, these changes will reduce supply, increase pressure on affordability and undermine the stated goal of boosting new housing,” she concluded.

The HIA’s call for amendments comes at a time when the Australian housing market is under significant pressure, with demand far outstripping supply. The association’s proposed changes aim to ensure that the legislation supports a diverse range of housing developments, thus contributing to a more robust and accessible housing market. As the Senate Inquiry continues, the HIA remains committed to advocating for policies that foster investment and growth in the housing sector.