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The federal government has been warned that “highly inefficient” taxes are contributing to an annual deficiency of about 30,000 new homes.
The Housing Industry Association told the Financial System Inquiry that new homebuilding has not been sufficient to meet population growth.
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Australia needs to build 186,400 homes per year but has only averaged 158,000 during the past decade, according to the association’s submission.
The submission was critical of the “heavy tax burden” on the housing sector, which it said was a major barrier to the supply of new housing to meet rising demand.
“These taxes primarily exist at state government level, although there are a number of inefficient taxes at local government level as well,” it said.
“Overall, taxes on housing represent significant barriers which constrain the responsiveness of housing supply to steady increases in underlying demand.”
However, the submission called negative gearing an example of positive government intervention.
“First, negative gearing lowers the cost of supply to the rental market, something which is of most benefit to lower income households,” it said.
“Second, negative gearing ensures that the rate of new homebuilding is higher and thereby helps alleviate Australia’s housing shortfall.”
[Related: Good news and bad news for home sales]
