More-affordable homes, or more affordable homes?

The Albanese Government's 2026 housing package is the most politically readable budget announcement in years. Negative gearing restricted to new builds. Capital gains tax overhauled to tax real gains rather than inflationary ones. A further $2 billion in infrastructure. A five per cent deposit scheme covering more than half of all first home buyers. The headline writes itself: Labor levels the playing field. But the gap between what a housing policy says it will do and what it actually does is, in Australian housing, almost always where the real story lives.

The tax redesign is coherent — most Australian housing policy has not been

Start with what is genuinely good in the design. Limiting negative gearing to new builds and replacing the 50 per cent capital gains discount with inflation-indexed real gains is not a populist sop. It is a meaningful attempt to recalibrate investor incentives away from speculative resale value and toward productive supply. By carving out new homes from the CGT changes entirely, the package preserves the investment case for building while reducing the tax subsidy on holding existing stock. That is a coherent structure. Most housing policy in this country has not been.

When you increase what buyers can spend in a market where supply is constrained, the additional capacity tends to be absorbed by higher prices rather than greater access.

The demand-side problem, however, does not disappear because you fix one part of the tax system. The expanded five per cent deposit scheme, Help to Buy, and the suite of state-level grants still in operation all increase purchasing power without directly increasing the number of homes available to buy. The economics here are not subtle. When you increase what buyers can spend in a market where supply is constrained, the additional capacity tends to be absorbed by higher prices rather than greater access. The intended beneficiary ends up paying back a portion of the subsidy through a higher purchase price. This has been observed repeatedly in Australian housing markets, and the policy design here has not fundamentally escaped it.

The infrastructure leverage is clever, but it runs through governments that have resisted density for decades

The government's answer to that critique is supply, and $2 billion in enabling infrastructure is not nothing. Roads, water, power, and sewerage are genuine bottlenecks. Developments that cannot be connected to infrastructure do not get built. The Local Infrastructure Fund targeting 65,000 homes over a decade is a real response to a real constraint, and tying access to it to state-based planning reform is reasonably clever policy architecture. You do not just fund the infrastructure; you leverage the funding to extract approvals reform from states that have been reluctant to deliver it.

The question is whether that leverage holds. State governments have powerful constituencies that resist density and faster approvals. Developer levies, heritage overlays, height limits, and neighbour notification requirements are not accidental features of Australian planning law. They reflect organised political interests that have survived decades of federal housing agendas. The EPBC streamlining, the national construction code reforms, the skills pathway for migrant tradies — each of these is a genuine piece of the puzzle. Together they describe a supply agenda that is more comprehensive than anything that has preceded it. But comprehensiveness is not delivery.

The pieces are real — but they are sequenced backwards

There is a useful way to hold the package as a whole. The negative gearing and CGT reforms are structural interventions that change investor behaviour over time. They do not produce a single new home by themselves. The infrastructure and approvals agenda could produce homes, but it runs through state governments, local councils, and construction industry capacity, none of which are fully in federal hands. The demand-side schemes accelerate the purchasing power of buyers entering a market that is still short on supply.

The honest read is that these pieces are sequenced backwards. If supply catches up to demand, the deposit and equity schemes function as intended, giving genuine lift to buyers who would otherwise be locked out. If supply does not catch up, they function as a transfer from buyers to vendors, with the government providing the financial bridge. Australia's track record is the second scenario.

The 75,000 homeowners projected into the market over the next decade is the number the government will be held to. That projection rests on the tax changes alone. It says nothing about whether those buyers enter a market with more homes in it or the same number. The difference between those two outcomes is not a rounding error. It is the entire question.

The Albanese Government has put more serious structural thought into this housing package than most. The design is better than the politics usually allows. Whether it produces more affordable homes or merely more-affordable entry into an expensive market depends on a supply pipeline that has never, in living memory, reliably come through.

Frequently Asked Questions

What does restricting negative gearing to new builds actually do?
It removes the tax subsidy for investors buying existing homes, which currently rewards holding appreciating stock over building new supply. By preserving the concession only for new builds, the policy redirects investor incentives toward construction rather than resale speculation — but it does not directly produce a single new home on its own.

Why do first home buyer grants sometimes make housing less affordable?
When government schemes increase buyers' purchasing power in a market where the number of available homes is not growing, sellers can simply raise prices to capture the additional capacity. The intended beneficiary ends up paying more than they would have without the subsidy, effectively transferring part of the grant to the vendor.

How does the 5 per cent deposit scheme work under the 2026 package?
The scheme allows eligible first home buyers to purchase with a five per cent deposit, with the government guaranteeing the remainder of the standard 20 per cent deposit threshold, avoiding lenders mortgage insurance. The expanded eligibility is projected to cover more than half of all first home buyers.

Why can't the federal government just fix housing supply directly?
Planning approvals, zoning, and development controls sit with state governments and local councils, not the Commonwealth. The federal government can fund enabling infrastructure and attach conditions to that funding to pressure states toward reform, but it cannot compel planning decisions — which is why federal housing agendas have repeatedly stalled at the state and local level.

What is the difference between more homes being built and homes becoming more affordable?
More supply is a necessary condition for lower prices, but demand-side subsidies running ahead of supply can offset any downward price pressure that new construction creates. Affordability only improves for buyers if supply growth is fast enough to absorb both existing demand and the additional purchasing power the subsidies generate.