How do the Coalition and Labor plans on housing differ

Any doubts that Australia’s growing housing challenges would be a major focus of the federal election campaign have been dispelled over recent weeks.

Both major parties announced strikingly ambitious housing initiatives as campaign centrepiece offers. So how do they compare?

What’s the Coalition offering?

The Coalition had already pledged several significant housing initiatives, should it form government. Among those, the biggest ticket item is the $5 billion program for enabling infrastructure to “unlock up to 500,000 new homes”.

In the absence of underpinning detail, both the wording of this pledge and its alleged potential impact have generated some scepticism.

Also announced well ahead of the campaign was the Coalition’s plan to allow first home buyers to draw down on their superannuation. They could withdraw up to $50,000 to help fund mortgage deposits.

This proposal has attracted some qualified support. But it’s been rejected by most of Australia’s top economists. This reflects concerns the measure could prove highly inflationary. It also risks a net loss for scheme participants if devalued retirement savings outweigh the benefit of accelerated access to home ownership.

Likewise, the Coalition’s newly unveiled plan to allow mortgage interest for first home buyers to be tax-deductible has been fiercely criticised for its likely inflationary and regressive effects.

Such arrangements are novel in Australia, but exist in some other countries. These include the Netherlands, where their impact has been recently described as damaging to both housing affordability and public finances.

What’s Labor offering?

Labor’s two new offers are to enable access to a mortgage with only a 5% deposit, and its $10 billion “Build to Sell” program.

As a demand-side instrument, the first of these could have some inflationary impact. But given the modest nature of the assistance provided, and that it only expands the existing Home Guarantee Scheme from its current maximum annual quota of 50,000 to an expected take-up of around 80,000, this is likely to be limited.

The Build to Sell plan would see collaboration with state and territory governments to commission 100,000 new homes in eight years. These would be for first home buyers only and, likely, for cost-price sale.

In further details of the plan, released just days out from polling day, Labor says the plan would be progressed partly via $2 billion in concessional loans to the states.

The whole build-to-sell idea revives the practice of the 1950s and 1960s where, in addition to constructing public housing for rent, state governments commissioned homes for sale. This contributed to the rapid rise in home ownership during that period.

As a supply-side measure, the new plan builds on the 2022 National Housing Accord. The accord aims to expand overall housing industry output to 1.2 million new homes in the five years to 2029.

Much about the Build to Sell plan has yet to be revealed. But from what we know, it looks like a bold initiative in challenging conventional modern thinking about the proper limits of direct state involvement in supplying a commodity largely provided through the market.

By expanding overall housing production, it could help in slightly moderating prices market-wide, as well as benefiting the homebuyers directly involved.

One-eyed agendas

When it comes to helping first home buyers, both parties have put forth some ambitious new propositions. But social housing and homelessness pledges have been glaringly absent from their proposals.

Neither Labor nor the Coalition has announced any significant new initiative to relieve rental stress at the lower end of the housing market, affecting millions of Australians. Measures that might, at least indirectly, help stem the rising tide of homelessness that now sees more than 10,000 newly homeless people being taken on by support agencies every month.

Given its numerous initiatives to increase assistance to low-income and otherwise disadvantaged renters already enacted since 2022, Labor has a somewhat stronger excuse here.

But while Albanese government measures, such as increased rent assistance, have eased the situation for some hard-pressed tenants, many other measures will only start to help in the next term of parliament.

That’s especially true for the Housing Australia Future Fund and all of Labor’s other post-2022 federal programs to expand social and affordable housing construction. Pledged commitments during the current parliament should add 55,000 new social and affordable homes to the national portfolio.

In combination with the Build to Sell initiative, this would see state-commissioned or otherwise funded housing construction perhaps equating to as much as 10% of all home-building later this decade. While short of the 16% achieved in the 1945-70 period, that would be a giant increase over the 1-2% typically recorded during the 2010s.

Read more: Homelessness – the other housing crisis politicians aren't talking about

Even so, social and affordable housing investment so far pledged by Labor is limited in relation to demand. It’s estimated 640,000 households have an unmet need for social or affordable housing.

The Coalition says if it wins the election, it would abolish the housing future fund. When asked how he would replace it, Shadow Treasurer Angus Taylor declared it unnecessary because “there’s billions of dollars that [already] goes to the states for social housing”.

While narrowly true, this is also disingenuous. The relatively modest funds referenced here – paid annually under the National Agreement on Social Housing and Homelessness – are entirely swallowed up in balancing the operating budgets of state public housing authorities.

With public housing systems otherwise mired deep in deficits, it’s been decades since this funding stream has been sufficient to generate any new housing supply.

In this respect, the Coalition’s 2025 housing pitch foreshadows a resumption of the Abbott-Turnbull-Morrison stance: nine years of federal subsidy drought for new social and affordable housing.

What else is missing?

Many have also criticised the recent major party offers as ignoring the overdue need for fundamental housing tax reform.

That’s true for Labor. But the Coalition’s pitch on mortgage interest would, in fact, amount to a major property tax reset.

Unfortunately, though, this so-called “negative gearing for first home buyers” would pile yet another damaging “market distortion” on top of all our existing property ownership tax breaks.

These concessions have, over decades, contributed to today’s housing affordability problem, as their value is capitalised into higher prices.

As observed by researcher Peter Mares, this new Coalition foray only goes to shine an even brighter light on the rational case to confront that problem head-on.