CGT Changes May Reduce Housing Supply, Real Estate Institute Warns

The Real Estate Institute of Australia says the government’s planned capital gains tax and negative gearing changes will make housing less affordable, not more.

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The Real Estate Institute of Australia (REIA) has told a Senate committee that planned changes to capital gains tax and negative gearing will reduce housing supply and push up rents, disputing the government’s modelling of the policy’s impact.

The Senate Economics Committee is examining the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026.

REIA president Jacob Caine said housing affordability would not improve through tax changes that discourage investment.

“Housing affordability will not be solved by reshaping tax settings in a way that reduces rental investment, adds uncertainty, and risks slowing the delivery of new homes,” he told the committee.

The institute said government modelling suggested about 7 million Australians currently live in rental housing, with around 75,000 expected to transition into home ownership over 10 years under the reforms. REIA said this equated to about one in 100 renters.

“The other 99 will be left in a rental market with fewer homes and higher rents,” Caine said.

REIA, alongside Master Builders Australia, the Housing Industry Association, and the Property Council of Australia, commissioned independent modelling from Qaive and Tulipwood Economics to assess the impact of the proposed changes.

The institute said the findings differed significantly from Treasury estimates.

Both Treasury and REIA modelling forecast a reduction of about 14,000 housing starts over the first four years under the new law. However, REIA said government projections assumed this would be offset by a $2 billion Housing Support Program, resulting in a net increase of 65,000 housing starts over 10 years.

REIA’s analysis suggested the reforms would instead generate at most 5,291 additional housing starts over four years.

Higher Rents Forecast

On rental prices, REIA said its modelling indicates increases around 50 percent higher in the first year compared with Treasury forecasts, and up to five times higher by 2029–30.

It said renters were already spending 24.3 percent of income on housing costs, and further increases could place additional pressure on low-income households.

The institute also forecasted broader economic impacts, including a reduction in gross domestic product of $1.374 billion between 2026–27 and 2029–30, and a fall in construction output of $1.9 billion over the same period.

It projects a decline of 2,016 full-time equivalent construction workers by 2029–30.

“A well-designed and fair property tax system can significantly improve both economic productivity and labour mobility, whilst creating a housing market that is responsive to the needs of Australians,” the REIA submission states (pdf).

“That review should come after supply has been addressed, not before.”

Caine told the committee that even before the tax changes, around 40 cents in every dollar of housing cost is attributable to government taxes or charges.

“Supply is the main game in solving this affordability crisis,” he said.

“The test for policy should be: does this increase supply? Anything that has a negative impact on the delivery of supply should be reconsidered, or counteracted by additional policies that support that,” he said.

Shares and Private Business Also Affected

Outside the property sector, investors also raised concerns about the broader economic impact of the reforms.

Geoff Wilson, chair of Wilson Asset Management, supported the CGT change being applied to property and unproductive assets, but pointed out that it also affected shares, private business, and “every other asset class in which Australians have invested their savings and built their retirements.”

He said Australia’s economic system relied on incentives for saving and investment.

“Australia’s prosperity has always depended on a simple idea: that if people work hard, save carefully, and take considered risks with their capital, they can build a better future for themselves and their families,” he said.

“We believe this legislation weakens that social contract.”

Wilson said the reforms could reduce investment in businesses and weaken productivity growth.

Shadow Housing Minister Andrew Bragg told the Centre for Independent Studies that failure to fix housing affordability risked hollowing out support for market democracy.

“Owning a home is one of the core components of capitalism and democracy,” he said.

“If younger generations cannot experience the dream, they lose trust in the system that promised it.”