The narrative that housing affordability can only be improved by lowering construction costs or land prices overlooks a critical cause of the problem: over-taxation. While building material and labour costs are undeniably important components of housing delivery, global markets, the national economy, demographic pressures and the training system shape them.

Taxes, by contrast, are a policy variable that governments can reduce immediately to increase the supply of new homes, and possibly even increase the revenue raised by the government.

Short-term levers

Governments cannot control the global price of steel, concrete or timber. As for land values, the required and significant changes to zoning, land release and infrastructure sequencing take years or decades.

What governments can do in the short term is reduce the tax imposts and regulatory barriers that materially raise the cost of supplying new homes to market, including:

• Remove or reduce taxes and charges on new housing
• Provide direct or indirect subsidies to offset the adverse impact of the tax imposts they impose
• Build public housing stock.

The first two of these approaches lower the cost to the home buyer and improve project feasibility, allowing more housing to be delivered sooner. Increasing public housing does add to the dwelling stock, but at a significantly higher cost per home to the government – and, therefore, the taxpayer.

Tax burden

Government taxes, fees, and charges, including infrastructure levies, stamp duties, delays and the GST, can add up to 50 per cent to the cost of a new home. These imposts often fall hardest on the very projects we need most: apartments in high-demand areas, affordable rental schemes, and infill developments near jobs and infrastructure. By removing or reducing these taxes, governments can immediately lower the minimum price at which new housing becomes viable, unlocking both private and institutional supply.

The current taxation system places the financial burden of urban growth disproportionately on new home building, rather than spreading it across the entire tax base. This suppresses housing turnover, reduces incentives to build, and entrenches generational inequality. Tax reform that shifts the cost of infrastructure and services from upfront levies to broader revenue streams would not only increase supply but also improve intergenerational equity and market efficiency.

Unlocking supply

Reducing construction costs through innovation and industrial reform is a worthwhile long-term goal. However, solutions such as prefabrication, materials innovation, and supply chain improvements require capital, time and behavioural change across an entire industry.

By contrast, reducing taxes can deliver results immediately. Rebating infrastructure charges or waiving GST or foreign investor surcharges on new builds could increase commencements within a single budget cycle.

In the long term, housing affordability depends on structural reforms that reduce the real cost of building through productivity, innovation, and better land planning. But in the short term, the only levers available to the government are fiscal and regulatory.

Removing tax imposts, simplifying approvals, or subsidising construction are not theoretical ideas. They are the most immediate and effective ways to increase the supply of new homes. Until these tools are deployed, cost pressures will persist, housing targets will fall short, and affordability will continue to deteriorate.

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Frist published on 15 July 2025.