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$vuetify.icons.faPhone1300 650 620

Governments cannot tax their way to increased housing supply

Media release

Governments cannot tax their way to increased housing supply

Media release
“Legislation introduced in Victoria today will not improve housing supply or reduce pressure on public housing stock,” stated HIA’s Chief Economist, Tim Reardon.

Mr Reardon was speaking in response to the introduction of the ‘Short Stay Levy Bill 2024’.

“The contention is that taxing short stay accommodation will see more homes be made available for long term rentals and raise revenue to fund public housing,” added Mr Reardon.

“No one supports landlords withholding homes from market. But the proposition that another tax on short-stay accommodation will increase housing supply or make more homes available for rent, in the long-term, lacks logic.

“The ‘first order effect’ of a tax on short-term rentals may see some rental properties become available for long-term accommodation. The second order effects will negate this benefit. Fewer short-term rentals, and growing demand, will see the rent on these properties continue to rise attracting landlords back out of the long-term rental market. 

“Taxing short stay accommodation does not increase housing supply. In the long run, it will increase rental prices in short and long stay rental properties. 

“This is just another tax on housing, that will reduce the supply of homes further and exacerbate the problem.

“This tax comes on top of other new taxes and costs on housing in recent years including:

  • A windfall gains tax, whereby when land is re-zoned, any subsequent uplift in the value of that land more than $100,000 is taxed at a rate of up to 62.5 per cent. 
  • A land tax surcharge for Victorians with more than one home, up to a $975 flat surcharge plus a 0.1 per cent increased rate of land tax. 
  • An absentee owner surcharge of 4 per cent, up from 0.5 per cent in 2016. 
  • A vacant residential land tax of up to 3 per cent on the capital improved value of taxable land 
  • The latest changes to the National Construction Code, which add tens of thousands of dollars to the cost of construction of a new home

“Governments cannot increase the supply of housing by taxing them more, even if the revenue is allocated to new public housing stock. This is an own goal that will further reduce housing supply and place more pressure on public housing stock. 

“A lack of public housing is not the cause of the housing crisis, and it is therefore not the solution. It is a symptom of higher government taxes and costs on housing. 

“Victoria requires more public housing stock, and this is the right time in the cycle to build more public housing.

“But public housing is a public good and should be paid for by all Victorians, not a tax on a narrow cohort of renters or households.

“Burdening new home buyers and renters with the cost of providing public or subsidised housing is part of the cause of this housing shortage, not the solution. 

“Up to 50 per cent of the cost of a house and land package is taxes, fees and charges. Housing is the most heavily taxed item in the economy other than fuel, alcohol and tobacco. 

“It is these taxes and government regulations that are the cause of the housing shortage and removing them is the solution.

For more information please contact:

Tim Reardon

HIA Chief Economist
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