Ahead of the looming Federal Election, both major parties have identified housing as a key issue to sway the minds of voters. Both parties have unveiled policies designed to try to make it more affordable to buy property for first-home buyers. However, experts question whether these policies will be enough to address the lack of housing supply in Australia.

Why is housing such an issue?

In some parts of Australia, median house prices have more than doubled over the last ten years. Over the past three decades, home ownership rates have decreased substantially, particularly among younger people.

What solutions are being offered?

The government has announced it will allow first home buyers to buy homes with a 5 per cent deposit. The policy would be available to any first home buyer, as long as they can pay the 5 per cent deposit. It also announced $10 billion to go towards building 100,000 new homes, which would be available exclusively to first-home buyers..

Meanwhile, Coalition policy will see mortgage repayments on newly built homes taken out by first home buyers become tax deductible for five years. The policy would be available to those earning less than $175,000 a year, or couples earning less than $250,000. There would be no limit to the size of the mortgage or the price of the home, but it would only apply to the first $650,000.

Why supply is the key issue

According to experts, the policies unveiled during the election campaign will have a limited affect on housing affordability. This is because, rather than adding to housing supply they simply increase the demand for it. This means they could have the unintended consequence of driving up house prices.

Michael Fotheringham, Managing Director of the Australian Housing and Urban Research Institute (AHURI) says to make housing more affordable, supply must increase.

“One of the reasons we have a broken housing system in Australia is we’ve focused, over a number of decades now, far too much on measures that increase demand for housing, and not enough on supply side measures,” he told the ABC.

According to Joey Moloney, the Deputy Program Director of Housing and Economic Security at the Grattan Institute, addressing supply can be challenging for the federal government. This is because they must co-operate with state governments and local councils in relation to planning approvals and land supply.

“It’s tricky for the federal government, because they don’t have a lot of levers on the supply side,” he told the ABC.

“A lot of these really detailed and laborious policy levers need to be pulled at the state level.”

Challenges in Increasing supply

According to Mr Moloney, new housing supply should be concentrated in established suburbs. This allows it to be serviced by existing infrastructure.

“Inevitably, you’re going to upset someone, because, inevitably, it’s going to involve building an apartment building next to someone who doesn’t want apartments next to them,” he said.

There are also many other challenges involved in increasing housing supply. These include:
• Construction labour shortages: In many cases, Australia currently lacks the construction workforce required to build the homes the country needs. Both major parties have recognised this, offering incentives to attract apprentices.
• Cost of building materials: In recent years, the cost of building materials has dramatically increased. This can impact the viability of some housing developments.
• Land banking: Some landowners and developers make a strategic decision not to develop land into housing. This is in a bid to wait until prices increase.

While both major parties want to make housing more affordable, without increasing supply this is unlikely to be achieved.

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Article References

Smee, B (14 April 2025) ‘What do Labor and the Coalition’s new housing polices mean for first home buyers?’, The Guardian, accessed 15 April 2025.

Wong, S (14 April 2025) ‘Labor and Coalition housing policies a ‘dumpster fire’, expert says’, ABC News, accessed 15 April 2025