Comment

Chris Wallace
The cunning design of Labor’s housing policy

Got $75,000 and never owned a home? The Albanese government is here to underwrite your $1.5 million Sydney property purchase through its newly relaxed and expanded Home Guarantee Scheme.

First-home buyers elsewhere have lower thresholds: $50,000 to buy a $1 million property in Canberra or Brisbane, $47,500 for $950,000 digs in Melbourne, $45,000 for a $900,000 dwelling in Adelaide and $35,000 for a $700,000 home in Tasmania.

The Home Guarantee Scheme was created by the previous Coalition government and was continued and this week dramatically expanded by the Albanese government. It has several cunning design features, none of which include relieving upward pressure on home prices.

The guarantee helps first-home buyers by cutting the usual 20 per cent deposit of the sale price that banks require to consider a loan application to just 5 per cent, slashing the time needed to save the deposit.

Not a single taxpayer dollar has to be spent to make that happen. The government’s guarantee is equivalent to the mortgage insurance that insurers sell to home buyers without a big enough deposit, to de-risk the mortgage for the lending bank.

If the bank forecloses on a home owner who can’t meet their mortgage payments and the forced sale proceeds don’t cover the loan, taxpayers will make up any shortfall up to 15 per cent of the original purchase price.

What could possibly go wrong?

Nothing for the banks. The home guarantee makes the mortgage a sure bet for lenders.

Probably not much for the government either, at least initially. There’s no loss to the budget at the outset beyond minor administration costs, and with supply shortages continuing to put upward pressure on house prices, it’s likely that forced-sale proceeds would cover outstanding loans in the case of foreclosures.

First-home buyers will be thrilled to move into their own digs. For those who can keep servicing a mortgage worth 95 per cent of the purchase price, and survive long enough to develop a capital appreciation buffer, all will be sweet.

The banks of mum and dad – the source of deposit gap funds these days for many first-home buyers – will also thank the government for saving them from having to dip into their superannuation to help their kids put a roof over their heads.

Things may not be so rosy for those buyers who eventually find themselves unable to service their mortgage and have their house sold out from under them, discovering the government guarantee is for the bank’s benefit, not theirs.

The adjustments to the Home Guarantee Scheme announced this week include the end of means-testing, with no caps on places or income limits for access, and bringing forward the expanded scheme from 2026 to October 1 this year.

“This is an enormously meaningful difference to the lives of the people that will use this, that’s perhaps a seven- or eight-year period where they’re choosing to pay off their own mortgage rather than someone else’s, and that’s a really good thing,” Housing Minister Clare O’Neil said on Monday.

The Coalition attacked the “open access” change.

“This is an uncapped scheme which is available to billionaires, or the children of billionaires, if they want to use a government program,” opposition housing and homelessness spokesperson Senator Andrew Bragg told ABC Radio National. “And I think we’re getting to a point where Australia is becoming a ridiculous nation where the taxpayer is underwriting mortgage insurance schemes for extremely wealthy people. I think it’s bizarre and ridiculous.”

It’s “not the Labor way”, chastised Liberal backbencher Senator Sarah Henderson. “Frankly, on this side of the chamber we are shocked that Labor has opened up the scheme to … well-off young Australians who don’t need this support.”

Prime Minister Anthony Albanese scoffs at the idea of rich people’s kids wanting or needing to access the scheme and is on strong ground attacking the Coalition’s frustration of Labor’s initiatives to expand supply – notably, its blocking of the Housing Australia Future Fund legislation in the last parliament and its opposition to build-to-rent legislation in this one.

Housing Minister O’Neil paints housing as a Hydra-headed challenge demanding action on multiple fronts.

“That’s why you are seeing our government step up and tackle this crisis from every single angle,” she told parliament on Tuesday. “We are building more homes, we’re helping renters get a better deal and we are bloody proud to be helping more Australians realise their dream of home ownership.”

Essential Research executive director Peter Lewis caught the unease of many on the progressive side of politics, however, when he warned of the danger of the agenda laid out in the book by American journalists Ezra Klein and Derek Thompson, Abundance, which is currently pervading the ministerial wing. Its focus on deregulation, which infused this month’s Economic Reform Roundtable, risks becoming “a new way of serving up free market’s greatest memories and latest hits”, Lewis said this week in The Guardian, singling out housing policy as a key example.

This week’s Essential poll underlined the yawning gap between trends in government attitudes and voter sentiment towards regulation. Only 29 per cent of Australians think there is too much regulation, according to the poll, and 70 per cent think there is “about the right amount” or “not enough”.

Lewis highlighted the fate of the national construction code designed to improve home sustainability, accessibility and environmental impact. The round table’s agreement to suspend further code changes suggested the “cheapest and least onerous path government can possibly take” was being pursued rather than “structural issues” being addressed.

The No. 1 structural issue in housing policy is persistently strong home price growth driven by the combination of supply bottlenecks and excess demand.

There is no compelling forecast or modelling to suggest the supply side and market accessibility initiatives the Albanese government has taken so far can steady, let alone restrain, galloping home price growth. It portends the escalation of a crisis over the next few years that is already way too bad for too many people – young, old and in-between.

How bad does it have to get before Labor reverses the special capital gains tax concession that former Liberal prime minister John Howard introduced to such damaging effect? What will it take for Labor to make negative gearing changes to stop property investment being the No. 1 tax shelter for everyday Australians?

There are answers to the usual objection that it would put Labor’s re-election at risk.

The government benches are full to overflowing, so there’s a manifest political buffer.

Changes could be grandfathered to apply only to future property purchases in a “no-disadvantage” approach that disarms opposition to change.

Some negative gearing could still be allowed, rather than closing property down as an investment channel altogether. A family home plus a negatively geared second property might be permitted, for example, instead of a tax-driven portfolio of multiple investment properties, as proliferates now.

Changes to capital gains tax and negative gearing are not the only things needed to solve Australia’s housing crisis, but they’re the cornerstones of any approach capable of arresting the raging home price growth that is making a bad problem rapidly worse.

Without changes to the capital gains tax and negative gearing, we’ll know the government only wants to do the easy housing policy things but not the structural changes that can fix the underlying problem.

It is asking a lot of government MPs, whose ranks include many significant property investors, to set aside their own habitual mindsets and investing practices and take this on – but it’s not an unreasonable expectation. It will require political skill to bed down such changes.

The Albanese government easily dominates a skinny opposition and sparse cross bench right now, and Albanese himself is at the top of his powers.

He can take confidence from his successful pivot in the last parliament, from a politician implacably committed to delivering the Morrison government’s stage three tax cuts to one who smoothly oversaw their reconfiguration with fairness in mind.

Albanese can do that too with the thorny tax-related aspects of housing policy in this parliament, as part of a comprehensive solution to the housing security needs of the nation.

Treasurer Jim Chalmers’ economic round table opened up on several fronts the conversation Australians now want continued. That may lead to unexpected places.

In the meantime, the government can and should deal with serious and obvious policy wrongs such as concessional capital gains tax on property and uncapped negatively geared property – without delay.

This article was first published in the print edition of The Saturday Paper on August 30, 2025 as "The cunning design of Labor’s housing policy".

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