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Industry bodies have warned that cutting CGT discounts and curbing negative gearing will deter investment, choke new housing supply, and intensify pressure in an already tight rental market.
In a joint statement, the Housing Industry Association, Master Builders Australia, Property Council of Australia, and Real Estate Institute of Australia have urged the government not to reduce the capital gains tax (CGT) discount, arguing that heavier tax settings would stifle housing supply.
The Australian peak real estate bodies warned that slashing CGT discounts or negative gearing will reduce rental supply, drive rents higher and ignore private investment as a key housing solution.
“At a time when interest rates are rising, a war is waging, and the country is in a housing crisis, now is the time to introduce policies that turbocharge new housing supply,” the statement read.
“Builders, renters and home owners cannot afford policies developed in a silo that would stall or reduce the number of new homes being built.”
The joint statement followed widespread rumours that both CGT and negative gearing changes will be announced at the May 2026 federal budget.
Last week, a Senate inquiry into CGT found that the discount favoured capital over labour, encouraging tax planning, shaping investor decisions, and channelling much of the benefit into existing housing instead of productive investment.
Additionally, when combined with negative gearing, the report found that the tax settings have shifted ownership away from owner-occupiers towards investors, exacerbating affordability pressures.
The inquiry concluded that the CGT discount disproportionately benefits some, furthering income, wealth, and generational inequality.
In comparison, modelling from Qaive and Tulipwood Economics, commissioned by the industry peak bodies, found scrapping negative gearing and the CGT discount would lift investor costs and drive rents higher.
The modelling also found that the CGT discount directly influences rental supply, arguing that availability is closely tied to investor appetite.
“Not every renter is in a position to become an owner at any given moment, and the unintended consequences of well-meaning policies to grow the ownership pool by shrinking the rental pool are likely to fall disproportionately on the shoulders of the most vulnerable,” the Qaive and Tulipwood Economics report noted.
It concluded that cutting the CGT discount to 25 per cent and limiting negative gearing to one property would slash gross domestic product (GDP) by more than $3 billion and wipe nearly 46,000 housing starts.
Rather than cutting the CGT discount, industry groups urged the government to prioritise boosting supply, reaffirming their commitment to delivering 1.2 million homes under the National Housing Accord.
“Investors finance up to two in every five new homes built – private rental investment is part of the solution to our housing crisis, not part of the problem,” the joint statement read.
“Housing policy demands a holistic approach, simply pulling one or two policy levers that increase the tax impost on housing will not increase supply.”
