Description
Labor’s deposit scheme won’t fix housing affordability in Australia. A public housing build program funded through dollar sovereignty could.
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Introduction: The Illusion of Housing Help
Australians are constantly told that the government is doing everything possible to make homes affordable. The latest example is Labor’s first home buyer scheme, which lets new buyers enter the market with a 5% deposit instead of the standard 20%. The policy has been celebrated as “life-changing,” cutting years off the time it takes to save for a deposit.
But here’s the truth: this is not a solution to housing affordability in Australia. It’s a demand-side policy that risks further inflating prices, saddles new buyers with higher debt, and leaves renters and lower-income families behind. The real path to affordable housing lies in supply-side reform, namely, public housing investment funded through Australia’s dollar sovereignty.
The Problem: Why Australians Can’t Afford a Home
1. Rising Prices vs Stagnant Wages
The gap between house prices and wages has never been wider. In 2024, the median house price across Australia reached around $807,110 (ABC), while the average full-time annual salary was just $88,400 (ABS). That’s ten times income, compared to just three or four times income in the 1980s.
The first home buyer scheme may reduce deposit hurdles, but it doesn’t change the fundamental problem: prices continue to rise faster than wages. The Treasury admits the scheme could push up prices, estimating a 0.5% increase over the next six years. Independent analysts warn it could be much higher, even up to 10% in the first year alone.
Simply put, schemes that boost demand without increasing supply make affordability worse, not better.
2. Investor Favouritism and Tax Settings
Another primary reason young Australians are locked out of homeownership is the tax system’s bias in favour of investors. Negative gearing and capital gains tax discounts allow investors to outbid first-home buyers, then reap long-term tax benefits.
Treasury figures show that 1.3 million Australians claim negative gearing deductions each year, significantly skewing the competition against first-home buyers. Investors view housing as a wealth-building asset, whereas ordinary citizens seek a stable home.
Instead of tilting the playing field back, Labor’s deposit scheme adds more demand pressure to a system already skewed by investor-friendly tax laws.
👉 Related reading: Neoliberal Housing Policies and Their Impact.
The Impact: Who Wins and Who Loses
3. Risks for First Home Buyers
While the scheme looks attractive on the surface, it exposes new buyers to long-term risks. By borrowing more with a smaller deposit, households face higher debt-to-income ratios.
Domain’s analysis shows buyers in Sydney could save eight years of deposit time, but they also take on bigger mortgages, with higher repayments and the risk of negative equity if the market dips.
Peter Tulip, Chief Economist at the Centre for Independent Studies, warned it was a “risky, dangerous way” to help, encouraging people to take one-way bets on the housing market.
This doesn’t improve housing affordability in Australia, it traps young people into fragile financial positions.
4. Banks and Developers Profit
Who benefits most from the deposit scheme? Not ordinary Australians, but banks and property developers.
Banks issue more loans, charge higher interest rates, and generate long-term profit streams. Developers see demand boosted and can keep selling properties at inflated prices. In this way, public money indirectly subsidises private profit.
This is part of a broader trend where government policies favour private markets over public purpose. Housing becomes an asset class for investors instead of a human right for citizens.
👉 Related reading: Corporate Capture of Policy.
The Solution: Building Real Affordability
5. Australia’s Dollar Sovereignty and Housing
Australia is not financially constrained like a household. As the issuer of the Australian dollar, the federal government can always fund programs that serve public purpose. The true limit is not “running out of money,” but resource availability and inflation risk.
Applied to housing, this means the government could directly fund large-scale public housing investment without needing to raise taxes first. Construction creates assets for communities, provides jobs, and stabilises prices in the private market.
👉 Related reading: Modern Monetary Theory and Australia’s Dollar Sovereignty.
6. Public Housing Build Program
A large-scale public housing build program would be a genuine solution to affordability. Instead of propping up demand, it expands supply.
Benefits of public housing investment:
- Cut waiting lists: More than 175,000 households are currently waiting for public housing.
- Ease rental stress: Over 30% of renters spend more than a third of their income on rent.
- Create jobs: Construction, planning, and maintenance industries would benefit.
- Stabilise prices: Increased supply reduces speculative bubbles.
- Build intergenerational equity: Housing becomes a shared public asset, not just a private investment.
External sources such as the Grattan Institute and the UN Office of the High Commissioner for Human Rights confirm that large-scale public housing programs are among the most effective tools for guaranteeing housing as a human right.
Frequently Asked Questions
Will public housing increase taxes?
No. With dollar sovereignty, the government can directly fund public housing construction without first raising taxes. Taxes are used to manage inflation, not to fund spending.
Won’t government housing spending cause inflation?
Inflation risks arise only if resources are already fully used. If labour and materials are available, public builds add supply and reduce inflationary pressures in the rental market.
How does public housing help renters?
By expanding supply, renters face less competition, stabilising rents and improving housing security.
Why is dollar sovereignty so important here?
It ensures that financial affordability is never a constraint. The real constraint is whether we have the workforce and materials to build the homes.
Final Thoughts: A Choice Between Debt and Security
The debate over housing affordability in Australia is really a debate over values. Do we want policies that push citizens deeper into debt, while protecting investors and banks? Or do we want structural reform that makes housing genuinely affordable?
Labor’s deposit scheme is a short-term patch that risks inflating prices and locking people into long-term debt. A public housing build program, funded through Australia’s dollar sovereignty, would directly address affordability, create jobs, and treat housing as a right rather than a privilege.
Australia faces a choice: more debt, or real security. The answer should be obvious.
What’s Your Experience?
What do you think is the bigger barrier to housing affordability in Australia, unfair tax breaks for investors, or the lack of large-scale public housing investment?
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Engaging Question
What do you think is the bigger barrier to housing affordability in Australia — unfair tax breaks for investors, or the lack of large-scale public housing investment?
References
ABS: Average Weekly Earnings, Australia
ABC: Australian Housing Market Trends
Grattan Institute: Housing Affordability Reports
UN Office of the High Commissioner for Human Rights: Housing Rights