Explainer: How Labor's housing plan will impact you

Daily Telegraph

06-05-2025

Australia's housing market is poised for significant change under a newly elected Labor administration that has placed housing affordability at the centre of its policy platform.
The Albanese government's comprehensive housing package promises billions in new investment, rent and first homebuyer support, crisis accommodation, and a crackdown on foreign investment.
Some experts, however remain cautious, with Labor's housing plan likely to drive property prices higher in the near term before supply-side measures can take effect.
Here's a quick breakdown on how Labor plans to tackle Australia's housing crisis.
100,000 homes for first home buyers
Labor has committed $10 billion to build 100,000 homes over eight years, exclusively for purchase by first home buyers and locked away from property investors. They would be built in partnership with state developers.
Universal 5 per cent deposit
From 2026, income limits under the First Home Buyers Guarantee will be abolished, allowing any first homebuyer to purchase a home with just a 5 per cent deposit without having to pay Lenders Mortgage Insurance. Prices on eligible properties will also be lifted and there will be no income caps or participant limit.
Smaller mortgages through Help to Buy
Labor's Help to Buy shared equity scheme, where the government covers up to 40 per cent of a home's cost that first home buyers can buy out at a later date, is said to be expanded later this year. Smaller mortgages mean lower repayments and homebuyers will also be able to gradually buy out the government's stake over time,
Build to Rent
Property developers can access tax incentives to build apartments with a portion of units rented 'affordably' below market rate.
Rent relief
Labor has delivered a 45 per cent increase in Commonwealth Rent Assistance – the biggest back-to-back increase in over 30 years, helping over 1 million households better manage rising rents.
Social and affordable housing push
Through the Housing Australia Future Fund and other programs, Labor plans to deliver 55,000 social and affordable homes (28,000 already in development). The scheme will prioritise housing for vulnerable women, children, veterans, and key workers. The aim is to cut social housing waitlists.
Support for crisis accommodation
Labor is investing a record $1.2b into new crisis and transitional housing-for older women, young Australians, and those escaping family violence-to provide safe, emergency shelter for the most vulnerable.
Apprentice incentive payments
To meet ambitious housing targets, Labor is looking to incentivise more people into trades.
This mean investing $78m to fast track the qualification of 6000 tradies to help build more homes across Australia.
From July 1, 2025, eligible apprentices will also receive $10,000 in incentive payments, on top of their wages, over the life of their apprenticeship to work in housing construction.
Foreign investor ban
From April 1, 2025 to March 31, 2027, foreign investors, including temporary residents and foreign-owned companies, cannot apply to buy an established dwelling in Australia unless an exception applies. These limited exceptions will include investments that significantly increase housing supply or support the availability of housing supply, and for the Pacific Australia Labour Mobility (PALM) scheme.
So what does it all mean? Ray White chief economist Nerida Conisbee provides some further insights.
Deposit scheme expansion: a double-edged sword
Labor's signature policy – extending the 5 per cent deposit scheme to all first home buyers regardless of income – represents a fundamental shift in housing accessibility.
Under the expanded program, approximately 80,000 Australians are expected to enter the property market annually, up from the current 50,000 who access the income-capped version.
'By removing the substantial barrier of lenders' mortgage insurance and the need for a 20 per cent deposit, the policy dramatically lowers the entry threshold to homeownership,' Ms Conisbee said.
'For the typical Sydney property, this could mean the difference between needing a $200,000 deposit and requiring just $50,000 – potentially saving years of saving time for aspiring homeowners.'
However, economic fundamentals suggest the policy is likely to drive price growth in the short term, Ms Conisbee ads.
'The Productivity Commission's research on first homebuyer incentives consistently shows that measures increasing purchasing power, without commensurate supply increases, typically lead to price escalation in targeted market segments,' she said.
'With more buyers able to enter the market simultaneously and competing for the existing housing stock, upward price pressure becomes inevitable.'
Supply challenges amid construction headwinds
Labor's ambitious target of building 1.2 million new homes over five years, including the 100,000 dedicated first-buyer properties, also represents an unprecedented construction challenge.
Australia has never achieved this volume in any five-year period, according to Ms Conisbee, who said the closest being approximately 1.1 million homes last decade – a figure achieved with significant foreign capital investment.
As it stands, the current construction environment presents substantial obstacles to meeting these targets,' she said.
These include building costs, which continue to outpace house price growth, making new construction increasingly uneconomical.
Industry insolvencies have also exceed 1200 annually and continue to rise, while Labor productivity remains low compared to historical standards.
Construction time frames, meanwhile, have extended from 6.5 months pre-pandemic to over 10 months today.
'The expanding gap between housing demand and supply – now approaching 500,000 dwellings nationwide – will also likely continue to widen before significant new stock becomes available,' Ms Conisbee said.
The paradox: short-term pain for long-term gain
The paradox of Labor's housing policy is that while it risks exacerbating affordability challenges in the short term through price inflation, it may ultimately create the conditions for improved affordability in the longer term.
Higher property prices, while challenging for new entrants, makes it possible for developers to overcome construction barriers and bring new supply to market.
As values rise, previously marginal development projects become viable, and the industry gains additional capital to expand capacity.
Ms Conisbee said Labor's complementary policies – including apprentice incentives, Build to Rent tax benefits, and the Housing Australia Future Fund – aimed to address supply-side constraints gradually.
'However, these measures will take time to yield significant results, likely trailing behind the immediate demand stimulus of the deposit guarantee scheme,' she said.
Outlook: prices rising to meet construction costs
The fundamental economic equation that will drive housing supply recovery is straightforward: house prices need to rise sufficiently to match or exceed construction costs.
One of the key challenges plaguing Australia's housing supply has been that building costs have outpaced house price growth, making it more affordable in most parts of Australia to buy an existing home than build a new one.
'As house prices accelerate under Labor's policies, they will inevitably reach levels that make new construction economically viable again,' Ms Conisbee said.
'This price-to-cost equilibrium is the essential mechanism that will stimulate developers to increase supply despite the significant headwinds facing the construction industry.
:As prices rise to match construction costs, developers will respond with increased output, gradually addressing Australia's critical housing shortage and setting the foundation for more sustainable affordability in the years ahead.'