Thirteen-year-old Adelaide student Sebastian Muñoz-Najar has not yet reached his teens, cannot legally hold a full-time job, and is years away from learning to drive. But even this primary school graduate is already consumed by despair over one critical life question: will he ever be able to afford to own a home in his own country?
Against a backdrop of non-stop headlines about Australia’s deepening national housing affordability crisis, Sebastian began running the numbers himself using little more than a Google search and a basic calculator. What he found alarmed him: if current trends of skyrocketing property prices and stagnant wage growth hold steady, the average Adelaide home will cost 17 times his projected annual income by the time he completes university.
Australia’s housing affordability emergency is no longer a contested political issue – across the political spectrum, policymakers and the public agree the country is in crisis. What has divided the nation and gridlocked legislative action for more than a decade, however, is how to fix it. Now, the federal government is moving forward with a polarizing set of reforms: eliminating long-standing, lucrative tax breaks for property investors, a change it argues will begin to address the intergenerational inequality that has come to define Australia’s housing market.
For younger Australians like Sebastian, the promise of the “Australian Dream” – the idea that hard work guarantees the reward of home ownership – has already been broken. They argue they have been locked out of the same opportunities their parents took for granted, and hope the reforms will rebalance a housing market tilted heavily in favor of wealthy investors. But critics warn the changes could choke off the very investment the country needs to build much-needed new housing, push rental prices even higher for already struggling tenants, and unfairly erode the life savings of ordinary Australians who built wealth through property investment.
Australia is now home to some of the least affordable major cities on the planet. Today, the average Australian property costs nearly 10 times the median annual household income – a four-fold increase from where it stood 25 years ago. Over that same period, national average rental prices have doubled. The root of the crisis is a simple supply and demand imbalance: Australia does not have nearly enough housing to accommodate its fast-growing population. Decades of underinvestment in public social housing, chronically slow residential construction, and restrictive zoning laws that block new development in high-demand urban areas have all combined to create the current crunch.
But many analysts argue that generous tax breaks for property investors have significantly exacerbated the problem. The two most high-profile policies at the center of the debate are negative gearing, which allows investment property owners to deduct any losses from their taxable income, and the 50% capital gains tax (CGT) discount, which halves the tax owed on profits from selling an investment property. Together, these policies have turned residential housing into an extremely attractive speculative asset, incentivizing mass buying and selling of properties for profit rather than for use as homes. Analysts note these policies were rolled out at the turn of the millennium, marking a clear turning point after which house prices began to outpace wage growth permanently.
These tax arrangements remain fiercely defended by existing homeowners, who benefit from rising property values that grow their personal wealth, as well as investor groups and real estate industry bodies that argue changes will cut into profits and disrupt the market’s ability to deliver new supply. The group bearing the worst of the crisis is young people, who are caught in a vicious cycle: saving for ever-larger down payments while paying soaring rents, only to face decades of large mortgage repayments on smaller properties located far from city center job markets.
Sebastian’s parents had long harbored quiet concerns about their children’s future housing prospects, but were shocked to learn the issue was already weighing on their 13-year-old son’s mind. “The first thought I had was you shouldn’t have to worry about this – you should be worrying about homework, friends, school,” Sebastian’s father Ed told the BBC. “The second was: you don’t have to just accept this.”
Together, the pair turned their anxiety into action: they built a website publishing Sebastian’s calculations and launched a public petition calling for reform to the CGT discount and negative gearing, which has now collected thousands of signatures from supporters across the country. “We hope this would remove the incentive to use houses as investments and bring houses back to being places to live,” Sebastian says.
This is not the first time Australian federal politicians have pushed for these changes. The center-left Labor Party, which now forms government, first proposed reforms to negative gearing and CGT in the 2016 and 2019 federal elections. It lost both campaigns, with many political analysts blaming the housing reform proposals for the defeat. But much has changed since 2019: the housing crisis has deepened dramatically, pushing its impact up into the middle class, while demographic shifts have put younger, disenfranchised millennial and Generation Z voters in a much larger share of the national electorate. Many older voters are also now seeing the crisis impact their own children and grandchildren, shifting their views on the need for change.
“It’s like a slow-boiling frog – this has been building for more than 20 years, but it has now hit crisis point,” Danielle Wood, chair of the Productivity Commission, the Australian government’s independent economic advisory body, told the BBC. “And I think these tax changes have probably become a bit symbolic in thinking about what’s created this problem.”
For older Australians who have already built property wealth, many see the proposed reforms as an unfair political attack. Retired Melbourne couple Christine and Cliff Hill, who own their own home plus three investment properties, reject the complaints from younger generations. Cliff, 64, says he and his wife were able to afford their first home by making sacrifices: moving to an outer suburb, cutting every unnecessary expense, and skipping luxury holidays. “You can’t go complaining that houses are $1m because they aren’t. They’re $500,000 or $600,000 but the young folks don’t want to live 35km from Melbourne,” he says. The couple profited heavily from the current tax system when they sold a fourth investment property last year, earning a $348,000 profit they would have paid half the tax on under existing rules. They argue the government’s reforms will lead to disaster: investors will either raise rents or sell off their properties, and even if there is a temporary bump in supply, long-term demand will still outstrip supply, leaving homes just as unaffordable for first-time buyers.
“The government are going after the inter-generational gap that they keep talking about – and being a baby boomer, I’m really over that,” Christine says.
But the current Labor government believes public opinion has shifted enough to make reform politically viable this time around. One early indicator of shifting public attitudes came in 2024, when Prime Minister Anthony Albanese faced widespread public backlash over his purchase of a multi-million-dollar clifftop holiday home amid the worsening affordability crisis. In its first budget following its landmark 2025 election win, passed as public anger over inaction on housing boosted support for minor progressive parties, the government outlined its planned changes: it will replace the fixed 50% CGT discount with an inflation-adjusted markdown, and restrict negative gearing tax benefits to newly constructed properties only.
Crucially, the changes will be grandfathered, meaning they will only apply to investment properties purchased after the budget passes; existing investors will keep their current tax benefits permanently. Even supporters of the reforms, however, acknowledge the tax changes alone will not solve the crisis. Experts warn the reforms will do little to address the core issue: the national shortage of housing supply. The tax changes are projected to cause a small drop in property prices and free up more market space for first-time buyers by reducing investor competition, but they are not a silver bullet.
“They’re not a panacea on house prices,” Wood says. Critics on the right have increasingly shifted blame for the crisis to Australia’s high migration intake, with the conservative Coalition opposition and right-wing populist party One Nation both calling for deep cuts to migration to reduce housing demand. While migration does contribute to population growth, experts say it is a minor factor in the supply shortage, and economists warn cutting migration would have severe negative knock-on effects for Australia’s labor force and overall economy.
Wood says the real solution is far simpler: “We just need to make it easier and faster to build.” While construction regulation is necessary to protect public safety, the current system requires dozens of overlapping approvals and layers of bureaucracy that have slowed average build times by 40% over the past 15 years.
For Sebastian, the tax reforms feel like a small step in the right direction, but he remains deeply skeptical that policymakers truly have the interests of young people at heart. Many sitting politicians own investment properties themselves, and he argues the grandfathering clause was explicitly designed to protect their own wealth. “Young people, they feel let down… disappointed in policymakers for allowing this to happen. And they also feel just sad that the ‘Australian Dream’ of owning a house is unattainable for them.”