The biggest housing budget win has nothing to do with negative gearing
It’s the incentives, stupid.
It’s been a long time coming, but in 2026 the Albanese Government is actually taking housing affordability seriously.
But despite all the bluster about negative gearing and capital gains, they’re actually the least important part of the budget’s housing reform story. All available research tells us these policies explain less than 5% of house prices.
The real answer to bringing down house prices lies in planning and construction reform. Some states have already been doing it since before it was cool—especially in my home state of Victoria, where massive planning reforms have made more homes legal in more places, and enabled them to get built faster.
It has also been Chris Minns’s personal crusade to keep Sydney from becoming a “city with no grandchildren”. But the anti-housing lobby in Sydney is well-funded and deeply ingrained—and much more willing to be deranged on-the-record—so New South Wales’s successes have been more limited.
Frankly, poor Chris Minns needs the Commonwealth’s help.
Enter Albo, Jimbo, and Clare O, finally bringing a serious policy to the table: a $2 billion carrot, dangled in front of states and councils, available on the condition that they reform their byzantine planning systems—and get rid of the unjust and unjustifiable rules that make it illegal to build homes across our nation’s towns and cities alike.
This policy, called the Local Infrastructure Fund, is a big deal. Mainly because it gives leverage to reformers in their fight against the old guard, who by nature and tenure tend to be less enthusiastic about change. They already have their fiefdoms, after all.
This promise of real dollars can be decisive. As much as it pains me to say it, in the contest of policy ideas, sometimes evidence isn’t enough. Sometimes those who win the argument are the ones who can tell the bean counters that their reform is worth some portion of $2 billion.
That’s office politics for you.
Of course, this policy will only be as good as the change it incentivises. The Commonwealth has to make sure they actually get bang for their buck, and avoid letting states and councils bamboozle them by pretending to do something meaningful while just rearranging the deck chairs.
This is why the Feds must demand states remove bans, like low-density zoning that makes it illegal to build apartments or townhouses—rather than tinkering around the edges with approval timeline targets. It’s important to remember that the fastest possible timeline is an instant NO.
As much as I love large-scale towers around train stations, broad upzoning is the Commonwealth’s best answer here. That means getting all states to sign up to a National Townhouse Code, as introduced at the 2025 election by the YIMBY movement and later backed by the Grattan Institute.
The Code would require states to set a minimum allowable density of at least three storeys, enabling townhouses and low-rise apartments to be built nation-wide, by-right. This one simple policy would solve a large number of our nation’s planning problems, especially in smaller capitals like Adelaide and Perth, and regional centres, where home prices have recently skyrocketed.
By making it easy to build townhouses—which at three storeys can be built at an impressive density, speed, and cost-efficiency—the Federal Government would enable Australia’s most popular housing product to flourish. And we know this sort of policy works. Not just in the legendary Auckland, but on our own shores: just over a year ago, Victoria introduced its own townhouse code, and permit applications jumped 40%.
But we can’t just leave the hard work to the states. In a twenty-first century economy, the Commonwealth has to take a stronger interest in our cities, and this policy is the first sign that they might finally be doing so.
As Keating said, Australia is no longer a quarry or a sheep run. It is in fact an extraordinarily urbanised nation: a full 80% of our economic activity takes place on less than 1% of our total landmass.
Cities are the drivers of economic growth, and the Feds see the greatest upside of that growth. It’s in their interest, then, to make sure that the labour markets that drive that economy—the people who live or want to live in our major cities—are not hamstrung by bad rules implemented by localist wowsers who want to pretend they live in an oxymoronic ‘inner-city village’.
Newsflash, folks: inner-city villages don’t exist, and for too long local councils have worked as enforcers for local NIMBY groups who like to pretend that they do. The parochialism that infests our local governments does little more than hamstring our nation’s economy, and lock out the young people and new arrivals who would benefit immensely from being able to live in homes near existing transport, community, and jobs.
It seems that Albo, Jimbo, and Clare O are finally wise to the importance of the Great Australian City, and are ready to stake a claim on its prosperity. Let’s just hope they have the chops to execute this generational opportunity to remake our nation for the better.