We can no longer afford to miss the middle

Late in 2016, the then NSW Planning Minister Rob Stokes released a draft Medium Density Design Guide and launched a design competition for “missing middle” housing, with the goal of fast tracking Sydney’s housing supply through more low-rise, medium-density terraces and dual occupancy dwellings in middle-ring suburbs.

Sydney Residential Housing

“Urban planning alone, no matter how innovative, can't do all the heavy lifting. We need to start thinking a lot more creatively about taxes.”

Given the predominance of large “empty nest” homes in these middle-ring suburbs, often on big blocks and owned by retired (or about-to-retire) baby boomers, finding ways to boost density in these areas makes a lot of sense. And with Sydney in need more than 700,000 new homes over the next two decades, policies aimed at “asset rich, income poor” suburbs, and which help drive supply through more flexible and affordable housing options close to the CBD, are now urgent. 

But I don’t think urban planning alone, no matter how innovative, can do all the heavy lifting. We need to start thinking a lot more creatively about taxes. 
Minister Stokes broached this topic when he lashed out at negative gearing late last year, saying tax breaks on investment properties are doing nothing to help push up supply or bring down prices. In doing so, he touched off an acrimonious debate that isn’t even close to being resolved – and which raised its head again on day one of the Berejiklian government. This led me to ask whether there might be less divisive fiscal options available. 

I believe that simple changes to Capital Gains Tax rules would stimulate more homeowners to create secondary dwellings on their properties – whether by building granny flats or subdividing existing homes – that would result in affordable accommodation in underutilised suburbs and provide homeowners with additional income or other support or benefits. 
Currently, CGT kicks in where homeowners rent or get commercial gain from part of their properties. However, removing or reducing it in these instances has the potential to spur untapped innovation in the private housing market (I could go on) – innovation that could do a lot to reinvigorate middle-ring suburbs and boost population growth where infrastructure like roads, trains, schools and hospitals already exists. Perhaps this is one of the “options” the Berejiklian government could discuss with the Federal Government – an option that, in my view, could go a long way towards addressing both housing affordability and supply, indisputably two of NSW’s biggest challenges.

Stephen Taylor

Australian Cities Director +61 2 8907 9084 Ask me a question
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