Housing supply and more affordable rentals will be top of the agenda when Treasurer Scott Morrison and his state counterparts meet in Canberra on Friday.
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A leaked copy of an affordable housing report, which will be considered by the treasurers on Friday, identifies planning rules, local councils and, crucially, federal and states taxes such as negative gearing and stamp duty, as factors that impact on the supply of affordable housing.
The report suggests four financing models that could unlock spending to grow the supply of affordable housing including, crucially, from the private sector.
Governments across Australia spend close to $11 billion a year on affordable and social housing, and Mr Morrison is determined to ensure the money is better spent - and in their final meeting for 2016, the treasurers will examine a report prepared by a federal-state affordable housing working group that examines this issue.
Back in October, the Treasurer effectively put the states on notice over the need to increase housing supply and tackle planning laws that stop, or delay, new houses being built. Those supply constraints can increase demand and force up house prices.
The meeting also comes a week after NSW Planning Minister Rob Stokes broke ranks with his federal counterparts and joined the federal opposition in criticising negative gearing tax breaks, arguing that increased supply alone would not solve the housing affordability crisis.
The Affordable Housing Working Group report, written by state and federal bureaucrats, is focused on rental affordability rather than the rising cost of purchasing a home.
On tax policy, however, the report notes that taxation rules and concessions "at all levels of government have a significant impact on supply and demand of housing across the housing continuum" and can "directly affect the viability of innovative financing models for affordable housing".
This happens by affecting the supply of affordable housing, and through its impact on the attractiveness of community housing as an investment prospect.
"Commonwealth government taxation policy affects housing in a variety of ways, in particular through capital gains tax and negative gearing arrangements, which are applied to investments more broadly," the report states.
"These settings may affect investment decisions in established housing and possibly make housing investment more attractive to individual 'mum and dad' investors over institutional investors due to the ability to deduct losses against other earned income."
At the state and territory level, taxes and concessions including stamp duties and land taxes, grants for first-home buyers and principal place of residence rebates also have an impact.
To ameliorate the cost of rental housing, the report suggested four potential models be examined to increase finance available to increase the supply of affordable housing.
These four models were the creation of housing trusts, the creation of housing loan/bond aggregators to attract greater investment, housing co-operatives and so-called "impact investing",a new form of financing that aims to address social problems, such as a shortage of affordable housing.
