Australia’s plan to build 1.2 million new homes by 2029 will barely ease the country’s housing affordability problem, says Christian Nygaard, housing economics professor at UNSW. The government’s target is ambitious, but even if achieved and continued for 20 years, Nygaard’s model predicts only a small drop in the house-price-to-income ratio. Nationally, this ratio would fall from 8.0 to 6.7, and in Sydney, from around 12 to 10. Why so little change? Nygaard explains that while more homes are needed because of population and income growth, other factors like tax benefits for home buyers and changing borrowing costs push demand up. He states, “The overall efficacy of producing more housing, in terms of affordability, becomes more limited than that 2-3% price impact in isolation suggests.” Nygaard supports building more homes but warns that focusing only on increasing supply won’t fix affordability as a social or political issue. He says policymakers should focus on who gets these new homes rather than just the number built. Nygaard also criticizes politicians for avoiding tough talks on how tax settings, such as capital gains tax discounts, encourage property investment. While changes to investor tax benefits might help, he says most capital gains happen in owner-occupied homes, which are hard to tax due to political challenges. “If you say, ‘it’s so difficult that we can’t touch owner-occupied primary home capital gains taxation,’ and so instead focus on something else, then you’re partially misdiagnosing why we are in the situation we’re in,” Nygaard said. “And you’re possibly ending up with prescribing, and believing in, the wrong policy solution: that the answer is just to build more housing.”