The economic case for investing in social & affordable housing
Oxford Economics Australia was engaged by the Construction, Forestry, Maritime, Mining And Energy Union (CFMEU) to explore the economic case for investing in Australia’s social and affordable housing, potentially funded by revenue from a super profit tax.
The first part of our analysis quantified the current gap in social and affordable dwellings by estimating unmet demand. Our analysis estimates that there is currently a gap of 750,700 social and affordable dwellings in Australia (the housing gap). This gap is expected to rise to 946,900 if no action is taken to substantially increase the supply of social and affordable dwellings.
Our analysis also quantified the investment required to close the housing gap. This considered only the capital investment required to build the required social and affordable dwellings. The investment required to close the gap is significant and requires long-term revenue streams to ensure ongoing investment into the sector. We estimate an investment of $511 billion is needed to close the housing gap by 2041, or an average $28 billion per annum.
Finally, we considered if a super profits tax could fund the required investment to close the housing gap. Our analysis indicates that an economy-wide super profits tax could raise the $28 billion per annum investment required to close the housing gap in social and affordable housing by 2041.
Theoretically, the benefit of a permanent, well-designed general excess profit tax is that it is efficient, does not discourage investment and automatically taxes economic rent without the need to identify profitable sectors during specific episodes. However, correctly calibrating the design features of the tax is crucial to limit impacts on investment and market distortions which would reduce economic activity, wages, jobs and therefore the social welfare it was designed to promote.
The experts behind the research
Emily, Alex and Geof bring years of experience in economic policy analysis and property market forecasting. Working with clients across both the public and private sector, the team provide insights into the macroeconomic environment including property market conditions and the policy landscape.
Emily Dabbs
Head of Macroeconomic Consulting
Alex Hooper
Lead Economist
Geoffrey Snell
Lead Property Economist
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