Two big words in the housing crisis: 'supply', or lack thereof, and 'affordability', or lack thereof.

The federal government sees housing supply as the issue. What if it’s not? We already have more houses than households, an excess of 750,000 homes (not to mention all those empty bedrooms). And we can’t build any faster. Increasing supply is not achievable.

The injudicious target of 1.2 million new homes in 5 years can never be met. A combination of increasing costs for materials, a lack of trained labour (with inadequate apprenticeships and inappropriate migration), slow approvals and increasing regulation has destroyed the expansion of construction and development. What is being built is being snapped up by investors.

The net result is Boomers and Gen X hold many houses and millennials few. The issue is one of distribution, not supply.

The key problem right now is affordability. How can younger people afford a house? One way is to change the housing that is built. Many more smaller, affordable, ‘low-and-close' housing options in the missing middle (point 4). But even so, the cost of those apartments and townhouses will be beyond the paying capacity of many millennials.

And that’s where changing finance could have greater impact than changing taxes.

Homes need to be funded, so a mortgage will be needed. You would think a country where the majority of the wealth is in mortgages would have established a better method for looking after those buying their first home: young, less wealthy, less credentialled. How beneficial it would be if first-home mortgages had concessional rates, several percentage points lower than property investment.

It would free first-time home owners from the vicissitudes of the Reserve Bank of Australia (with only one hammer to bash the nail of interest rates). It is iniquitous that the RBA’s attacks on inflation result in rising mortgage rates that make housing more unaffordable, particularly for millennials, and, perversely, increased unemployment.

The Labor Party's first policy foray to address housing affordability, by changing taxes in the budget, won’t alter that situation. But a far more radical idea, to require financial institutions to positively discriminate towards home purchasers, certainly could. What if all banks were directed by federal government regulation to offer rates to first home buyers at, say, 2% less than investments?

That’s a really bold initiative, rather than this week’s fiddling at the margins. 'Impossible', you say.

But what if we, the people, still owned the Commonwealth Bank of Australia, the biggest entity on the stock exchange? The sale initiated by Treasurer Paul Keating in 1991 (until 1996 under PM John Howard) raised approx. $8 billion. Compare that to its profit in FY25 of 10.25bn. And it also removed a counter to the RBA and a competitor to the privateers.

Imagine what could be achieved if it were still owned by the government, subject to government fiat in regulations, to ensure that interest rates favoured those entering home ownership rather than those investing. But that bird has flown. We need a new lever.

So, what will be the methodology by which a brave government will support millennials in their financial endeavours to reach homeownership? Perhaps a tax discount for first-time home owners. A tax break to encourage home ownership could work. And the opposition loves lower taxes. Do what negative gearing was meant to do, but never did.

Forget the flailing housing supply argument altogether. That’s more housing for investors. It’s changing the affordability equation, which is the key issue for home ownership. A taxable idea.

‘Housing Australia – Noun + Verb' is a forthcoming book by Tone Wheeler, collecting fifty years of work on philosophy, policies, projects, planning, processes and the practice of housing.

Tone Wheeler

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