Contemporary issue: housing affordability: HSC Legal Studies

What this dot point is asking

Affordability is one of the four contemporary issues that must be studied in the Shelter option of the Legal Studies Stage 6 Syllabus (2009), alongside discrimination, homelessness and social housing. You must identify and investigate the issue and evaluate the effectiveness of legal and non-legal responses to it.

It was examined in 2020 (Question 29(a)) and 2024 (Question 29(b), paired with social housing). NESA's feedback in both years made the same point: move beyond describing the housing crisis and evaluate legal responses, meaning legislation, government policy and legally based programs. It also rewarded answers that connected affordability to other issues such as social housing, boarders and homelessness.

The answer

Identifying the issue

Affordability means being able to pay for adequate housing while still meeting other basic needs. A common benchmark is that housing costs above 30 per cent of income for lower-income households cause housing stress.

Evidence of the problem:

• Renters. A new lease took about 33 per cent of median household income in 2025, an all-time high (NHSAC, 2026). Anglicare's Rental Affordability Snapshot of nearly 49,000 listings in March 2026 found one affordable for a single person on JobSeeker, 88 for someone on the Age Pension and 17 for someone on the Disability Support Pension; a couple with two children on two minimum wages could afford almost 15 per cent.
• Buyers. The years needed to save a deposit rose from 9.0 (2015) to 11.2 (2025), and a new mortgage took about 45.9 per cent of median income (NHSAC, 2026). Home ownership among households aged 25 to 34 fell from 61 per cent in 1981 to 43 per cent in 2021.
• Consequences. More people rent for life, younger people depend on family wealth, low-income households move far from work and services, and more people are pushed into overcrowding, boarding houses and homelessness.

Causes. Supply has not kept up with population growth; planning rules restricted density in well-located suburbs; construction costs rose (and the 2026 conflict in the Middle East pushed up fuel prices and added to the risk of higher construction costs); tax settings (negative gearing and the capital gains discount) favoured investors over first home buyers; the Reserve Bank raised interest rates three times in 2026; and social housing fell as a share of all housing.

Legal responses: supply

• The National Housing Accord (Commonwealth, states and industry) targets 1.2 million well-located homes in five years from 1 July 2024, backed by Commonwealth incentive payments. The NHSAC expects the target to be reached around September 2030, over a year late.
• NSW planning reform. NSW's share is 377,000 homes by mid-2029. The low and mid-rise housing policy (from 28 February 2025) permits dual occupancies, terraces, townhouses and residential flat buildings within 800 metres of 171 town centres and stations, and the Housing Delivery Authority fast-tracks large projects. Planning bonuses reward developments that include affordable rental housing.
• Homes for Australia: A National Plan (28 May 2026) and the 2026-27 Budget included funding for infrastructure to unlock land for new homes.

Legal responses: buyers and investors

• Stamp duty relief: NSW first home buyers pay no transfer duty on homes up to $800,000 and a concession up to $1 million.
• 5% Deposit Scheme: from 1 October 2025, all first home buyers can buy with a 5 per cent deposit without mortgage insurance, with unlimited places, no income caps and a $1.5 million Sydney price cap.
• Help to Buy (from 5 December 2025): shared equity of up to 40 per cent (new homes) or 30 per cent (existing homes) for eligible lower and middle income buyers.
• Tax reform: the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received assent on 26 June 2026, limits negative gearing for residential property to new builds: from the 2027-28 income year, losses on established homes bought after 7.30 pm on Budget night (12 May 2026) can be deducted only against income from residential property, including capital gains, with any excess carried forward, while properties already held at that time are grandfathered. It also replaces the 50 per cent capital gains tax discount for individuals, trusts and partnerships with indexation and a 30 per cent minimum tax for gains accruing from 1 July 2027 (gains accrued before then keep the discount, and investors in new builds can choose either method). Further legislation on the details (for example, what counts as a new dwelling) was consulted on in August 2026. The aim is to reduce investor competition with first home buyers and direct investment to new supply.
• Foreign buyers: the ban on foreign purchases of established homes, in place since 1 April 2025, was extended to 30 June 2029.

Legal responses: renters

• Commonwealth Rent Assistance was increased by 15 per cent (September 2023) and 10 per cent (September 2024).
• Tenancy law (see leasing): rent increases limited to once every 12 months for all leases (31 October 2024); solicited rent bidding banned (from December 2022, later extended); background check and lease preparation fees banned (2024); fee-free rent payment (2025); Smart Rental Bonds (portable bonds) from 10 August 2026, statewide from 16 September 2026, reducing the upfront cost of moving. NSW has rejected caps on the amount of rent increases.
• Social and affordable housing for those the market cannot house: see social housing.

Non-legal responses

• NGOs and research: Anglicare's snapshot, Shelter NSW, the Tenants' Union and the Everybody's Home campaign document the problem and campaign for reform; the NHSAC (an independent statutory advisory council) publishes annual assessments.
• The media coverage of rental queues, "renovictions" and young people locked out of ownership made affordability a central issue at the 2025 federal election and in the 2026 tax debate.
• Families and communities: intergenerational help with deposits, share housing and living with parents are private responses that entrench inequality.
• Industry: build-to-rent developers and community housing providers add supply outside traditional investor ownership.

Evaluating the effectiveness of legal and non-legal responses

Judgement. Legal responses to housing affordability have become far more ambitious since 2023, tackling supply, buyer access, investor tax settings and renters' costs at the same time, and the 2026 tax reforms show values shifting from treating housing as an investment towards treating it as shelter. But their effectiveness so far is limited to moderate: the most important measures work slowly (supply) or have not started (tax reform), demand-side schemes may inflate prices, and renters, the group under most pressure, have gained protection mainly on the frequency and process of rent increases, not the amount. Affordability is the clearest example in the option of the law responding to changing values but struggling to change outcomes quickly.

In one sentence

Housing affordability in NSW is at record lows for renters and buyers, and governments have responded with supply targets and planning reform, first home buyer schemes, the 2026 negative gearing and capital gains reforms and support for renters, which reflect changing values about housing but have so far delivered only limited relief because supply is slow and key reforms start in 2027.

Try this

Q1. Identify TWO causes of declining housing affordability. (2 marks)

• What the marker wants. Two clear causes, such as insufficient supply and tax settings favouring investors.

Q2. Explain how the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 aims to improve affordability. (5 marks)

• What the marker wants. The negative gearing and CGT changes, commencement, grandfathering, the aim of reducing investor competition, and a limit.

Q3. Evaluate the effectiveness of legal responses in making housing more affordable for renters. (8 marks)

• What the marker wants. Rent Assistance, tenancy reforms and portable bonds, evidence of rental stress, and a judgement.