A PROVOCATIVE proposal to tax spare bedrooms has emerged as a potential solution to Australia’s housing affordability crisis.
Research from Cotality highlights a stark mismatch: more than 60 per cent of households have one or two people, yet 75 per cent of homes contain three or more bedrooms.
This inefficiency, says Cotality head of Australian research, Eliza Owen, raises doubts about “how well the housing market is serving real demand”.
Ms Owen proposes a tax on spare bedrooms to encourage downsizing, making it costlier to hold oversized homes and cheaper to live smaller. She advocates replacing stamp duty – which hinders mobility – with a broad-based land tax scaled to property size.
“It seems unfair to ask younger households to pay higher prices for stock utilized by older households,” she told ABC News.
Census 2021 shows 1.3 million two-person households live in three-bedroom homes, outnumbering larger families in similar properties.
The idea links with broader tax reform debates. Firstlinks reports Treasury forfeits A$50 billion annually by exempting owner-occupied homes from capital gains tax (CGT). Professors Peter Siminski and Roger Wilkins argue this, plus untaxed imputed rent, drives inequality, with homeowners’ incomes 86 per cent higher than renters’ once housing wealth is included – shifting Australia’s OECD inequality rank from 16th to 10th.
Suggested reforms include land or housing wealth taxes, or factoring homes into pension asset tests.
Yet the spare bedroom tax has triggered fierce backlash. One real estate agent argued the region’s aging population already struggles with limited housing options and that government should focus on incentives, not penalties.
The agent said, “Instead of bullying older residents who’ve earned their homes through sacrifice, the Government should consider stamp duty incentives to encourage downsizing. That way, seniors have real choice while freeing up family homes for the next generation.
“It’s seems like a lot the wrong people, are sitting at the right tables making decisions.”
Firstlinks readers branded the idea “socialist nonsense”, noting homeowners already face stamp duty, rates and upkeep. Critics warn such taxes could freeze the market, deter downsizing and unfairly target retirees.
Politically, it’s seen as “suicidal”.
The debate exposes the tension between reform and Australians’ deep attachment to homeownership. Balancing fairness and reality remains a formidable challenge.
