With the federal election drawing near, housing affordability has once again become a key talking point, with both major parties unveiling plans aimed at helping first home buyers. After months of little attention, housing is now front and centre in the national debate.

Labor is proposing to reduce the upfront cost of entering the market by allowing buyers to purchase with just a 5% deposit, backed by a government guarantee to avoid costly lenders’ mortgage insurance. In parallel, a $10 billion commitment has been made to support the construction of 100,000 new homes.

Meanwhile, the Coalition’s plan targets longer-term mortgage costs. They’ve suggested allowing buyers of newly built homes to claim mortgage interest as a tax deduction — potentially saving thousands each year. An additional $5 billion infrastructure package is designed to support land development and unlock new housing supply.

While both approaches aim to improve access to home ownership, they tackle different sides of the affordability puzzle — upfront costs versus ongoing expenses. Labor’s scheme is likely to appeal to a wider audience, especially as it applies to both new and existing homes. The Coalition’s offering, on the other hand, is more focused on stimulating new construction through targeted tax incentives.

However, the underlying issue remains Australia’s growing housing shortfall. Demand has consistently outpaced supply since 2007, with a deficit now approaching half a million homes. At the same time, the construction sector continues to face significant headwinds — from rising costs and longer build times to labour shortages and increasing insolvencies.

The demographic landscape is also shifting. Smaller households and an ageing population are driving demand for more compact, low-maintenance homes, yet most new stock continues to favour larger dwellings. With many retirees remaining in oversized homes and limited incentive to downsize, underutilisation of existing housing stock is becoming a growing concern.

As the election approaches, the key question is whether these policy packages go far enough to address the structural challenges at the heart of Australia’s affordability crisis — or whether they are merely short-term solutions designed to win votes.