The Coalition and Labor have unveiled major housing policies ahead of the May 3 federal election, with industry groups welcoming the focus but urging faster supply and broader reforms.
For the first time in Australia, an elected Coalition government under Peter Dutton has pledged to introduce a tax deduction on mortgage interest for first-home buyers purchasing new-build homes. This proposed scheme aims to make borrowing more affordable and fast-track equity for buyers during the first five years of homeownership.
Under the First Home Buyer Mortgage Deductibility Scheme, eligible Australians will be able to deduct interest on up to $650,000 of their mortgage from their taxable income. The offer applies to new dwellings intended as the buyer’s primary residence and is available to individuals earning up to $175,000 and couples earning up to $250,000.
“This policy is designed to ease the financial burden during the most challenging years of homeownership,” the Coalition said.
For example, a buyer earning $120,000 with a $650,000 mortgage at 6.1% interest could save about $12,000 annually through this benefit.
The scheme not only supports individual buyers but is also expected to generate broader economic activity.
By incentivising new builds, the government hopes to boost the construction sector, generate employment, and ease the housing supply crunch—especially critical as Labor’s goal to build 1.2 million homes is now projected to fall short by at least 400,000.
Urban Taskforce Australia described the move as “a huge step” that improves project viability and encourages new developments. However, it also called for continued efforts to cut red tape and reduce state-imposed development fees.
In a parallel effort, the Coalition promises to expand the Home Guarantee Scheme, raising income thresholds to $175,000 for individuals and $250,000 for couples.
Property price caps will also increase, and the number of places under the First Home Buyer Guarantee and the Regional First Home Buyer Guarantee will be uncapped.
This initiative builds on the Coalition’s broader housing platform, which includes the Super Home Buyer Scheme, $5 billion for infrastructure to unlock land, and regulatory reform to ease mortgage access.
“Restoring the dream of homeownership is part of our plan to get Australia back on track,” the Coalition said.
In a bold counter, Prime Minister Anthony Albanese announced Labor’s plan to let all first-home buyers enter the market with just a 5% deposit—without income or placement caps.
The government will guarantee part of the loan, allowing buyers to avoid lenders mortgage insurance (LMI).
“The median home now costs $820,000,” Labor said. “5% is $41,000. The last time that was enough for a 20% deposit was in 2002.”
Labor said this change reflects the financial reality for modern buyers, especially in high-demand cities like Sydney and Brisbane.
Alongside deposit support, Labor promises to invest $10 billion in constructing up to 100,000 homes exclusively for first-home buyers. These homes will be developed in collaboration with state governments and private industry under Labor’s broader $43bn Homes for Australia Plan.
Master Builders Australia praised the initiative, calling it “good economic and social policy,” while also warning that workforce shortages and rising construction costs could hinder its effectiveness without additional action.
The Mortgage & Finance Association of Australia (MFAA) welcomed both parties’ announcements, highlighting the positive impact on affordability and market access.
MFAA CEO Anja Pannek (pictured left) praised Labor’s broader eligibility and the Coalition’s deductibility scheme as beneficial for cash flow.
“Any policy that helps Australians into their first homes is welcomed by the MFAA, especially as they face higher barriers to entry – including high cost of living which affects serviceability, and increasing property prices in most states which means large deposit requirements” Pannek said.
However, she emphasised the need for supply-side measures and faster implementation timelines.
Peter White (pictured right) of the Finance Brokers Association of Australia (FBAA) also welcomed the focus on first-home buyers but expressed concern that existing mortgage holders are being left behind.
“It is important that policies don’t just help new borrowers enter the market, but existing borrowers to stay in the market and retain their homes,” White said. “We’d like to see practical assistance for existing borrowers, so they can more easily refinance and access lower interest rates.”
He warned that new demand-side initiatives might inadvertently push prices higher unless paired with strong supply-side actions.
He also sounded a note of caution on Labor’s 5% deposit plan, noting lender obligations and potential limitations on securitising such loans, which could cap their availability.
With both major parties now offering expansive housing strategies, voters face a clear choice in the upcoming election.
The Coalition’s focus on tax relief, construction stimulation, and home loan accessibility is pitched as a structural fix, while Labor’s emphasis on deposit support and home-building targets positions it as a rapid responder to immediate affordability concerns.
Industry groups agree that helping first-home buyers is essential, but stress that long-term housing affordability hinges on more than headline incentives.
As Denita Wawn of Master Builders put it: “Supporting first-home buyers is only meaningful if we’re also making it easier to build the homes they want to live in.”
Both policies have won support in principle, but stakeholders urge governments to act swiftly, coordinate reforms, and keep long-term sustainability front of mind.
For more information and details, read the announcements from the Coalition and the Labor Party.
