Election 2025: What Labor and Liberal Housing Policies Mean for Australia’s Housing Crisis—and Granny Flats…

Introduction

As Australia barrels toward the 2025 Federal Election, housing affordability has taken centre stage. With soaring rents, home prices outpacing wages, and supply failing to meet demand, 

Both major parties have unveiled ambitious housing policies aimed at tackling the crisis. What do these promises mean for everyday Australians—and how might they influence the growing interest in granny flats as a solution ?

Labor’s $10 Billion Play: 100,000 New Homes for First-Time Buyers

Prime Minister Anthony Albanese used his campaign launch to announce a $10 billion government investment aimed at delivering 100,000 new homes for first-time buyers over the next eight years.

• 🏠 Buyers would only need a 5% deposit, with the government guaranteeing the remaining 15%.
  
• ❌ This eliminates the need for costly mortgage insurance, saving buyers up to $23,000.
  
• 📆 Construction is slated to begin in 2026-27, with keys in hands by 2027-28.
  

This builds on Labor’s Housing Australia Future Fund, which focuses on social and affordable housing. While the plan is bold, many question if it moves fast enough to ease current pressures.

👉 Read more on Labor’s housing plan via The Guardian

Liberal’s Supply-Side Squeeze: Immigration Cuts and Mortgage Tax Deductions

Opposition Leader Peter Dutton countered with a more demand-focused approach:

• ❌ Temporary ban on foreign buyers to reduce investor pressure on the local market.
  
• 🌏 Immigration cuts to ease housing demand.
  
• 💸 New tax deduction for mortgage interest: First home buyers could deduct interest on loans up to $650,000 for the first five years—potentially saving up to $14,500 annually.
  

The Coalition believes this policy will benefit 85% of taxpayers and provide immediate relief to those struggling to enter the market.

👉 Read more on the Liberal plan via AP News

What This Means for Granny Flats

Granny flats are already in the spotlight as a practical, cost-effective solution to the housing crisis. Here’s how the election policies might impact this growing sector:

🔨 Increased Pressure for Fast, Modular Solutions

Labor’s longer-term strategy could unintentionally boost interest in fast-to-build dwellings like granny flats while Australians wait for supply to catch up.

🏡 Investor Opportunity Under Liberal

If immigration slows and foreign buying pauses, local investors may pivot to backyard developments to generate income and fill the rental void. Mortgage interest deductions may also free up cash for small-scale developments.

🧓 Multigenerational Living Support

Neither policy directly references granny flats, but both focus on affordability for young Australians. Granny flats offer an immediate way for families to pool resources, making home ownership more feasible in the short term.

Conclusion: Political Promises vs. Practical Solutions

While both major parties have finally acknowledged the housing crisis with bold promises, their plans differ fundamentally:

• Labor is playing the long game with large-scale construction and government support.
  
• Liberals are opting for immediate tax relief and reduced demand pressure.
  

In the meantime, granny flats remain one of the fastest, most affordable solutions for families looking to create multi-generational homes, boost rental yields, or get a foot in the property market.

As always, keep a close eye on policy shifts—but don’t underestimate the power of a smart backyard investment.

👉 Want help finding the right property for a granny flat build ? Contact us today to learn more about our network of real estate and finance partners.