For years politicians have been rolling out policies they claim will make housing more affordable. And for years housing affordability has continued to get worse. Housing needs to become cheaper and instead it is becoming more expensive.

You might expect that our politicians would be concerned by the fact that all their policies fail. Instead, the government rammed two new housing affordability bills through the parliament yesterday which are more of the same.

The best you can say about the government’s two new policies is that they will have no impact on the housing market.

The list of policies that both sides of politics have claimed will fix the problem is long. First home buyer grants, government support for social and affordable housing, first home buyers accessing super to buy a home, plus many, many more.

All the while anger is growing as house prices keep rising.

There are two things you can do to make something cheaper. You can increase supply or decrease demand. Or both. If there is a bumper crop of apples (more supply), then the price of apples goes down. When fewer people wanted to buy DVDs (less demand) the price of DVDs went down.

The first problem is many of these policies don’t increase supply or decrease demand. In fact, some of them do the opposite.

The various first-home-buyer grants gave first-home buyers more money to buy a house (increase demand). They all show up the auction and bid up the price of homes making them more expensive.

The Coalition’s plan to allow first-home buyers to access their super will act like a super-charged first-home-buyer grant. While they claim it is a policy designed to help people buy their own home, it will actually lock more people out of home ownership and strip super from those that do manage to get in.

In the last few years there has been much more focus on increasing the supply of housing with calls for state governments to loosen planning regulations to increase density, particularly around transport hubs. So, can we build our way out of this affordability crisis?

Increasing supply will help make housing cheaper, but housing supply is not the cause of the affordability crisis, and it will be difficult to build our way out of it.

But, ‘wait’, I hear you say, hasn’t all the talk been that we’re not building enough homes to keep up with the increase in population?

It might surprise people to know that over the last 12 years the number of homes has been growing faster than the population. Since 2011 the population has increased 21% while the number of homes has increased 24%. The supply of homes is increasing faster than the population.

If it isn’t a lack of homes, what has caused the affordability crisis?

The problem is on the demand side. Over the past 20 years there has been a big increase in investment demand for housing. Compared to first home buyers, investors are more likely to be richer and have higher incomes.

They have flooded into the housing market biding up the price and locking people out of the market.

What caused the rush of investors? It was the interaction of two tax concessions, negative gearing and the capital gains tax (CGT) discount.

In 1999 the then Howard Government introduced a 50% discount on the tax of capital gains. That means that if you owned an investment property for more than 12 months you got half the capital gain tax free.

This meant selling a house for more than you bought it was a great way to earn income. Negative gearing meant you could afford to bid up the price of houses and make a loss because you could write the loss off on tax.

Every home where an investor beats out an owner occupier means one less homeowner and one more renter. For people who can buy a home, the higher prices have meant bigger mortgages, paying more in repayments, and having less to spend on everything else.

The solution is to cut back negative gearing and the CGT discount. This will reduce investor demand for housing and make housing cheaper. It will also raise billions in extra revenue that can be used to build more houses, increasing supply.

The Labor Party know that cracking down on investor tax concessions will make housing more affordable, they took exactly this policy to the 2019 election. What they fear is the Coalition running a scare campaign against them.

But what both the major parties should fear is the growing anger of those trapped out of home ownership and those burdened with massive mortgages. More phony housing affordability policies that do nothing to fix the problem will only fuel voter disenchantment.