Housing Crisis in Hobart: From Most Affordable to Least Affordable in a Decade

A decade ago, if you wanted to buy a home on a modest income, Hobart was your best bet in Australia. The median house price sat around $285,000 - genuinely within reach for working families, nurses, tradies, and teachers. Fast forward to 2024, and that same median has blown past $700,000, while Hobart wages remain among the lowest of any Australian capital city. In the space of one decade, Hobart transformed from the most affordable capital in the country to the least affordable relative to local incomes.

This didn't happen by accident. It happened because of deliberate policy choices - choices made by politicians from both major parties, choices that benefited a specific group of people, and choices that ordinary Tasmanians were never asked to vote on.

The Policy at the Heart of the Problem: Negative Gearing and Capital Gains Tax Discounts

At the federal level, two interlocking tax policies have turbocharged investor demand for housing across Australia - but their impact has been especially devastating in smaller markets like Hobart.

Negative gearing allows property investors to deduct losses on their investment properties against their other income, reducing their tax bill. If your rental property costs you more to hold than it earns in rent, the government essentially subsidises the difference through the tax system.

The 50% capital gains tax (CGT) discount, introduced by the Howard government in 1999, means that when an investor sells a property, they only pay tax on half the profit. Together, these two policies make it financially rational for wealthy Australians to buy properties, run them at a loss, and wait for prices to rise - because the government rewards them for doing so.

The cost to taxpayers is enormous. The Australian Treasury estimates these concessions cost the federal budget approximately $19 billion per year - money that could fund public housing, infrastructure, or healthcare.

What This Did to Hobart Specifically

Hobart's housing market was small and relatively insulated for years. Then several things converged:

• Interstate investors - particularly from Victoria and NSW - discovered Hobart's low entry prices and high rental yields
• Short-term rental platforms like Airbnb removed thousands of properties from the long-term rental market (estimates suggest over 2,000 properties in greater Hobart are listed on short-stay platforms at peak periods)
• The Tasmanian state government, under both Liberal and Labor administrations, failed to build meaningful amounts of public housing or introduce effective investor regulation
• Population growth from sea-changers and remote workers post-COVID added further demand pressure

The result: Hobart's rental vacancy rate dropped below 0.5% for extended periods - anything under 3% is considered a crisis. Median weekly rents have risen from around $280 per week in 2014 to over $530 per week today. For someone on the Tasmanian median income of roughly $62,000 per year, that's more than 44% of gross income going to rent - well above the 30% threshold that defines housing stress.

Who Benefits, and Why the Policy Persists

Negative gearing and the CGT discount are enormously popular with one group: existing property investors. And that group is politically overrepresented.

Around 2.2 million Australians own investment properties. They vote. They donate to political parties. Many of them are also senior professionals, business owners, and media figures whose voices carry disproportionate weight in public debate. Modelling by the Grattan Institute has consistently shown that the top 20% of income earners capture the overwhelming majority of negative gearing benefits.

When Labor took a policy to the 2019 federal election to wind back negative gearing and halve the CGT discount, the campaign against it was ferocious. The Coalition - and a compliant section of the media - ran a scare campaign framing it as an attack on "mum and dad investors." Labor lost. The policy was quietly shelved. The Albanese government has not revisited it in any meaningful way.

The Tasmanian state government, meanwhile, introduced short-stay accommodation regulations that many housing advocates described as too weak to make a material difference, while consistently failing to meet its own public housing construction targets.

The Evidence Is Clear

Multiple independent bodies have examined these policies and reached similar conclusions:

This is not a contested area of economics. There is broad expert consensus that these policies inflate prices. The disagreement is political, not empirical.

This Is Exactly Why Direct Democracy Matters

Here's the uncomfortable truth: most voters do not benefit from these policies. The majority of Australians are either renters, aspiring first-home buyers, or owner-occupiers who would happily see prices stabilise. Polling consistently shows majority support for winding back negative gearing when the question is framed honestly.

Yet the policy persists - because in a representative democracy, politicians calculate what protects their funding, their base, and their own investment portfolios. Many federal MPs are themselves property investors with a direct financial stake in maintaining the status quo.

If Australians could vote directly on whether to spend $19 billion per year subsidising property investors - or redirect that money toward public housing, first-home buyer support, and rental assistance - what do you think they would choose?

At Direct Democracy, we believe you should get to make that call. Not a politician. Not a donor. You.

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