The government modelled the housing impact of its negative gearing changes. The HIA wants to know why the same test has not been applied to the SMSF borrowing ban.
The Housing Industry Association has asked the federal government one direct question about its new ban on self-managed super fund borrowing for residential property: how many homes will it cost?
That is the whole argument, and it is a fair one.
When the government reworked negative gearing and capital gains tax in the budget, Treasury modelled what those changes would do to housing supply. The HIA now wants the same treatment applied to the SMSF measure. If restricting one source of investment was worth modelling, so is restricting another.
So far, that modelling has not been released.
What actually changed
On 23 June, the government struck a deal with the Greens to secure Senate support for its broader tax package. Part of that deal was a ban on new limited recourse borrowing arrangements, or LRBAs, used by SMSFs to buy residential property. The bill passed both houses of Parliament and received Royal Assent on 26 June 2026.
The ban is prospective. Existing arrangements are grandfathered, and commercial property borrowing is untouched. It commences 45 days after Royal Assent, which puts the cut-off somewhere around mid-August.
What is an LRBA?
A Limited Recourse Borrowing Arrangement lets an SMSF borrow money to buy a single asset, usually property, held inside a separate trust. If the loan defaults, the lender can only claim that one asset. The rest of the fund is protected. LRBAs have been available since 2007. From commencement, they can no longer be used to buy residential property, only business real property.
The HIA’s case
The association’s Chief Economist, Tim Reardon, kept the point simple. Restricting access to capital that finances new housing is likely to reduce the number of homes that get built. The only genuine question is by how much.
Reardon argued that SMSFs represent one source of private investment that supported new construction, particularly in markets where investor demand helped make projects stack up in the first place. Reduce that investment, and you should expect fewer homes, not cheaper ones. As he put it, housing does not become more affordable if fewer homes are built.
He also made a technical point that matters more than it first appears. Home building is determined by the marginal borrower, especially in apartment projects. Remove a small number of projects and the effect on supply can be larger than the raw borrowing figures suggest.
That is the crux of it. The HIA is not claiming the SMSF sector is enormous. It is arguing that small numbers at the margin can decide whether a project proceeds at all.
The presale problem
This is where the story gets more interesting than the headline numbers.
The government’s defence of the measure rests on scale. Treasurer Jim Chalmers described SMSF borrowing as less than 1 per cent of total residential property borrowing, and less than half a per cent of new residential borrowing each year. By his estimate, the ban would raise around $50 million over the forward estimates. On those figures, it looks trivial.
But borrowing statistics only capture settled loans. They do not capture the role an SMSF buyer plays much earlier in the chain.
“New housing supply does not begin at settlement. It begins when a developer is trying to prove to a lender that enough buyers are committed for the project to proceed.”
Nerida Conisbee, Ray White Chief Economist
Ray White chief economist Nerida Conisbee made this point directly. An SMSF buyer may sign a contract and help a project clear its presale hurdle long before the dwelling is finished and long before the loan ever shows up in ATO data. New housing supply does not begin at settlement. It begins when a developer is trying to prove to a lender that enough buyers are committed for the project to proceed.
That is the gap between the headline figure and the on-the-ground reality. A buyer class that looks like a rounding error in the lending data can still be the difference between a project getting finance and stalling. In a market where feasibility is already the central constraint, that distinction is not academic. Anyone tracking Australian construction industry trends will recognise the pattern: approvals, presales, labour and financing all interact, and pulling one lever rarely moves supply the way the headline suggests.
Why builders should care
For builders, the relevance is upstream of the build itself.
The projects most exposed here are the marginal ones. Apartment developments that need to hit a presale threshold before a lender will fund construction. If SMSF buyers were quietly helping some of those projects across the line, removing them does not just reduce demand. It can remove the project.
That flows straight into the pipeline. Fewer approved projects reaching construction means fewer starts, which means less work for the trades and suppliers who were counting on it.
None of this is an argument that the SMSF measure is the defining issue in Australian housing. It is not. The bigger constraints remain construction costs, planning, infrastructure charges and labour. But the HIA’s point stands on its own terms. If a policy is expected to reduce investment in new housing, the honest thing is to publish the estimate of how much supply it costs, then let people judge whether the trade-off is worth it.
The transparency question
There is a consistency argument buried in all this that is hard to dismiss.
The government has already conceded, through its own budget modelling, that changing housing taxation reduces new home supply. It went to the trouble of quantifying that effect for negative gearing and CGT. The SMSF ban restricts a different source of the same thing, capital for new housing, and so far it has not been put through the same analysis.
You cannot easily hold both positions at once. If the measure is too small to matter, then modelling it should be quick and reassuring. If it is large enough to warrant reversing nearly two decades of settled policy overnight, then it is large enough to model. Either way, the analysis should exist.
The HIA is not asking the government to reverse course. It is asking it to show its working.
Frequently Asked Questions
What is an SMSF limited recourse borrowing arrangement (LRBA)?
A structure that lets a self-managed super fund borrow to buy a single asset held in a separate trust, with the lender’s claim limited to that asset if the loan defaults.
Does the SMSF borrowing ban apply to new builds?
Yes. The ban covers residential property broadly and does not carve out new builds, which is part of the industry’s concern about supply.
When does the SMSF residential property borrowing ban start?
Forty-five days after Royal Assent, which was granted on 26 June 2026, putting commencement around mid-August 2026.
How much of the housing market do SMSFs actually make up?
By the Treasurer’s figures, less than 1 per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year.
Are existing SMSF property loans affected by the ban?
No. Existing arrangements are grandfathered and continue unchanged. Commercial property borrowing is also unaffected.
The Good Builder Take
The number that will get quoted is $50 million over four years. It makes the whole thing sound like a rounding error, and on the revenue side, it is.
But builders know the housing pipeline does not run on settled-loan statistics. It runs on presales, feasibility and marginal projects that either clear the finance hurdle or do not. A buyer class that is invisible in the lending data can still be the reason a development proceeds.
That is why the HIA’s request is reasonable, and why it is worth watching whether the government answers it. The measure may well turn out to be minor. But “trust us, it’s minor” is not modelling. If the negative gearing changes were worth quantifying, this is too. The industry is entitled to see the number before it accepts the reassurance.
Until then, the honest position is the one Reardon landed on. The question is not whether restricting this capital reduces supply. It is by how much, and right now, nobody outside Treasury can say.
Last updated: July 2026. Commencement date subject to the timing of Royal Assent.
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This article is intended for general information purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and industry requirements vary by state and territory and change over time. Builders and trades professionals should seek independent advice relevant to their specific circumstances before making business, legal, or financial decisions.
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