Housing affordability is very real problem according to the Property Council of Australia, but potential solutions being put forward by policy makers will do little to address the issue.

While much of the affordability debate recently has centred on taxation issues such as negative gearing and capital gains tax discounts, PCA chief executive Ken Morrison said that is nothing more than a “false debate.”

“Australia is having a false housing affordability debate. While the problem is very real, the solutions being bandied have nothing to do with the problems that have left us with entry level housing that is far more expensive than it needs to be,” Morrison said.

“There's no running away from the laws of supply and demand, and it's what all the experts - including the Reserve Bank and the Henry Tax Review - have pointed to as the real cause of our affordability woes,” he said.

Global credit rating firm Moody’s recently released figures showing housing affordability worsened in Australia in the 12 months to March 2016, with Australian households spending on average of 27.6% of their monthly income on mortgage repayments.

Rather than hail a change to negative gearing as a possible affordability remedy, Morrison said fiddling with the tax break could actually make the situation go from bad to worse.

“You can't put $32 billion in new taxes on the property industry and not expect it to harm housing supply and make a bad situation worse. No modelling has been produced on the Opposition's proposed changes to negative gearing. No one can be certain about its impact on investment, construction, prices and rents,” he said.

“Some have argued that it is investors that are driving up house prices. The evidence does not support this. The fact is that owner-occupiers account for two in every three purchases. Far from crowding out home buyers – investors are supporting supply. In 2015, investors supplied 58,000 new dwellings nationwide.”

Morrison said the current debate around affordability is a “tax debate masquerading as a housing affordability debate”,  and that affordability will only be improved by “systemic changes to state planning laws, state taxes and continued predictability in terms of federal taxation.”

“We should… incentivise the States and local government to reform outdated planning laws. While we have seen piecemeal improvements from state governments in recent years, our planning systems are stymieing growth and putting artificial pressures on house prices.

“We need to kick-start the debate on state taxation. Stamp duty is a dreadfully inefficient tax that is a drag on the economy and kicks every house buyer in the shins. Stamp duty has become a woeful crutch for state government budgets. In Sydney, the typical householder pays $35,000 in stamp duty, in Melbourne its $32,000 and in Perth $16,000.”