There are persistent rumours the federal government will make changes to the capital gains tax discount and possibly negative gearing – perhaps as soon as the May budget.

This is great news for everyone who wants to see housing become more affordable.

The CGT discount is the culprit for big increases in house prices in the past two decades. After it was introduced in 1999, prices began to increase much faster than incomes:

But correlation doesn’t equal causation. So, how do we know that it is really the CGT discount pushing up prices? How can we be sure that it isn’t just a lack of supply?

We hear commentators say all the time that this is a problem of housing supply. It has been restrictions on property developers that created this crisis, and now we need to build our way out of it.

Another popular claim is that the problem is immigration, we’re letting too many people into the country, which then uses up our housing stock.

All these claims rest on the idea that the population is growing much faster than the number of homes.

But we can test that. If we look at the past 10 years, the population has increased by 16 per cent. For the number of homes to have kept up with the growth in population, they must have increased by at least 16 per cent. But, they have actually increased by 19 per cent.

The number of homes is increasing faster than the population. We can see this below:

To be clear, just because the........

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