It defies all logic that while creating policies to ease the housing crisis, the government is instead managing to make it worse, but that is what’s happening with the aged care reforms.

While a big part of fixing the housing crisis is in building new homes, the other part is freeing up existing homes – which is quicker and cheaper and enables to people to live in areas with established infrastructure.

Currently around 70,000 Australians move into aged care each year, a figure that is set to grow substantially, and yet the aged care reforms create financial barriers to selling these homes.

The aged care reforms will cap the value of the family home included in the means test at $206,039, but other assets such as bank accounts and shares will be included at market value. It creates an incentive for people to keep the family home and a disadvantage for people who have their wealth in assets other than their home.

In fact, the greater the value of the family home the greater the incentive. Someone with no home and $2 million of investments will be assessed on all of those assets, while someone with a $2 million home could keep it and have only $206,000 assessed, keeping $1,794,000 out of the aged care assets test.

The most common reason people sell the home is to pay the Refundable Accommodation Deposit (RAD), however the aged care reforms create a number of disincentives for people to do so.

Instead of bemoaning Australia’s love of property, we need to recognise that it makes financial sense.

The first is that the RAD is included in the aged assets with 7.8 per cent of assets above $238,000 contributing towards the hotelling supplement, and 7.8 per cent of assets above $502,981 contributing towards the non-clinical care contribution.

Someone who keeps a $2 million home could save $41,500 per year in means-tested contributions compared with selling the home. People who pay a RAD after 1 July next year also face an exit fee of up to 10 per cent if they stay in aged care for five years.