Labor estimates a family paying the national rental average of $462 a week could save $92 a week under its plan.
Overseas students, temporary foreign workers and other non-residents would not be eligible tenants for the new homes.
The policy will start slowly over the next term of Parliament if Labor wins the election, with only 20,000 new units and houses to be built during the term on a federal outlay of $102 million over the four years to 2022.
Mr Shorten will announce the plan at Labor’s national conference in Adelaide on Sunday, where delegates are preparing for debates on workplace relations, trade and asylum-seeker policy.
“We will be a government in the best of the Labor tradition: economic prosperity, social progress and a fair go for all,” he says in a draft of his speech.
“We have a vision for the future, the plan to pay for it and the team to deliver it.
“We are determined. We are united. We are ready. Ready to serve. Ready to lead. Ready to govern.”
The national conference risks inflaming internal disputes and undermining Mr Shorten’s message about being “ready to govern”, but faction leaders have been working on deals to minimise bruising arguments and ensure the Opposition Leader prevails on every policy.
The housing policy is made possible by the increases in tax revenue in Labor’s election platform, including $32 billion over a decade from changes to negative gearing and capital gains tax as well as $56 billion over a decade from tighter rules on tax refunds from dividend imputation on shares.
Prime Minister Scott Morrison has warned voters of higher taxes under Labor, a claim that includes new revenue measures as well as Mr Shorten’s rejection of some of the government’s income tax cuts over a decade.
The Australian Housing and Urban Research Institute estimated last month that the nation had a shortfall of 433,000 social housing units and needed about 36,000 built every year to meet future demand.
The Labor proposal only goes some way to meeting that objective.
One of the authors of the AHURI report, Dr Laurence Troy from the University of NSW, said Australian governments had only been funding about 3000 new social housing units every year.
“We estimate that output of about 15,000 is needed just to stop the existing shortfall from getting even bigger. To fix the current problem as well, over a 20-year period, calls for a 10-fold increase,” Dr Troy said.
Mr Shorten will use his speech on Sunday to promise help for Australians on lower incomes who are spending too much on rent.
“A hidden struggle in this country is being fought by the hundreds of thousands of our fellow Australians who can’t afford to live anywhere near where they work,” Mr Shorten says in the draft of the speech.
“They’re spending over a third of their pay packet on rent – and plenty more on petrol each day they travel.
“Rental affordability is a national challenge and it demands national leadership.”
The policy plan says a Labor government would work with community housing providers, the residential construction sector and institutional investors to back the scheme, but it is silent on whether individual investors might also build new homes that qualify for the subsidy.
The scheme complements the Labor policy on negative gearing, which scales back tax deductions on investment properties by restricting the tax benefits to newly-built homes over the long-term. Existing investment properties would be “grandfathered” so taxpayers could continue to claim their deductions, but taxpayers would not gain the benefits of negative gearing from future purchases of existing dwellings. They would have to invest in new construction instead.
The Labor housing affordability policy has been costed by the Parliamentary Budget Office at $102 million over four years and $6.6 billion over the decade to June 2029.
David Crowe is the chief political correspondent for the Sydney Morning Herald and The Age.