This article is from the Australian Property Journal archive
AUSTRALIA will miss the National Housing Accord target of delivering 1.2 million new homes by 2029, according to a broad-ranging report tabled by the Albanese government’s National Housing Supply and Affordability Council, which laid bare the issues exacerbating the national housing crisis.
“Australia’s housing market is far from healthy,” said the National Housing Supply and Affordability Council chair, Susan Lloyd-Hurwitz.
“There is no denying the housing crisis we are in. It is a longstanding crisis, fundamentally driven by the failure to deliver enough housing of all types – from social housing through to market home ownership.
“At its heart, this crisis is about insufficient supply, but many contributing factors are making it more acute – the resumption of migration at pace, rising interest rates, skills shortages, elevated construction company insolvencies, weak consumer confidence and cost inflation to name just a few.
“These all combine to create an environment in which prices and rents are growing faster than wages, rental vacancies are near all-time lows, 169,000 households are on public housing waiting lists, 122,000 people are experiencing homelessness and projected housing supply is very low.”
The Council’s projections indicate the gross new market housing supply will total 903,000 dwellings during the National Housing Accord period – the five years from 1st July – with a further 40,000 social and affordable dwellings funded by the Housing Australia Future Fund and National Housing Accord Facility.
It said the five-year supply target agreed to in the National Housing Accord is “suitably ambitious”.
“The Council recognises the need for an ambitious target as Australia faces a significant unmet demand for housing,” it said – while adding that new demand for housing is projected to be approximately 871,000 households over the five-year Housing Accord period, less than the overall target.
“However, more supply than is strictly necessary to meet future new demand is required to address the unmet demand for housing currently in the system, including for people experiencing homelessness, and to offset the effect of demolitions,” the report said.
The Council will assess the effect of new policy measures on supply over the first 12 months of the five‑year target period and reassess the suitability of the target.
Housing affordability to worsen
The report warned that affordability in the housing market – which has witnessed record house prices, surging rents and vacancies around historic lows – is set to become worse.
“The overall shortfall in new supply relative to new demand will add to the already significant undersupply of housing in the system. As a result, housing affordability is expected to deteriorate further over the forecast horizon,” it said. The report’s six-year projection horizon runs from the 2023-2024 to the 2028-29 financial years.
“There will be no surplus of new housing supply that could address the significant unmet demand for housing that currently exists due to affordability constraints or to accommodate the 122,000 Australians experiencing homelessness at the time of the 2021 Census.”
Ne new supply of market housing over the projection period is expected to average around 173,000 dwellings per year, peaking at 177,000 dwellings in 2026–27. Fresh Australian Bureau of Statistics data shows just 161,527 new homes have been approved over the past year.
Report welcomed by industry
“The report rightfully acknowledges the housing system’s inability to supply sufficient housing that meets the population’s needs is the primary reason for worsening affordability,” said Master Builders CEO Denita Wawn.
“Despite high demand for housing, people are not going ahead with new builds because the numbers just don’t stack up.”
Growth in national construction costs continued to stabilise in the first quarter of 2024, CoreLogic’s Cordell Construction Cost Index shows, but costs are still a whopping 27.6% higher than at the start of the pandemic.
“Builders welcome the recommendation that more is needed to boost the industry’s capacity by improving availability of skilled labour, enhancing flexibility in supply chains, increasing the availability of financing and bolstering sector productivity.
“Low productivity from labour shortages, materials, and poor planning/regulation all drive up building costs and impact housing supply.”
The Property Council of Australia said it welcomed the release of the report.
“This important report shows the government’s housing targets are Australia’s best chance of bridging our housing deficit,” Property Council Chief Executive Mike Zorbas said.
“In the report’s own words, we need more housing of all types – social housing through to market home ownership.
“The golden levers here are planning efficiency, land release and last mile infrastructure and governments are finally starting to understand this.”
Zorbas added that the “fastest way for the government to introduce high-quality new homes to take pressure off the broader market” was through purpose-built student accommodation, retirement living communities and build-to-rent housing (BTR).
“If executed well, reforming the withholding tax rate for BTR housing will create 160,000 new homes by 2033,” he said, referring to the Albanese government’s plans for BTR investor concessions.
Social housing “essential infrastructure”
The report said that non-market housing, such as social housing and affordable housing, is “essential infrastructure”.
“It reduces homelessness and the incidence of poverty, supports economic productivity and labour market participation, and fosters more cohesive and sustainable communities.”
On the list of the Council’s 10 areas of focus identified for improving housing system outcomes was investing in social housing. This would help lift more people out homelessness as part of a “housing first” approach.
Also identified were improving rental market outcomes for tenants, improving efficiency in the land use and planning – including a nationally consistent approach to inclusionary zoning. which would support the supply of affordable housing, the separation of development approval and policy, and quicker assessment – and boosting capacity in the construction sector.
Improving data availability, addressing regional-specific housing challenges, enhancing First Nations housing outcomes, and ensuring the taxation system supports supply and affordability were also on the list.
The report said Australia’s tax system favours home ownership over other forms of housing tenure.
“This can widen inequality between homeowners and renters. Historically, most Australians could access home ownership and the associated tax benefits that come with it. However, home ownership is becoming less available for a growing segment of the population. While the Council supports the goal of home ownership, it also supports the development of alternative tenures that assist lower-income households to access some of the tax benefits of home ownership,” it said.
