Addressing Australia’s Housing Shortfall: Solutions for Sustainable Growth

We are in the midst of the worst housing crisis I have seen in my five decades of being involved in property.

It was a significant shortage of houses for those who want to buy, and worse shortage of dwellings for people who want to rent.

And while all sorts of excuses have been bandied about, including CoVid, surging immigration, "nasty greedy" property investors, in reality, Australia’s housing crisis isn’t new—it’s a product of over two decades of systemic undersupply and growing demand, which has been further exacerbated by the COVID-19 pandemic.

While housing affordability has been a hot-button issue for years, solving this deeply embedded problem is not a quick fix.

According to HIA Managing Director Jocelyn Martin, as much as we would like to pin our hopes on one government or a single term, this issue demands a coordinated, long-term effort from all levels of government.

The solution must be multi-pronged, involving federal, state, and local governments working in unison to create a robust, sustainable housing supply.

According to Martin, the question is: How can we create a more equitable system and increase the number of homes available without passing the cost burden solely onto new homebuyers?

According to the Housing Industry Association (HIA), the answer lies in a series of reforms aimed at increasing supply, reducing taxes, and addressing the broader infrastructure challenges that go hand in hand with property development.

The tax burden and housing affordability

The current tax structure in Australia unfairly burdens new homebuyers, with up to 50% of the price of a new home being comprised of taxes, fees, and charges imposed by various levels of government according to Martin.

When the price of new homes is driven up by taxes, the natural consequence is a reduction in the number of new homes built.

It’s a vicious cycle: fewer homes being built results in an even greater tax burden on the diminishing number of new homebuyers.

This imbalance is one of the core reasons behind the persistent undersupply in Australia’s housing market.

To break this cycle, we must rethink the role of government taxes in property development.

HIA’s stance is clear: the more you tax housing, the fewer homes you will get.

In fact, instead of adding to the tax burden, governments should be working to alleviate the pressures on new homebuyers by lowering the costs associated with property development.

Holistic solutions for a long-term problem

The HIA’s comprehensive set of recommendations offers a roadmap for addressing the housing supply challenge.

What’s refreshing about their approach is that it isn’t confined to just one segment of the housing market.

Whether it’s affordable housing, public housing, or private rentals, the focus should be on increasing supply across the entire housing continuum.

Here are some of the key recommendations that stand out:

1. Housing affordability as a guiding principle: Every government department involved in housing-related policies must adopt housing affordability as a core principle. This means decisions around infrastructure, taxation, and planning should always consider how they impact the cost of housing.
2. Equitable public housing investment: Public housing needs to be funded consistently and equitably, not just during election cycles. The current funding model creates sporadic investments that fail to keep up with demand.
3. Investment in infrastructure: One of the most significant bottlenecks in increasing housing supply is the lack of shovel-ready land. Greater government investment in enabling infrastructure—roads, utilities, and transport—would expedite the process of bringing new land to market.
4. Fair share of infrastructure costs: Right now, the costs of infrastructure upgrades are too heavily shouldered by new homebuyers. These costs need to be more equitably shared across all sectors of society.
5. Foreign investment and skilled migration: Restoring foreign investment in home building would help boost the number of homes in the private rental sector. Additionally, facilitating skilled migration would address the critical labour shortages in the construction industry, which is currently hampering new development.
6. Reforming Lending Restrictions: First home buyers are struggling to secure financing due to unnecessary lending restrictions. Reevaluating these barriers could open up homeownership to more Australians, particularly as interest rates continue to rise.
7. Planning Reform: Planning delays and restrictive regulations are adding to the cost and time it takes to build new homes. Streamlining these processes across state and territory governments would dramatically reduce the inefficiencies that are currently plaguing the system.
8. Balancing Regulatory Measures: Governments need to strike a balance between necessary regulations and additional costs. Implementing a moratorium on new regulations that inflate housing costs would give the industry breathing room to catch up with demand.

Leadership and coordination are key

Perhaps the most crucial point HIA makes is the need for coordinated leadership across all levels of government.

No single entity has the power to resolve the housing crisis on its own, and fragmented efforts are only going to prolong the pain.

The Housing Minister, Treasurer, Finance Minister, and state and local governments all need to be on the same page, working together towards a common goal: increasing supply, stabilising prices, and making housing more affordable.

But leadership requires more than just coordination—it requires bold decisions and a willingness to move away from the status quo.

Local councils, in particular, need to reassess their role.

At present, they have too much influence over land availability, and their reliance on housing-related taxes is adding to the problem.

If we want to see real progress, these councils will need to be incentivised to release more land and be compensated for any loss of revenue that might result.

Moving forward

The housing crisis in Australia isn’t insurmountable, but it does demand serious action now.

The recommendations put forward by the HIA offer a solid starting point for addressing the root causes of housing undersupply.

By increasing housing stock across the continuum, reducing the tax burden on new homebuyers, and improving infrastructure, we can expect to see rents stabilise and home prices become more affordable by the end of this decade.

Australia’s housing future depends on leadership, collaboration, and a willingness to rethink how we finance and develop new homes.

There’s no time to waste—we must set the stage now for a housing market that works for everyone, not just the few.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.