We know that there is a dire housing shortage around Australia, not just for rental accommodation, but for people needing social housing, affordable housing, and for people wanting to live in desirable locations around Australia.
And this is only going to get worse with our borders now open to skilled migrants and international students.
So, it was great to see that the recently delivered budget contained multiple housing initiatives, including the “aspirational target of 1 million new, well-located homes over five years from 2024”.
But in my mind, while our government sounded serious about housing — I don’t think they’re serious enough to fix the structural problems that have locked so many Australians out of owning a home and, increasingly, renting one.
And that’s what I discuss in today’s Podcast with Dr. Andrew Wilson, chief economist of My Housing Market.
Look anywhere in Australia, and you'll see a housing market under intense pressure.
It makes the federal government's goal of a million homes over 5 years under a new Housing Accord sound like a welcome relief.
But is it really?
We know our property markets are severely undersupplied, so any initiatives to increase supply are welcome, but it seems this policy has not really been thought through.
Even the budget documents call 1 million dwellings an “aspirational target”, and the federal government itself is only locked in for an extra 10,000 homes, and these won’t even start until 2024.
The recent Federal budget came up with an ambitious target of 1,000,000 new homes built over 5 years from mid-2024.
A new “Housing Accord” was agreed upon with the States to free up land and to incentivize institutional and superannuation funds to invest in affordable housing.
Treasurer Jim Chalmers explained he was looking to encourage the big banks - Commonwealth Bank, ANZ, NAB, and Westpac - as well as superannuation funds to invest in social and affordable housing.
Under the new plan, the Federal Government is planning to spend $350 million to deliver an additional 10,000 affordable homes over 5 years, so all in all, the Federal Government is only going to provide 20,000 homes under this deal.
States and territories would be expected to deliver the same number of homes for low- to middle-income households.
Overall, the plan aims to have 1 million new homes built by 2029.
Currently, no policy detail has been provided, and we don’t know how this initiative will be executed - suffice it to say the government wants to play a leading role.
The government is looking for private sector stakeholders, mainly superannuation funds, to build these extra homes.
But the federal government has to make these projects commercially attractive. It is unlikely superannuation funds will accept the low yields the private investors accept, particularly when they can get better returns for their money elsewhere, such as commercial property
There are plenty of holes to pick in this ambitious policy:
- Australia typically builds around 160,000 to 180,000 dwellings a year. The new target will push that forward marginally (the goal is now 200,000 pa).
- We will need to build more than 200,000 new homes a year to keep pace with the rebound in population growth.
- Why are they waiting a year and a half to get going?
- There is a massive shortage of primary trades to build houses.
- Where will these houses be located?
- The Housing Accord is laying the foundations for institutional ownership.
- The accord encourages ‘institutional investment’ in housing, including from superannuation funds. Traditionally, institutionally funded housing has not been a large part of the Australian housing stock.
In addition to the new initiatives outlined in the Housing Accord, the federal budget reaffirms a raft of existing policies to boost affordable housing and overall supply. These include:
- A Help to Buy scheme, allowing up to 40,000 eligible Australians to own a home through the government taking an equity stake in the property.
- The Regional First Home Buyer Guarantee supports 10,000 low-deposit home loans for Australians living in the regions for at least 12 months.
- A $10 billion housing Australia Future Fund to boost social and community housing.
- An expansion to the exemption of home sale proceeds from pension asset testing from 12 months to 24 months to encourage downsizing; and,
- The Defence Home Ownership Assistance Scheme, with $46.2 million added to the scheme to help defence force members buy their own homes.
These existing policies are likely to have mixed effectiveness in boosting the housing supply, but ultimately, it is a step in the right direction for easing price pressures in housing long term.
Links and Resources:
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Dr. Andrew Wilson, Chief Economist My Housing Market
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