The Federal Labor government made a bold pledge to build one million new homes in five years as part of their housing accord last October.
As Treasurer Jim Chalmers unveiled the ambitious plan, many applauded the effort to address Australia's rental crisis and housing shortage.
However, with the housing industry warning that high-interest rates and rising costs could derail this ambitious plan, is it time for a reality check?
In fact, most industry commentators felt the plan lacked detail and was unlikely to be achieved.
Recently the Housing Industry Association (HIA) recently submitted a sobering warning to Treasury’s employment white paper, stating that just 185,000 homes a year will be built in 2024 and 2025, falling short of the 200,000 homes per year target.
The HIA attributes the slowing of the building boom primarily to higher interest rates, which have led detached home starts to plummet by 43 per cent from the June 2021 peak.
Labor's housing accord aims to encourage institutional investors and superannuation funds to boost the housing supply by freeing up land and expediting zoning, planning, and land release for social and affordable housing.
These are “fancy words”, but most industry commentators felt the plan lacked detail and was unlikely to be achieved.
And according to the HIA, even if the one million homes pledge is met, it won't be enough to address the long-term undersupply of housing in Australia.
The Real Estate Institute of Australia echoes these concerns, stating that Australia's housing needs far exceed existing commitments.
We know that Australia is currently suffering from a rental crisis with vacancy rates at historic lows in all our capital cities.
With the National Housing Finance and Investment Corporation reporting a shortfall of 106,300 dwellings between 2023 and 2027, it's clear that Australia's housing crisis is not going away anytime soon.
One significant obstacle to new housing supply is poor planning practices and land-use rules that limit medium-density housing.
The Committee for the Economic Development of Australia (CEDA) points out that these restrictions not only contribute to higher house prices but also exacerbate congestion by forcing new developments further away from city centres where infrastructure is less developed.
To overcome these challenges, the government must consider several avenues for improvement:
- Review planning practices: Local and state governments should work together to streamline planning processes, allowing for faster approval of new developments and eliminating unnecessary red tape.
- Ease land-use restrictions: By allowing for more medium-density housing and mixed-use developments in appropriate areas, the government can increase the housing supply while promoting more sustainable and diverse communities.
- Innovative financing options: Encouraging public-private partnerships, offering low-interest loans for affordable housing projects, or providing tax incentives for developers who include affordable housing in their projects could help stimulate the construction of new homes.
- Support for first-home buyers: Providing financial assistance, such as grants or low-interest loans, to first-home buyers could help more Australians enter the housing market and alleviate some of the demand for rental properties.
- Investment in infrastructure: By investing in infrastructure projects, particularly in outer suburban and regional areas, the government can create more attractive options for new developments and ease the pressure on the housing supply in major cities.
As tenants, property investors and homebuyers alike grapple with the consequences of Australia's housing shortage, it's more important than ever for policymakers to come up with effective solutions.
Only by addressing the root causes of the crisis can we hope to build a sustainable housing market that caters to the needs of all Australians.