Cracking the mystery around the stalled $10 billion housing fund

Almost one month ago to the day, the Australian Senate pressed pause on the Government’s Housing Australia Future Fund (HAFF), and many felt the national housing agenda spluttered to a halt - right in the middle of a housing crisis.

The truth is less dramatic, more problematic and very strange.

The Commonwealth plans to establish a $10 billion HAFF that would build 30,000 new social and affordable housing properties in the first first years. Once established and the fund generates returns, investment returns will be used to fund social and affordable housing projects.

But there are issues, so let’s start with the strange.

Against a backdrop of higher interest rates, we are again seeing accelerating house prices as new housing and land supply falls, with annual shortfalls estimated at 21,260 at-market and 45,000 affordable or social homes each year.

This comes as the national economy tries to rebuild capacity and productivity post-Covid by reinvigorating immigration and trying to fill the thousands of jobs employers desperately need. Cost of living challenges are multiplying in an inflationary environment, and it has never been harder to build a new home or rent an existing one.

It’s clear that more development-ready land and more houses are needed to match anticipated growth. It’s also clear that it cannot happen without governments harnessing the capacity of the entire development sector - private industry and community housing providers alike.

Thousands of hours have been spent since the May 2022 Federal Election debating the best way to achieve these aims.

Unfortunately, like Lilliput and Blefuscu – the fictional island nations fighting over which end of an egg to crack in Gulliver’s Travels – Australia’s politicians have ground everything to a halt over how to do it.

No one can agree, and nothing appears to be better than something imperfect.

If the issue was water or food instead of housing, there wouldn’t even be a debate – leaders from all spheres would galvanise to solve the issue post-haste.

Housing, like water and food, is critical for survival, but the reaction to this housing crisis could not be more different.

Despite concessions on the HAFF, including a further $2 billion funding for social housing, The Greens have stalled the progress of the bill until the Federal Government speaks with their state counterparts about rental initiatives, including a nationwide rental cap.

This won’t happen until 16 October this year. Neither the Federal Government nor the Opposition support rental caps, as they understand they make delivering properties into the rental market, whether existing or new, unviable, and more so at times when costs outstrip income such as now.

It might be considered a populist, politically attractive short-term fix for some, but international experience shows the longer-term impacts would be devastating to housing supply.

Political posturing over HAFF

Instead of seeing the additional $2 billion of funding as a win for all parties, Australia is currently in a stalemate over a proposal that neither major Federal party has or should support.

The Federal Government will continue talks with The Greens and hopefully sanity will prevail, but expect an interesting few months of posturing in the interim.

Sadly, every month spent prevaricating on getting the job done delays 500 houses from commencing under the HAFF.

Fortunately, the fund is not the entirety of the Federal Government housing agenda, nor does it purport to address the whole question of housing affordability.

The HAFF is only a starting point, focused at the most acute end of the housing continuum.

Even if it was implemented today, it does not create more development ready land, it doesn’t fix planning and approval delays, and it doesn’t help people purchase their own home. It creates the opportunity for more social and affordable housing, but it does not deliver more housing overall.

The fact remains that affordability issues in urban and regional areas alike are the result of a chronic lack of development-ready land. This has several causes that vary across different jurisdictions, and can include a lack of enabling infrastructure, insufficient zoned land, poorly integrated planning and approvals.

These issues simply must be solved, irrespective of whether the HAFF becomes a reality. Even small interventions like setting clear housing targets, and streamlining approvals for enabling infrastructure or construction, result in real dollar upticks in productivity and housing supply, ultimately making new homes less expensive for buyers.

While we hope the HAFF gets traction, the Federal Government has other ways to achieve the same results. The HAFF targets can still be incentivised under the National Housing and Homelessness Agreement (NHHA) or the Housing Accord, to ensure states and territories drive infrastructure and housing supply.

Existing funding lines can be used, such as the $1.6 billion NHHA, or even the untied $2.9 billion Financial Assistance to Local Government Grant for local priorities (FALGG).

At the end of the day, we need to use every tool at our disposal to immediately boost development-ready land and project viability to minimise the impacts on housing affordability.

To this end, UDIA National is developing the Development Ready Pipeline metric, a tool that will enable government to identify, manage and resolve barriers to housing and land supply. The HAFF is important, but it is far from the only game in town. We will continue to drive forward practical solutions and Australia is watching.

Stark housing reality

The reality is stark - dwelling commencements are down 21 per cent on a 12-month rolling average and rental listings are down 32 per cent on the long run average, while rental dwelling construction is down 19 per cent.

The chronic lack of supply has seen housing land prices jump 24 per cent since last year and national rental pricing has grown 45 per cent. Rents have gone up 40 per cent since March 2020.

The bare facts have not changed - historically thin and declining housing supply pipelines, with pandemic-driven material and labour shortages, are driving up prices and ordinary Australians are forced to rent for longer, at higher rates, inevitably pushing others into social and affordable housing that suffers the same housing scarcity.

The world does not stop turning and the chronic lack of housing supply will continue to relentlessly grind away Australian housing aspirations while we figure out how to crack the HAFF egg.