Housing crisis requires private sector developers to double output - but how?

Across the past two decades, Australia has significantly underdelivered new dwelling supply across the nation, underpinning the ongoing erosion of housing affordability.

It has driven down homeownership rates and increased household indebtedness.

In short, it has led to the housing crisis the industry and the people of Australia are now experiencing.

To put our industry’s challenges in perspective, the Federal Government has laid out an ambitious target to build 1.2 million homes over five years and like many good ideas it is easier said than done.

This will require solutions to some fundamental problems to enable us to boost housing supply.

There is not enough development-ready land, not enough enabling infrastructure, productivity has dropped meaning projects take longer to complete, and environmental approvals, planning, zoning and approval processes, pre and post construction, are unforgivingly slow and complex.

To add to these issues our industry is facing a chronic shortage of skilled workers needed to build the homes and communities for the people of Australia.

Eighty-five per cent of all housing is delivered by small to medium sized enterprises and if they are to double their capacity, we need initiatives to help them get there.

- Col Dutton, UDIA

This week it was announced that 90,000 extra construction workers would need to be found in the next three months for the government to meet its target of 1.2 million new homes by 2029.

The development industry, like many others, is experiencing major cost increases and delays from skilled worker shortages - capacity has reduced right when we need to be building more homes than ever.  

We clearly need a continued focus on skilled migration, with a greater focus on migrants that can contribute the critically important skills needed by our industry, particularly the construction workers and tradespeople.

All these challenges need to be addressed before we can turn this crisis around. Our industry’s ability to adapt, to pivot, and innovate is something that has helped us stay focused and we need to get creative and we need to get practical.

National Congress seeks housing crisis solutions

It is no wonder everyone is looking for smart ideas and to learn from each other and our collective experience both here and globally, which is why we created the UDIA National Congress.

Each year at this event, UDIA members, industry leaders, and international and local thought leaders gather to share their expertise and experience on the fundamental issues impacting our members and our industry and the latest Congress in Melbourne did exactly that.

What is needed?

Unless we bolster development ready land, provide enabling infrastructure, broaden density bonuses and halve planning and approval times, the Government’s initiatives risk stalling.

Over the next two years, housing completions will fall well short of the 240,000 houses a year we need to make the 1.2 million target, which is 38 per cent more than in 2022-2023 and almost 20 per cent more than our highest ever five-year average for construction.

We will then need to almost double completions to around 300,000 each year thereafter to make up the difference.

These are issues across federal, state and territory governments and existing market headwinds make solving these problems even more difficult. Industry is struggling to return to pre-Covid productivity much less overcome historic land shortages. It will take new apartment developments two years to ramp up and the lack of infrastructure investment is currently hobbling greenfield supply.

Private developers to provide vast bulk of housing

Through our discussions, government is very aware of the enormity of the task and has been taking advice to step past many of the traps and pitfalls. The ministers for housing, Treasurer and Treasury have made crucial changes to the Housing Australia Future Fund (HAFF) in order to build flexibility and properly harness private housing providers.

Already, government is hearing concerns from some quarters that the HAFF and Accord target is at risk of falling short due to early predictions from some states that they will not be able to make the five-year Accord target.

The key issue for government is that the HAFF and Accord broadly account for 40,000 houses in the 1.2 million target.

The lion’s share (97 per cent) of the target relies on private development. Critically, 85 per cent of all housing is delivered by small to medium sized enterprises (SMEs), and if they are to double their capacity, we need initiatives to help them get there.

The Federal Government has put in place plans with states and territories to accelerate planning approvals, streamline regulation and encourage greater development uplift for affordable and social housing under the HAFF. We are now pressing government to look for ways to broaden these improvements across the housing continuum in line with the Accord target.

All of these challenges will be the key focus of our continuing advocacy on behalf of our members, through our submissions, letters and meetings at all levels with federal, state and local governments, to ensure Australia stays on track with economic growth and provides housing opportunities for all Australians.