Housing supply requires policy deadlines, not headlines
In tackling the housing crisis, government needs to play its part in creating an environment in which private sector developers are willing to take on the risk to deliver the home supply so desperately needed.
It’s amazing the difference a festive season can make.
Last year, the market was grappling with interest rates rises. Now, after the extent of the cost of living crisis has been laid bare by the faster-than-expected decline in inflation, cuts appear to be on the agenda.
The Reserve Bank’s new meeting format has delivered a sensible decision first up. Keeping rates on hold, with the potential for strategic rate cuts in coming months, is a logical move at this point. Inflation battles have been won but the war isn’t over yet.
As long as the cost of housing is deemed an appropriate contribution to the Reserve Bank’s calculations – a non-discretionary commodity alongside discretionary items – then the potential for inflation to remain above the target range will persist.
In hindsight, we can call 2023 the year of the housing supply headline. But what we really need is a housing supply deadline.
Until then, prices to buy and rent homes will only increase, and housing will be the sector placing upward pressure on inflation, even as other categories fall.
Private sector the housing key
We’ve had so many announcements, schemes, rezonings, an “accord”, and more, but very little in the way of new project starts. Government’s inability to solve the housing crisis is proven.
It will be up to the private sector. The best we can hope is for Government to play its part in creating an environment in which developers are willing to take on the risk.
This is a huge challenge. Construction costs are very high and some building companies have collapsed. Others are on a knife-edge. The appetite for risk is low.
The NSW Department of Planning’s own estimates show that only a miniscule proportion of the new homes expected under the Minns Government’s housing density policy, which involves new planning controls around train stations across the state, will be built in the next five years.
Department estimates anticipate only 11,400 additional homes will be built in this period, on top of those already projected, under the reforms. It’s a drop in the ocean of what’s needed. In response, Government has emphasised the policy’s outcomes are a long-term proposition.
The deadline for everyone struggling to find a home to buy or rent is much more pressing than this.
A drastic change in approach is needed. Grandiose ministerial announcements won’t promote the environment needed to encourage new supply.
To encourage investment back into the residential sector will mean abandoning the policies and addressing the taxes that have driven investment away.
With its changes to Stage 3 tax cuts, Federal Labor has shown that promised policies can be wound back if it makes sense to do so.
The challenge for the NSW Government this year will be to seriously address those policies that have driven investors away from residential property, and at long last begin to tackle the housing crisis in earnest.
