Million-home housing policy 'vague' and already 'in doubt'
Widely derided as 'vague' and 'lacking detail', the Federal Government's Housing Accord, announced in its first budget, is already facing an uphill battle to meet its ambitious target of delivering a million new homes in five years.
Light on detail, facing enormous hurdles and already under threat.
That’s the broad consensus on the Federal Government’s aspiration - not promise - to deliver a million “well located homes” over five years from 2024.
The Accord claims to lay the groundwork to improving affordability by addressing Australia’s housing supply challenges and enabling the delivery of more social and affordable housing.
But many have questioned its likelihood of success and even its basic premise.
The Housing Industry Association on Monday (21 November) said its forecasts point to construction starting on 970,720 new homes in five years, a shortfall of almost 30,000 homes that could blow out further.
“The RBA and the government have gone head-to-head with ambitious, and conflicting goals,” the peak housing group’s National Outlook Spring 2022 report stated.
“If the RBA continues to increase the cash rate in 2023, this forecast will be downgraded, and the challenge of building one million homes will become increasingly difficult,” the report said.
The national Housing Accord was put together between the states, local government and industry.
Treasurer Jim Chalmers said the Federal Government, state governments, the construction industry and private investors would join forces to build the million new homes.
HIA senior economist and report co-author Tom Devitt said the goals “seem to be at cross purposes”.
“Even though they do appear to be conflicting on that front, there are other tools at the government’s disposal,” Mr Devitt said.
Mr Devitt said one option would be to provide grants to local governments that expedite land releases to effectively reduce prices and encourage house and land purchases.
Damian Collins, Managing Director, Momentum Wealth, said the Accord itself was “a bit vague”.
“There’s no real detail and no indication of what sort of housing mix there will be, in terms of suburban infill or through more urban expansion,” Mr Collins told API Magazine.
To meet the million-home target by the government’s end of 2028 deadline, the building industry would need to significantly lift its pace.
The HIA report indicated Australia has built more than one million homes in a five-year period on the past but noted the achievement in the half-decade ending in December 2018 was heavily buoyed by an unprecedented apartment boom.
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“The necessary 200,000 homes a year has been achieved in the past but that figure is more 180,000 per year at the moment,” Mr Collins said.
“The building industry is constrained by labour shortages and costs.
“Material shortages are starting to come good but we very much need an increase in well targeted skilled migration if they’re going to meet that target.
“We definitely need a million homes to ease the rental and housing supply crises but it’s going to be a real challenge.”
HIA Senior Economist, Nicholas Ward said the persistent, severe shortage of workers had driven the price of skilled tradespeople up sharply, by 10.4 per cent over the year to the September quarter 2022. The trades in most acute shortage are bricklaying, and carpentry.
“Since the September Quarter 2021, the index has recorded trades shortages that are worse than all prior readings of the index.”
“The elevated demand for home building has exacerbated the pre-existing shortage of skilled trades and the rise in the cash rate will slow building activity, but this is not expected to adversely affect demand for building trades on the ground until 2024,” Mr Ward said.
The HIA anticipates multi-unit construction will increase by more than 10,000 homes a year from 73,920 starts in 2022, to more than 85,500 in 2024.
Labour shortages were particularly acute in two states, according to Mr Collins.
“Mining and infrastructure development in Queensland and Western Australia is taking a lot of the potential housing construction industry workforce,” he said.
Andrew Clugston, Partner at Pitcher Partners Melbourne, said planning processes would need to be improved if the ambitious target was to be met.
“While not within the remit of the Federal Government, any discussion regarding housing affordability would be incomplete without addressing the lack of supply of developable land resulting from the current planning process in most states.
“It would appear an aspect of state and territory government involvement in the Accord will be to expedite zoning, planning and land release as well as working with local governments to deliver planning reforms.
“This will be a critical component to the Accord’s success,” he said.
The government's intention for this new affordable housing to be “well-located” hinted at a priority on infill development, according to Anderson Chow, Analyst, Jarden Group.
“That phrase probably indicates a good portion could be multi-residential units,” he said.
The Government’s plan is welcomed but in its current shape does not amount to fundamental reform, according to Property Council of Australia chief executive Ken Morrison.
The substantive commitments within the Accord are welcome but limited, namely a review of build-to-rent housing and an extra 20,000 affordable housing dwellings.
“The housing supply actions are general and unspecific but its potential importance emerges once we put this together with the new housing policy architecture the Government has flagged,” Mr Clugston said.
That includes a new National Housing Supply and Affordability Council to be in place from 1 January, initially on an interim basis and later backed by legislation. The Government’s current National Housing Finance and Investment Corporation (NHFIC) will become Housing Australia, with broader powers and a $10 billion Housing Australia Future Fund to administer (among other schemes).