The recent passage of the $10 billion Housing Australia Future Fund (HAFF) marks a significant step in the government's housing strategy. However, as the housing crisis deepens, doubts persist about the feasibility of building over 1.2 million homes in five years.
Industry leaders question whether this ambitious goal is attainable or merely a political pipe dream.
According to experts Simon Pressley (pictured above centre) and Bianca Patterson (pictured above left), the current market challenges and poor policy decisions of the past has left the 1.2 million target unattainable.
“It’s unrealistic and will put further strain on the building industry, with many companies already on the brink of collapse,” said Patterson, director and finance specialist at Perth brokerage Calculated Lending.
“The 1.2 million is just a wish. Governments will not be building or funding those properties. However, many new properties get added to Australia’s housing pool will be determined by the actions of everyday Aussies,” said Pressley, head of research at buyers agency Propertyology.
Amid a cost-of-living crisis, rising rents, and increased migration, the government has developed a 10-year National Housing and Homelessness Plan in collaboration with state and territory governments to improve access to safe and affordable housing.
The plan comprises the HAFF, set to create 30,000 new social and affordable homes in its initial five years, and the Housing Accord, with the promise of delivering one million well-located homes between 2023 and 2028.
However, the latter was revised in August to 1.2 million homes between 2024 and 2029 as conditions worsened.
To meet this target, an average of 240,000 net new homes will need to be constructed every year in the five-year period.
However, a forecast from the construction industry’s peak industry body Master Builders Australia showed that only 209,000 new houses are to be built per year between 2022/23 and 2027/28.
Master Builders Australia CEO Denita Wawn (pictured above right) said the building and construction industry was “the canary in the economic coal mine”, with only 170,100 homes to be built in 2023/24 – well below what was needed to hit the target.
This prediction also depends on favourable macroeconomic conditions, including accelerated construction speeds, supply chain improvements by 2026, and the cessation of new workplace reforms proposed by the government.
“Australia’s economy is navigating a challenging period,” Wawn said. “There is no denying millions of Australians and business owners are feeling the mounting pressure of rising costs of living. From social and community housing, rental properties to owner-occupiers, the common constraint is supply.”
“In good news, the projected volume of new starts over the five-year period up to 2027-28 exceeds the one million home target under the Housing Accord but only just. There is still a lot of work that needs to be done to achieve the revised target of 1.2 million homes as announced by National Cabinet last month.”
Another reason to doubt the government’s plan is to look at the track record of the government and construction industry.
In the decade between 2006-2016, only 1.47 new million homes were constructed, according to ABS data.
Patterson said the expectation to build a similar number in half the time would “be a disaster”, considering the current conditions.
“We simply do not have the labour force we need to build these houses in the timeframe,” Patterson said. “Immigration of workers is the obvious solution; however, we don’t have adequate housing supply for our current population, so further immigration – required across many sectors – will put housing at a critically low supply.”
Patterson also pointed to the government’s Homebuilder grants policy, which had left many unable to get confirmation on when their builds would be completed even three years on from the pandemic.
“These grants were an optimistic, poorly thought through incentive that many attribute for the collapse of reputable and experienced building companies over the last year,” Patterson said.
“Ambitious build targets now, which will likely require some form of incentive from the government risk further damage to the industry and businesses. y concern is that the additional pressure on the building industry with flow through to brokers and lenders, much as they did through COVID.”
Patterson said she hoped that this time the government would consult the industry to consider the challenges their targets and incentives would present for customers, mortgage brokers and lenders.
“A considered and well-rounded solution needs to be consulted on and devised, rather than just rushing to push more money out into the economy over a very short period to appear like they are making an effort to solve a problem they significantly contributed to.”
While others look to the building industry as the harbinger of change, Pressley said the biggest problems for housing in Australia had “very little to do with construction”.
“Nothing gets built unless someone within the private sector navigates their way through the various layers of policies, taxes and government inefficiencies,” Pressley said.
“There are multiple layers to supply. Politicians and policy writers constantly fail to realise that people do not spend their lives living in the same home. As their income, age, and family structure change, they move multiple times. And the housing needs of an overwhelming majority are met from a specific established property.”
Pressley said Australia’s housing system was “locked-up” by a series of “poor policy settings”.
“Our two biggest problems are mobility restraints in the resale market and dangerously unsupportive attitudes towards the rental supplier,” he said. “A society that regards ‘investor’ as a dirty word is a society in desperate need of addressing its core values.”
If Australia’s population was frozen today, Pressley points out that the rental pool would need to instantly increase by more than 300,000 properties to reach a balanced rental market.
“And that figure increases by 70,000 per year. Everyday Aussie investors are the only segment of society who is capable of increasing the size of the rental pool in a meaningful way.
“They’ve already funded more than 3 million out of the 3.3 million rental homes in this country. A little-known fact is over the last 30-years, federal and state governments have collectively reduced their contribution from 400,000 properties in 1990 to 300,000 in 2020.”
“Only a fool would say that governments have ever made a positive contribution to housing supply for decades.”
However, it is not all doom and gloom, according to Wawn. “There are good reasons for believing we are overcoming the worst of the challenges as long as government policies do not hamstring these efforts.”
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