Building industry experts are urging the government to cut red tape and support private industry as it prepares to address Australia’s growing housing crisis.
Australians are feeling the strain of soaring home prices, record low rental vacancies, and rising homelessness, but the federal government has set an ambitious housing plan to ease the pressure, promising to build 1.2 million homes over five years.
However, the plan has already started to faulter at its first hurdle with bureaucratic processes slowing down approvals of new developments, according to George Karam, director of Parramatta brokerage BF Money.
“Expensive land, a lengthy planning system, a complicated building code, super expensive construction inputs and an expensive taxation system cannot deliver affordable housing,” said Karam (pictured above left), who is in the running for the La Trobe Financial Commercial Broker of the Year award at the 2023 Australian Mortgage Awards.
“Government can make as many announcements as they like, but political spin can’t be exchanged for rent relief or a down payment.”
No region better encapsulates Australia’s development problem than Western Sydney.
Stretching from the iconic Blue Mountains to the Parramatta CBD, the region is set to be a major recipient of a population increase, with a projected 50,000 people expected each year through to 2041.
Housing continues to be a major issue in Sydney with vacancy rates remaining low and affordability difficult particularly in a higher interest rate environment.
The western precincts are expected to provide the bulk of housing stock over the medium term, taking advantage of existing infrastructure projects, such as the Western Sydney Airport and the expansion of the Metro train line.
However, the Residential Development Report by Ray White Commercial Western Sydney showed there are significantly fewer dwellings being built, and approvals for new construction are also decreasing.
Yet the demand is there. Across the Western Sydney precinct there are currently 483 projects in the development pipeline which have the potential to add 39,663 dwelling units over the next three to five years.
Ray White CWS director Peter Vines (pictured above right) said there 5,506 units are currently under construction, likely to be completed within 18 months, and a further 19,171 in the planning stage.
With the southwest expecting to record the largest ongoing rate of growth with close to 90,000 people, followed by Liverpool of over 80,000 people Vines said there was a strong outlook of investors and developers shifting their focus to this region.
“We’re predicting the southwest to be one of the largest development opportunities across the state,” Vines said.
However, Vines said there were multiple challenges in the current market, such as the high cost of construction and obstacles in getting building approvals, that delay the process.
“Any developer you speak to these days says it’s an 18-month to two-year wait and trying to get a construction certificate is another huge challenge,” Vines said.
Vines said the approval process for developments was slow due to a backlog of applications, insufficient personnel, and intricate intricacies in the process.
“Some planners work part-time, causing delays in responses to applicants' inquiries,” Vines said. “Overall, there are multiple levels of inefficiencies in the approval process that contribute to delays in construction projects.”
Both Karam and Vines agreed that the housing crisis had been building for a while with the industry pushing for improvements to the planning system for decades.
“It’s been a constant gripe since I’ve been in commercial real estate in Western Sydney,” Vines said. “There’s good ideas but getting the rubber stamp to get projects off the ground is time consuming.”
A Western Sydney local, Karam remembers the promises of dozens of towers amid a bustling metropolis with Parramatta positioned to be the west’s answer to Sydney.
“There’s a few towers that have been built since then, but I feel like we’ve missed a generation because of the slow planning rules and regulations,” he said.
Karam said this occurred because there was s no cohesion between the government’s aspirations “no matter how noble” and the reality of the obstacles.
He believes the long and delayed planning process adds to the cost of development, as does the requirement for expensive underground car parking, which in Karam’s view, are often not needed.
These layers of cost, time, delay, and risk make it difficult to build affordable housing and over time create a housing crisis.
“The government doesn't have clear plans. They aspire to develop affordable housing, but their actions are contradictory.”
Karam said the government had to make a choice: Either subsidise the rental at the end or subsidise the cost of delivery but regardless, to make affordable housing, “you need to make it cheaper”.
“To get a lower cost output, we need lower input costs,” Karam said. “Affordable housing is not complicated, nor is it difficult. But by trying to please everyone, the system benefits no one.”
Vines believes that the housing crisis is “complex” and “a sum of all parts” when it comes to who needs to play a role in helping with the issue.
He said that responsibility couldn’t just sit with the government, and that developers could also play a role in helping address the situation in Western Sydney and across the country.
“You can’t only blame the system as there is a lack of skilled labour in this country. There’s a lack of planners and a lack of workers in so many industries that it’s difficult to know where to begin,” Vines said.
“The government has set up the Future Fund and is considering incentives like bonus density for projects that meet specific criteria. Stimulating off-the-plan sales through investors may also be part of the solution.”
However, Karam said the private industry was “screaming” because they were “ready to go”.
“I don’t think there has or will be a failure of the private sector. Banks and non-banks are lending, demand is there, and in many cases, the land, capital, human resources, and will of the private industry are waiting for approval,” Karam said.
“The problems and responsibility are with the public sector bureaucracy. There's too much caution and too many rules and regulations.”
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
