The supply of new housing in Australia continues to fall short of new demand, the latest report indicates.

And the nation is expected to fall well short of its national target of delivering 1.2 million new homes over the five years from 1 July 2024.

The National Housing Supply and Affordability Council has released the 2025 edition of its State of the Housing System report.

The report outlines the current situation and forward projections regarding housing supply and affordability throughout Australia.

It found that the nation’s housing crisis continued to deepen in 2024.

This occurred as the national housing shortage continued to grow and affordability continued to deteriorate.

In terms of supply, the report noted that a decade low 177,000 new dwellings were completed around the nation in calendar 2024.

This was 46,000 homes short of the 223,000 dwellings which the Commission says were needed in order to satisfy underlying demand during the year.

It further adds to what was already a significant existing national housing shortfall.

Turning to affordability, the report noted that average household incomes continued to fail to keep pace with rising house prices and rents – albeit with the rate of affordability deterioration continuing to moderate when compared with that experienced in 2023.

As a result, the average household across Australia now needs to fork out as much as half (50 percent) of their income in order to meet repayments on an average mortgage. Meanwhile, renters need to pay an average of 33 percent of their rental income in order to afford an average rental property.

Meanwhile, the ratio of dwelling prices to income rose to 8.0 whilst the average time which is required to save for a home deposit increased to 10.6 years.

Over the longer term, the Commission suggests that 938,000 new dwellings will be completed over the five years from 1 July 2024 to 30 June 2029.

This is 262,000 short of the national housing target of delivering 1.2 million new homes over this period which is established under the National Housing Accord.

Far from bridging the housing gap, meanwhile, the national housing shortage is expected to continue to deteriorate further.

After an expected 113,000 demolitions are considered, the net number of new homes which are expected to be delivered during the Accord period is expected to come in at 825,000.

This is 79,000 fewer compared with the 904,000 dwellings which are expected to be needed in order to satisfy new underlying demand.

Supply is expected to fall short of demand in every year, although the magnitude of that shortfall is expected to gradually ease.

According to the report, almost two thirds of new supply over the five-year period is expected come from single detached housing.

This will occur as the supply of medium and higher density dwellings is forecast to remain subdued as poor project feasibility weighs on supply and the low (albeit increasing) levels of approvals which are currently in the system interact with long lead times for higher density developments.

Slightly more encouragingly, however, affordability is expected to broadly stabilise over coming years as the rate of growth is expected to slow to less than four percent by 2027 and the ratio of dwelling prices to income is expected to ease slightly from 8.0 to a still high 7.7 by July 2029.

However, rental vacancy rates are expected to remain below 2.5 percent over the period to June 30 2029.

This means that housing options for tenants will remain extremely limited.

In the only promising note regarding the report, the Commission expects the supply of social and affordable housing to accelerate as Commonwealth and state governments beef up commitments and investment in this area.

  Australia’s housing supply falls short of demand

Reform needed to address structural barriers

In its report, the Commission found that structural constraints are the primary barriers to greater supply.

These include an inadequate pipeline of skilled workers; scarce, fragmented and costly land suitable for development; low rates of productivity and innovation in the construction sector; restrictive and complex land use and planning approval systems in some jurisdictions; market frictions and financial incentives that limit the optimal use of the existing housing stock; and a fragmented housing policy and regulatory ecosystem that adds to costs, timeframes and risks.

It called for fourteen actions across the five areas, including:

• Unlocking greater investment in social and affordable housing. This includes establishing goals to restore the proportion of social/affordable housing to 6 percent and 10 percent of housing stock over the medium and long term respectively; implementation of inclusionary zoning targets; more financial support for First Nations housing organisations; and review of the National Regulatory System for Community Housing.
• Improving construction sector capacity and productivity by addressing barriers to modern methods of construction; boosting construction skills training and skilled migration; and industry investment in training, apprenticeships and workforce diversity.
• Improving planning systems and ensuring that sufficient land is available for development. This can be done through consistent application of best practice planning and zoning principles; revision of state/territory/local planning regulations to promote greater density in well-located areas; and boosting the capacity of institutions to assemble and remediate land and provide enabling infrastructure.
• Supporting better outcomes for renters by supporting institutional investment in rental markets (such as through build to rent arrangements) and implementing the Better Deal for Renters agreement to support tenant rights and security of tenure.
• Ensuring that the tax system supports housing supply and affordability by reviewing Commonwealth/state taxation arrangements to support fair access to home ownership (such as by reviewing negative gearing and the capital gains tax discount arrangements) and transitions from stamp duty to a broad-based land tax.

National Housing Supply and Affordability Council chairperson Susan Lloyd-Hurwitz says that change is necessary.

“Australia needs a better housing system – one that can provide Australians with the homes they need,” Lloyd-Hurwitz said.

“This means a housing system that can provide home ownership and rental options to all households, meet the diverse housing needs of the community, and ensure the safety and wellbeing of all Australians.”

Calls for Action

Building industry lobby groups and homelessness advocacy groups both agree that the report highlights the need for action.

However, different advocacy groups have focused on separate priorities.

Col Dutton, National President of the Urban Development Institute of Australia, has called for additional funding to be made available to support enabling infrastructure (roads, sewerage etc.) along with incentives for states and territories to help unlock more housing opportunities – such as through faster approval process.

“This housing crisis will only break when we get more creative in our suite of solutions, including driving upfront Housing Accord Bonus incentives, to bolster dwelling supply in the National Housing Accord period…” Dutton said.

“… These steps are essential to meet demand and ensure sustainable, affordable housing supply for Australians into the future.”

Meanwhile, Australian Council of Social Services CEO Cassandra Goldie AO called for more income support, greater investment in social housing, delivery of ‘long overdue’ tax reform and stronger rights for renters.

“This report paints a devastating picture of our housing system in crisis…” Goldie said.

“… The government must seize the opportunity to ensure everyone in Australia has an adequate income and access to secure and affordable housing.”

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