The National Housing Finance and Investment Corporation (NHFIC’s) State of the Nation Report shows national housing supply is being held back from a range of factors, including a lack of serviced land and ongoing opposition to development.

It is yet another in a long stream of calls to address this burgeoning crisis.  This is not the time for the Senate to be blocking support for additional housing supply.

The NHFIC Report confirms that new housing supply will fall well short of demand for housing and will fall well short of the Commonwealth’s commitments.  The Report is yet another call to action for three levels of Government to work to address failing housing supply.

The NHFIC Report identifies the following impediments to housing supply:

  • Interest rates
  • Availability of serviced land
  • Ongoing community opposition to development
  • Long lead times for delivering new supply.

Industry commentators have variously called for more social housing, more affordable housing, and the need to overcome community opposition to new housing supply. This is reflected by the NHFIC Reports own commentary. All of these things are correct and well-meant.  But the biggest handbrake on housing supply is the state-based planning systems.  You can’t build new homes without approvals and the planners are turning the investors away by making investments unfeasible.

Everyone speaks of a housing supply crisis, but very few have joined the dots … until now!

The complexity and time required to comply with the obligations of the planning systems across Australia, with the worst case being that of NSW, is resulting in many projects that might have been feasible 18 months ago, now being marginal or simply unfeasible.  Interest rates have gone up, resulting in exactly what they were designed to achieve and reducing demand.  In contrast, labour shortages and construction materials have dramatically increased in price.

Jennifer Hewitt of the AFR has written an excellent article which details the increasing difficulties facing those who want to rent or buy a home in Australia.  To see the article in full, Click HERE

The article points out:

“Brawling in the Senate over the size of the Albanese government’s proposed funding package for social and affordable housing actually deflects attention from the much bigger problem of availability and affordability more generally.”

As Hewitt points out above, the private sector is key to resolving housing shortages as it is they that deliver the lion’s share of the new housing that our growing Australia desperately needs (over 95% of all new homes are market priced private sector delivered homes).

Jennifer Hewitt says that policy failure across all levels of government has created a housing supply crisis.

“Yet, this doesn’t attract much hard political discussion or detailed policy negotiations beyond good intentions and professed ambitions to do better in mostly state-based areas such as zoning or infrastructure, or medium-density dwellings.”

Despite the housing supply crisis and record rental increases, Building Approvals have dropped nationally to the lowest levels since 2012 following interest rate rises, reflecting a drop off in new applications according to Hewitt.  While there is still strong demand for new homes with immigration rates also no reaching record levels, the banks are limiting their exposure to potential defaults and this is cooling demand.

But it is the rising costs of construction; the cost of complying with a plethora of regulation; the delays in securing planning approvals; the failure of planners to recognise the provision of housing is a good in its own right and continually seek to draw more from the property development well; all of this is causing investors to simply take their money elsewhere.

Increasing housing supply by increasing urban density and height is not only an environmentally friendly solution, it’s also the cheapest for Governments who are struggling to meet infrastructure demands post COVID.

Of the issues raised by NHFIC, apart from interest rates, the other three factors are the responsibility of the State Government.  The new Minister for Planning in NSW, Hon Paul Scully MP, has a massive challenge ahead.  The delivery of infrastructure required to service land is the other factor that keeps all Treasurers awake at night.

Planning reform, co-ordinated infrastructure planning and delivery, State Government led planning assessments for big high-yield projects as well as incentives for developers to provide a wide range of housing options will all be critical to address the housing supply crisis in the short to medium term.

The rejection of NIMBY candidates at the recent State election should give the new Minns Labor Government some comfort if it presses for more development in well located areas with new or unutilised infrastructure capacity, particularly those areas around new metro lines.

It is increasingly apparent that those suffering from the housing supply and rental crisis, predominantly younger generations, are looking to new Governments to address supply.

The NHFIC report notes emerging housing and rental stress, with around 377,600 households are in housing need, comprising 331,000 households in rental stress and 46,500 households experiencing homelessness. (see p.8 of the NHFIC Report)

The report identifies shortages in apartment construction as a significant threat, with one person households identified as the fastest growing household type in the five years to 2032.

With migration and international student numbers predicted to come in at record levels this year, urban consolidation focussing on apartments, are the only realistic option for additional supply, along with all the greenfield areas currently planned for growth.

Current forecasts for new homes show that right across Australia, there is a massive shortage looming.  This NHFIC State of the Nation’s Housing 2022-23 Report shows the need to boost the funding for social housing, for affordable housing, but it also highlights that unless a concerted effort is applied to the delivery of private housing, we are heading for a worsening crisis.

To see a full copy of the NHFIC State of the Nation’s Housing 2022-23 Report, Click here: