A crisis should bring out the best of us as a nation. Leadership, innovation, bravery and determination to overcome the crisis
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The new reality of the housing supply and affordability crisis has grown to such an extent that it occupied an entire day’s focus at last week’s National Cabinet meeting. It has taken some time, but at least now we see a commonly agreed roadmap to start to address this problem.
Every State Premier joined the Prime Minister to say the planning systems across Australia must be reformed. In total, $3.5 billion was put on the table by the Commonwealth to make sure it happens.
The National Cabinet has unanimously agreed to a revised and up-rated National Housing Accord.
It’s a solid step in the right direction after decades of neglect by the Commonwealth when it came to housing. The National Cabinet’s decision to lift the 5-year target for the supply of new homes from 1 million to 1.2 million has been backed by pile of cash – a $3 billion funding pool for those states and territories which exceed their targets. This is a substantial carrot for the State’s to drive politically difficult planning reforms through.
It appears from the National Cabinet statement however, that there is no financial outlay from the Commonwealth to assist in this process until 2029, after the homes have been delivered. The fact is the states will need some support to assist in dealing with some troubled political waters in the implementation of the planning reforms. A progressive payment regime is an improvement that must be established.
If this Commonwealth funding carrot is to succeed, it needs to be dangled before the States from day one, not at the end of the 5 years. There will be at least two Federal elections between now and 2029. Progressive payments of the New Home Bonus will provide a greater incentive for States to reform their planning systems and start delivering the new housing required.
What’s more, incremental annual payments will ensure the Federal Government keeps their finger on the pulse in terms of the states’ performances and provide an opportunity to amend or refine the way in which the infrastructure funding program works to the benefit of housing delivery across the nation.
The mood of the electorate has changed. The social licence for planning reform and a focus on housing supply is now there. The media have seen the impact of the constraints of the planning system and the resultant shortages in supply. More and more often, media commentators are highlighting the fact that any increase in fees, charges or taxes (no matter how worthy the cause) have an immediate and direct impact on the cost and the supply of new homes.
What makes today’s housing supply crisis worse is that many of its impacts are causing intergenerational shocks and dysfunction that will be felt for decades to come. But the economists have come to the table now and planning reform is universally considered essential.
The Commonwealth, State and Territory leaders all agree – planning reform and housing supply is critical.
In a bid to have the planning system be all things to all people, planning across Australia has been intoxicated by the opportunities created by low interest rates, where there was little economic consequence to increasing the costs associated with the delivery of new homes. Things have changed. A series of rapid rises in interest rates has seen the growth of the mortgage cliff phenomenon for those whose fixed rates are reaching their end. Housing costs, as a multiple of average household incomes, have never been so high – for renters or mortgage holders.
Most millennials can’t afford to buy a home and reap the benefits of the longer-term security it provides; an entire generation cannot afford to leave home or find a rental property without financial subsidy from rich (or often not so rich) parents; women fleeing from domestic violence; all those struggling at the lower end of the social economic spectrum, are struggling with accommodation options because rental vacancies are close to zero across the nation.
The housing shortage is putting strain on many families the distance between work and home, for many, ever increasing for affordable accommodation.
On top of the $3 billion planning reform incentive pool, the Commonwealth has put an extra $500 million on the table called the Housing Support Program, which aims at “kick starting” supply in well located areas close to public transport, with high amenity and jobs. This is the language adopted by the Minns and Andrews Governments and is an important step towards unlocking a significant portion of this funding program.
The apportionment of the new National 5-year housing target of 1.2 million new market delivered homes, based on the current population share, will require that NSW delivers 31.4% of the new homes.
For NSW, the higher target means that rather than delivering approximately 314,000 new dwelling by mid-2029 (as was mandated under the original National Housing Accord target of 1 million homes over 5 years), it will now need to deliver more than 375,000 new between July 1, 2024 and June 30, 2029.
NSW delivered only 47,000 completed dwellings in the last 12 months. Shifting this to the target level of 75,360 new homes each year, every year, for 5 years, will be a stretch and require all shoulders to the wheel.
Federal and State Governments appear to be committed to the goal. There is new money available to assist Councils (though $500 million does not go far). Councils which seek to sabotage housing supply must not be tolerated.
NSW will need to complete 75,360 new houses every year for the next 5 years. NSW has NEVER produced over 75,000 new homes in any year before.
By Tom Forrest, CEO, Urban Taskforce Australia